It is possible to get a short term loan for a startup or small business, however be prepared for more stringent qualification requirements. In addition to the documentation already noted above, you may also need to provide projected cash flow and projected financial statements for the next 3 to 5 years. In addition, you’ll need to clearly lay out in your financial projections how you plan to repay the loan. Even with all that, if your business is a startup it’s most likely that you’ll only qualify for a secured loan, so you’ll need some personal assets such as real estate.

Short term loan interest rates are economy-dependent. In a normal or boom economy, they’ll be higher than long term loans, but lower during a recession.

The interest and repayment requirements of short term loan rates can be calculated in different ways and obviously you’ll want the calculation that is most in your favor. Our experts at Big Think can assist you with finding a lender who will provide your business with the most favorable terms.

Short term financing is an essential option for small businesses. Buying inventory, covering working capital expenses while awaiting payment of invoices, and expanding operations are just some of the uses small businesses have for short term loans.

While the overall structure is similar to their more common relative, long term loans, there are some important differences.

As with long term loans, your business will need to qualify with the lender. In addition to your credit score, the lender may also want to see records of previous loan repayments, payment histories to your suppliers and your company’s cash flow history, preferably for the past 3 to 5 years. An income statement may also be required. Depending upon these factors, and the lender you’re dealing with, your loan may be secured against collateral or unsecured, also known as a “signature loan.”

Payment schedules also differ. Where traditional long term loans usually require monthly payments, short term loans may have payment schedules as frequent as every business day.

Benefits

Lukewarm credit OK

Limited paperwork

Quick access to cash

Can be used for a wide variety of purposes

Drawbacks

Relatively high Annual Percentage Rate (APR)

Capped loan amount

Daily payments

At McGuire Consulting Agency, we can help you structure the best loan for your needs. If you’re confused or need clarification about the qualifying requirements for a loan, please contact us. We’ll be happy to help.