Things To Prepare Before Obtaining Short Term Finance

Whether you want to upgrade your technology or need help paying employees, short term finance options can be hard to get for smaller businesses. Therefore, it is important to understand what you need to do before obtaining or trying to obtain short-term financing. There are many things you should know before even considering these loan options to ensure you’re making the right decision.

What Are They?

Short-term loans are loans that are offered to companies and individuals with a shorter payment cycle than traditional loans. The term itself can mean different things to different lenders, but in most cases, the loan must be paid off in less than one year, and usually sooner than that.

How They Work

Applying for a loan of this nature can be easier than getting long-term loans because you are dealing with small amounts of money. This means that the lender takes on less risk and may be more willing to dole out the money. These loans are so small that there is no collateral, which can be an advantage and a pitfall, as well. You won’t have anything to back up your loans except your good faith, but you don’t have to put up the house, car or other large items in the case that you can’t repay.

While every lender must list their APR (Annual Percentage Rate), short-term financing is different because the interest isn’t compounded for a full year. Therefore, you may want to ask the lender how they determine APR to make it easier to understand.

Choosing The Right One

Many lending companies offer short term finance options, so it becomes difficult to determine which one is right for you. There is no easy or magic formula to help you determine what you need and where to go. However, a few words of advice include choosing a company that uses transparency and honesty. You want all the information to be up front and something that is quick to get.

What To Know/Get Prepared

Chances are, the lending company will look at your credit history. While short-term loans are more lax when it comes to higher credit scores, they may still check. Therefore, it may be helpful to know what your score is before getting financing. They will also want to see your cash-flow history, tax information, business plans and more. Because it is short-term, they may not need all of this information, but is helpful to have it available anyway.

Before obtaining short-term finance help, you need to prepare certain things. Visit UCapital once you’ve gathered all the information to get started.

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