here can be times when your business faces cash flow issues, which can hamper its smooth functioning. It is at times like these when short-term credit comes in handy. Short-term credit options come with flexibility, easy-to-meet eligibility criteria, and a seamless application process, helping business owners like you acquire funds instantly. It will help cover both operating expenses and unexpected costs.
Please go through the section below to learn the benefits of availing short-term credit, how it boosts business cash flow, and when to consider availing it.
Benefits of Short-Term Credit for Businesses
Here are the compelling benefits of availing short-term credit:
1. Fast Funding
Short-term financing choices come with quicker approval and funding processes than traditional business loans. This is why you can avail of it in need of quick, instant funds. Short-term credit is processed quickly, empowering you to cover expenses and continue operating.
2. Easy Application
The business world is fast-paced; hence, business bodies look for credit options that come with less processing time and an easy application process. With short-term credit, you do not have to undergo extensive documentation and verification processes. You can apply for short-term credit online and get the funds in your account within one day.
3. Flexibility
No strict rule is imposed on how you can use the short-term credit. You can use it to meet instant production costs, wage payments, purchase raw materials, etc. This proves beneficial for small businesses that still need a pre-set budget for spending.
4. Simple Prerequisites
The eligibility criteria set for short-term credit is lenient. Most short-term credit lenders do not ask for collateral. In addition, you do not have to show an excellent credit score to get approval for the credit option. Hence, new businesses or start-ups can avail of this without an established credit score.
Accessing Short-Term Credit Options
Accessing short-term business loans is much easier. You can receive the amount in the mandated account within 24 hours. Many financial institutions like Poonawalla Fincorp offer short-term credit as per the customers' requirements.
When to Consider Short-Term Credit?
When you are running a business, there are many times you will need financial backup to cover immediate cash requirements.
1. Emergency Expenses
Your business can face financial emergencies at times. For instance, one of the major pieces of equipment broke, and it needed to be fixed as fast as possible. Short-term credit comes in handy during such scenarios.
2. Bridge Cash Flow Gaps
There can be times when your business earnings need to match the expenses. This can lead to pending dues. Seasonal businesses often face cash flow gaps. These cash flow issues can be resolved by availing of short-term credit options.
3. Purchase Inventory
Inventory is a significant business expense. If you run a retail store, you might need instant funds to purchase inventory and business supplies. The availability of short-term credit helps to buy extra inventory before any occasion or event.
Also Read - Short Term Loan Vs Long Term Loan: Differences, Benefits, Characteristics
What is the Difference between Short-Term Credit vs. Long-Term Loans?
- As the name suggests, a short-term loan comes with a short tenure ranging from 1 to 3 years, depending on the financial institution. On the other hand, long-term loans can range anywhere between 5 to 15 years.
- The processing time of short-term credit is much faster. As a substantial loan amount is disbursed in the case of a long-term loan, processing time can take up to a week.
- A short-term business loan will help you address immediate cash needs and enable you to pay employee salaries, restock products, purchase inventory, etc. If you need funds to buy a plot of land, expand your business, or set up a factory, you must opt for a long-term credit option.
- For short-term credit, you generally do not have to pledge any collateral. However, in the case of a long-term credit option, you might be asked to pledge collateral.
- Short-term credit application requires you to undergo a minimal documentation process. ID proof and income proof are enough. However, for a long-term credit option, you might have to submit a certificate of business existence, IT Returns, Bank statements, etc.
Short-Term Credit Application Tips
Before applying for short-term credit, you must know the following application tips.
1. Compare Lenders
Before applying for short-term credit, you must compare different lenders or financiers and their offerings. Go through the terms and conditions, repayment norms, and interest rates, and choose one offering that aligns with your requirements and repayment potential.
2. Check the Eligibility Criteria
While comparing the lenders, you must analyse the eligibility criteria they need you to abide by. It will help you make an informed decision. Not adhering to the eligibility criteria can lead to the rejection of a loan application.
3. Know the Capital You Need
Apply for a realistic amount that will help you address your financial needs. Overborrowing will result in a monetary burden and increase the chance of default. You must have a clear idea of why you are borrowing the amount. This way, you can make the most of the credit options.
Also Read - What Are the Different Types of Business Loan in India?
To Conclude
If you have cash flow issues or have to manage unexpected business expenses, applying for short-term financing proves highly beneficial, especially with Poonawalla Fincorp.