Short-Term Finance: What You Need to Know
If you’re in search of funds for your business – whether lines of credit or invoice financing or general business loans, you’ll see the terms “short-term finance” and “long-term finance,” along with many other terms used to categorize finance products.
In the meantime, as you consider your options for funding it’s crucial to learn how short-term finance operates in relation to long-term finance, as well as the types of short-term financing options offered to your business.
We’re here to assist. This guide will discuss the meaning of short-term finance in more detail, and discuss the most popular kinds of short-term financing and what lenders offer the most appropriate short-term options for your company. We’ll also go over the advantages and disadvantages of short-term finance so that you’ll have the facts you need to determine what is best for you.
Short-Term Finance Definition
What is short-term financing exactly?
Short-term finance is defined as any loan that the borrower repays with a shorter period of repayment. In particular it is the loan that an company is able to pay off in less than one year. However certain lenders label loans that have a repayment period of 18 months in the form of “short-term business loans.”
Beyond that basic definition, short-term financing has distinct aspects. For instance, this kind of finance is easier to finance, is easier to obtain and has lower costs of capital. These characteristics are generally due to the lower repayment terms (again typically less than one year) which short-term financing can be defined as.
Furthermore, due to these quick repayment times this kind of finance is typically employed for working capital, buying inventory as well as to cover cash flow problems as well as other similar needs.
With that said, if your looking for short-term financing as you’re looking for access to quick cash, or you cannot qualify for financing for the long term it’s crucial to note there is only one securedfeature of short-term loans is the short repayment timeframe.