All business being large or small rely on their cash flow undoubtedly the lifeblood of their long-term success.
However, there are periods during the year where cash flow is problematic due to many reasons which are either or not in control of the business owner.\
Unexpected expenses or financial losses due to bad decisions; far too quick rapid expansion; staff commitments and ATO debt are all contributing factors which will affect any business cash flow.
Business debt needs to be met with cash flow, or this can quickly spiral out of control seriously crippling any business.
So what are the solutions when cashflow is unable to meet business debt?
If we concentration on debt funding, most small businesses have traditionally received most of their business finance from banks in the form of a business loan or term business finance facility. These business finance facilities may have short, intermediate, or long-term repayment facilities.
The different lengths of loan term expiry is determined to some degree on how strong or weak a business’s current monthly cash flow is to repay back the loan, and the original purpose for the loan and how it will be used.
So, let’s have a brief look at short-term business loans in Australia.
What Are Short-Term Business Loans?
A short-term business loan is, without doubt, the most popular & common form of business funding, because it achieves the urgent business working capital funding fast and does not stretch a business loan commitment utilising a business’s cash flow over a long period.
Small businesses most often need short term business loans instead of long-term cashflow funding, because it can help you meet an immediate need for financing without requiring you to make a long-term term commitment. These loans are usually anywhere from 90 days to 120 days in loan term.
The advantages of a short term business loan enable readiness, stability and flexibility, so even if you do not expect something to happen within a business, extra cash flow may be a wise choice to be ready in the event of anything unexpected.
Purposes for Short-Term Business Loans
Businesses involved in the industries that are seasonal in nature like retail business, cafes, restaurants and catering services who have to either build up stock for the upcoming holiday season or turn to funding in quiet periods to see them through, a short-term business finance facility is the perfect solution.
Meeting payroll tax and unexpected business expenses or just to even out monthly cash flow particularly a business that has many cyclical trading months during the year can also be reasons for applying for short-term business funding.
Applying for Short Term Business Loans
How to apply for a short-term business finance is a simple process with minimal paperwork and on many occasions approval and funding within 24 hours.
To start your approval process for a short-term loan product, you will have to present supporting documentation to a specialist business lender, whether it is a bank, a credit union, a mutual bank, or an online short-term business loans’ lender which are usually the fastest option for funding when time is of essence and minimal paperwork is at hand.
The lender will want, at least, a record of your business trading account payment history for the last 4-6 months to confirm what your monthly business turnover is and whether you may have any other business commitments currently in place. You should also be prepared to provide any company finances if the lender requests it.
All documentation provided should be presented in a professional manner and should reflect a strong indication of the strengthening of the business.
Your chances for a successful short-term finance approval will be determined solely on the financial position of your business and whether the loan the business can offer to repay the loan balance you have requested or the worst case scenario a lower loan amount.
The convenience of short-term business loans to small businesses is essential for our economy to operate efficiently.
Without short-term financing, small businesses literally cannot function, as they will not buy their stock, cover working capital shortages, expand their customer base or operations, or grow in times of business expansion opportunities.