Debt Financing and Short-Term Business Loans Application Process

These days, you will find many lending companies offering short term business loans, other than the traditional banks. The process to get a loan from any bank is not only lengthy and time consuming, but the rejection rates are pretty high. Thus, most small businessmen choose to opt for short term loans from private lenders.

One of the popular lenders of short term business loan is BingoLoan. They ensure that an applicant gets what he or she is looking for, as BingoLoans notes down all the information about the customer’s requirements.

What are various Short-Term Business Loans?

Usually, small businessmen prefer short-term loans, rather than long-term debt. All short-term loans usually mature within 1 year or less. This means the loan must repaid back to the lender within 1 year.

For a fact, short-term loans are usually repaid much before the 1 year duration, say within 90 to 120 days. Such term loans with shorter maturities will help you to meet all your immediate needs without going for any long-term commitment.

Purposes of such Short-Term Debt Financing

These short-term loans can be very useful to any retail business which is a seasonal in nature. They may need finance to create their inventory and then sell them within a week or two and repay back their loan amount.

Few other reasons why people take short-term business loans can be immediate need of working capital for covering certain temporary deficiencies.

Also, some time you need to balance out your present cash flow or an immediate bill need to be paid like customer’s bill or payment of salary/wages etc.

Qualifying for Short-Term Loan

For qualifying for short-term loan, you need to prepare comprehensive documentation for your lender with following information:

  1. Your record of payment history for any other loans you availed before
  2. Your payment histories for the suppliers
  3. Cash flow history of your company for last 3 to 5 years
  4. Your income statement for specified period as demanded by the lender.

All documentation that you provide must be in professional format.

Based on your documentation you will be qualified for receipt of any short-term loan. The lender will also determine whether your loan should be secured by any collateral or unsecured loan will be ok.

Short-Term Vs. Long-Term Loan Rate of Interest

Usually in any kind of economy, rate of interest charged on short-term loans will always be higher as compared to that of on long-term loans.

However, in recessionary economy, interest rates can also be low and even short-term loan interest rates will be even lower than interest rate of long-term loans.

Usually short-term loan interest rates are dependent on prime interest rate and some premium. Either the bank or lender will determine the premium after determining the risk involved.

By looking at all the documentation they will make all these decisions and also qualify the short-term loan.

Interest rate of short-term loan are calculated in number of ways. It is essential that you should get little knowledge about how the interest rates are decided. You must also be aware about current rate of prime interest.

Having gathered necessary knowledge you can negotiate with the lender about the interest rate that he will offer for your short-term loan.

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