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Four signs it’s time to consider a short-term loan

Life just has a way of sneaking up on you when you least expect it. Everything might be going well and your financial situation might look cosy, but then something drastic and out of your control surges into your life and throws everything into disarray. All of a sudden, your perfect world crumbles around you and there is no clear answer or guide you can follow to get out of your predicament. 

Luckily, these situations do not last forever and there is something you can do about it. Most of the time, the situation is much less devastating than what you make it out to be. When you sit down and look at your status, you could come to realise that you only need a short-term solution. That is where instant short-term loans come into play. 

What is a short-term loan?

As the name implies, a short-term loan is a financial loan obtained for personal or business use. These loans are only meant to meet an immediate need and are not geared toward a long-term situation. 

The principles are the same as other financial loans. The capital is borrowed and paid back with interest. The only difference between a short and long-term loan is the interest rates and the repayment period. But how do you know when you need a short-term loan?

Business startup costs

When time is of the essence for your business, then there is no better option than a short-term loan to get your business up and running. So often it happens that there is a small window of opportunity to start a business and when you do not have the immediate funds available to get things going, a short-term loan can mean the difference between a failed startup or a successful venture. 

You could have a revolutionary idea and might need to file for patent protection or you need money to upgrade your business’s output capacity to meet the demand. Whatever the reason, a small injection of funds could pay off immensely in the end. The small amount of interest that you are going to sacrifice is nothing compared to the potential income that you stand to lose if you do not have the necessary funds available at the right time.   

Seasonal gaps in expenses

When your business is influenced by the seasons and special holidays, you need to look at short-term loans for your business. Businesses that are cyclical in nature, like retail businesses that have certain days in a year where sales are expected to spike require a spike in their buying power to meet the demands of their customers on special days. 

For example, Florists will need three times the amount of stock on special days like Valentines and Mother’s Day. Tech stores might need to stock up on new toys before Black Friday Cyber Monday, which means an unusual hike in stock costs upfront. 

When the business is still relatively new, these short-term loans could be called upon regularly. But as the business settles into a rhythm, they could start to plan for these events and save up during the year until they are a place where the loan is not needed anymore. 

Emergency expenses

Whether you need to fix something at home or in the office, emergencies happen all the time. In general, it is a good idea to budget for these unforeseen expenses before they happen but it is not always possible to plan for the more expensive emergencies. A car that breaks down or a house that is flooded costs much more than replacing your spectacles. 

The thing about these expenses is that they come without warning and often derail a person. It is not the immediate expense that is the biggest problem, but the effect that it has on a person. It derails a financial plan and clouds your judgment. When you procure a short-term loan, it frees your mind to think clearly again and make new plans.   

Cashflow for staff and operational costs

Small businesses that start up often have cash flow problems. It is not that the business is necessarily a flop, but rather that the rhythm of cash flow has not been established yet. Operational costs and paying staff is often where the majority of the money goes to. When clients are late in paying or when there is a disruption in the chain, it puts a strain on the owner to keep things going. 

It is not that the money is not there, it is just in transit, which is when a short-term loan can bridge that gap. You are going to pay a bit of interest on the loan, but it beats losing your business’s doors. After a while, your business will also settle and cash flow problems will also start to diminish.

Categories: BusinessNews