A business owner needs to raise capital to manage and scale crucial business operations. Sometimes, a business might not be able to generate enough revenue to continue operations.
Whether they choose to give up running their business owing to adverse circumstances or keep fighting to raise capital and turn things around is the true test of the mettle of business owners.
Several funding options are available for companies. These include line of credit, equity financing, and short-term business loans. Short-term business loans are the preferred choice among all these options. Such loans can provide a business the funding it needs to continue daily operations. Read on to understand the advantages and disadvantages of short-term business loans in India.
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What exactly are short-term business loans?
Short-term business loans have a shorter repayment tenure. Usually, the repayment tenure of short-term business loans ranges between six months and three years. These loans are provided to fulfil the short-term requirements of businesses. For example, a short-term business loan in India might help a company pay salaries to employees. Some might opt for a short-term business loan to buy equipment or pay off an urgent loan. A business can easily acquire a short-term business loan with a reliable financial institution.
Pros of short-term business loans in India
Some key advantages of short-term loans for businesses in India are as follows.
- Quick disbursal
Sometimes, a company requires funding to fulfil an urgent obligation. For example, a business might not have funds to pay salaries to its employees. It cannot delay the salaries for long, as employees might start raising questions. In such a situation, a company requires a loan in quick succession. Short-term business loans are quickly disbursed compared to other business loans. The loan application for a short-term business loan is simpler than other business loan applications. A company can acquire a short-term business loan by providing a few details and documents to the lender.
With NBFCs like Fullerton India, a company can obtain a short-term business loan online at low interest business loans in India. Any urgent financial obligation can be fulfilled with less paperwork and an easy approval process. Companies don’t have to postpone employee salaries or equipment purchases due to a lack of funds.Â
- Simple eligibility criteria
For long-term business loans, the eligibility criteria are complex. The approval ratings for long-term business loans are also low. Compared to other business loans, the approval ratings of short-term business loans are high. Companies that have a high credit score easily get a short-term business loan in India. Since the eligibility conditions for short-term business loans are simple, most business are eligible for them. Short-term business loans are excellent funding options for small/medium-scale enterprises.
- Less debt
With short-term business loans, a company can infuse capital quickly. A business owner can invest at the right time with a short-term business loan. Business owners can prevent a cash flow issue from growing with a short-term business loan. Also, a short-term business loan is paid in installments which means you need to repay the loan amount in easy instalments. This way you can take the stress off and repay later with your profits.
What are the cons of short-term business loans in India?
- Increased interest charges
Business loans with a shorter repayment tenure might have a high-interest rate. Since lenders offer short-term business loans easily, they charge higher interest rates. It happens to nullify the risk associated with short-term business loans. However, a company can get affordable interest rates for short-term business loans with a good credit history.
- Frequent instalments
When the tenure for a business loan is shorter, frequent payments are required. You have to make monthly payments to repay a short-term business loan. Businesses with a good cash flow should apply for short-term business loans. Sometimes, lenders offering short-term business loans might ask for weekly payments.
With NBFCs like Fullerton India, a company can get affordable short-term business loans at competitive interest rates and flexible repayment tenure.
