Short-term cash loans are a type of financing that can help businesses get quick access to cash when they need it. These loans typically have a short repayment term, ranging from a few weeks to a few months, and are designed to be repaid quickly. Short-term loans can be a useful tool for businesses that need to cover unexpected expenses, finance a temporary project, or bridge a cash flow gap.
How a short-term cash loan can help a business
Short-term loans provide quick access to cash when the business needs it, which can be crucial in emergency situations or when unexpected expenses arise. Additionally, sometimes businesses have to pay their expenses before they receive payment from their customers. This can put a strain on their cash flow, and short-term cash loans can help cover these expenses until payment is received.
Finally, a short-term loan can be used to finance new projects and business opportunities to generate extra capital for the business. Many businesses don’t have the working capital available to take advantage of opportunities. For example, a business might need to hire additional staff to fulfil a large contract or invest in marketing to take advantage of a new market opportunity.
Loan features to know
Loan amount and repayment terms
Short-term cash loans are typically smaller than long-term loans, with loan amounts ranging from a few thousand to a few hundred thousand dollars. Repayment terms are also shorter, with some lenders offering terms as short as a few weeks. A shorter loan term lets you cover costs without being tied up in a costly and lengthy payment plan.
Interest rates and fees
Much like personal loans and large traditional business loans, short-term business loans have interest rates and an establishment fee that you should read before agreeing to the loan conditions. These are the most important features to look at when you compare short-term loans.
Eligibility requirements for short-term cash loans are typically less stringent than those for traditional loans. Lenders may require a minimum credit score or proof of cash flow, but security is usually not required. OnDeck’s eligibility criteria requires a credit score of 500, to have been in business for at least 1 year and with a minimum annual turnover of $100,000.
Application and approval process
Short-term cash loans can be applied for online, and the approval process is usually quick. Lenders may require documentation such as bank statements, tax returns, or proof of income to verify the borrower’s ability to repay the loan. When approved, funds are transferred to the borrowing business’s bank account.
There are two types of short-term business loans: Secured loans and unsecured loans.
A secured loan requires you to offer some sort of asset as collateral to be claimed if you are unable to repay the loan. Unsecured loans do not require collateral, they instead utilise the business credit history and current financial situation to determine a loan amount that the borrower will be able to repay.
Advantages of a short-term cash loan
Short-term cash loans have a number of advantages over other financial solutions. These advantages come down to flexibility and speed, providing a business with the funds needed to capitalise on opportunities and pay costs before they can affect the cash flow and smooth operation of a business.
Quick Approval Process: Short-term business loans have a faster approval process than traditional business loans, allowing businesses to get the funds they need quickly.
Easier Eligibility: Short-term business loans often have less stringent eligibility requirements than traditional business loans. This can be beneficial for businesses that may not qualify for a traditional loan due to their credit history or lack of collateral.
Flexibility: Short-term business loans are often more flexible than traditional loans, allowing businesses to borrow smaller amounts for shorter periods of time. This can be helpful for businesses that only need to borrow a small amount of money for a short period of time.
No security Required: Short-term business loans often do not require security, which can be beneficial for businesses that do not want to put assets up as collateral.
Fixed Repayment Schedule: Short-term business loans often have a fixed repayment schedule, which can help businesses budget and plan for repayment more easily than with a traditional loan.
Prepared by OnDeck Capital Australia Pty Ltd ABN 28 603 753 215 (“OnDeck”) for general information purposes only. Content may belong to or have originated from third parties and OnDeck takes no responsibility for the accuracy, validity, reliability or completeness of any information. Information current as at March 2023. You should not rely upon the material or information as a basis for making any business, financial or any other decisions. Loans issued in Australia are subject to the terms of a loan agreement issued by OnDeck. Loans are subject to lender approval. OnDeck® is a Registered Trademark. All rights reserved.