Short Term Loans
Short Term Loan Short Term Loans – An Overview
Author: Grant Olsen
Date posted: 04.16.24

A short term loan can be a great option when working capital of up to $1 million is needed quickly. With no collateral requirement, no restrictions on the use of funds and a lightning-fast turnaround, unsecured short term loans are among the most flexible and popular loan products.

It’s not uncommon for situations to arise where business owners need to borrow money on an expedited timeline. Traditional bank loans and SBA loans almost always move too slowly to work in these scenarios.

Fortunately, short-term loans offer an ideal solution. Non-bank lenders, such as alternative funders and hedge funds, typically issue these loans, allowing you to skip the mountains of paperwork and lengthy underwriting process. In fact, it’s very common to receive same-day approvals and have the funding deposited into your account within just a couple of days.

Short term loans usually have a funding maximum of $1,000,000. And as they’re built for speed, these loans have term lengths ranging from 4 to 24 months.

 

Given their borrower-friendly timelines, don’t be surprised if you pay more for a short term loan than you would for a standard-issue loan product. The interest rates often begin around 12%, but it all depends on your unique situation. Repayment is conveniently handled via an ACH debit on a weekly, semi-monthly or monthly schedule.

 

There can be substantial prepayment discounts on short term unsecured loans. Additionally, your payments can build business credit and the interest can be tax deductible. Be sure to consult with a financial advisor on the best way to deduct the interest when it’s time to file your taxes.

 

What Is an Unsecured Loan?

Whenever you borrow money from a lender, there’s a risk that you may not repay it. To safeguard themselves from potential losses, lenders often ask you to “secure” the loan with collateral, which may include vehicles, homes, or real estate. In case you fail to repay the entire loan, the collateral goes to the lender as compensation.

However, with an unsecured loan, the lender doesn’t demand collateral from you. In this arrangement, the lender takes on more risk, and you don’t have to risk your personal property by tying it to the loan.

 

Using a Short Term Unsecured Loan

These loans provide both speed and versatility. In fact, lenders generally do not impose restrictions on how you can use the funds. You can utilize your short-term unsecured loan for various business purposes. For example, if you come across a business opportunity that requires fast action, these funds can come in handy. Furthermore, you have the flexibility to use the funds for hiring employees, bolstering cash flow, or purchasing equipment. The main point is that you have several options available to you.

 

Keep in mind that short-term unsecured loans usually incur higher costs compared to regular term loans. Therefore, it’s best to utilize them in situations where the faster timeline eliminates other options.

 

 

Applying for a Short Term Unsecured Loan

Once you’ve done your due diligence and confirmed that a short term unsecured loan is the best option, it’s a very quick and easy application process. Typically you will only need to submit:

 

  • A completed application
  • 3 months business bank statements
  • Business tax return (for higher loan amounts)
About The Author | Grant Olsen

Grant is a writer specializing in small business loans, leadership skills, and growth strategies. He is a contributing writer for KSL 5 TV and has been featured on FitSmallBusiness.com and ModernHealthcare.com. Grant has a B.A. in English from Brigham Young University.

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