Key Factors to Look at When Applying for a Short Term Loan
Businesses fail to proceed as planned due to some enforceable circumstances, when this has happened, you may need to get some funding to generate more revenues for your business. When you looking for a quick loan for your business which you don’t want its repayment period to extend for more than 12 months, then you should consider going for a short term loan. Short term loan is an amount of money given to a business or anyone and they are expected to repay it within a period of 3 to 12 months. When applying for a short term loan, there are several things that you need to put into considerations. Read this article to learn the important points to remember when borrowing a short term loan.
You need to look at the type of loan that you borrowing . When it comes to short terms you have two options to go for either the secured one or unsecured type. Secured loans are where the business owner is required to have an asset which will act as security for the money that he or she is going to borrow and this allows them to borrow the funds with a low-interest repayment rate. Unsecured business short term loan does not need one to have any collateral, instead proof of business existence is a must as well as present bank statements, this type of a loan attracts a higher interest rate.
You need to factor in the interest charge on the short term loan you looking to borrow. Different lending institutions charge different rates of interest for the money they are going to lend you, you must visit different lending institutions and compare their interest rates before settling for any lender. However, you should also understand your credit score will have a role to play when deciding on the interest rate from the lender, the higher your credit score the lower the interest you may be charged.
You should factor in the repayment policies of the short term loan. Since most business owners are looking for a short term loan with the best repayment conditions, you should check the EMI of the different lending institution and settle for the one you find comfortable dealing with.
Look into the repayment schedule of the loan You need to lay down a plan on how you will be repaying the loan otherwise the short term loan may bring you more challenges than how you were before. As short term loan borrower, you should have the knowledge to calculate the EMI and since it is likely to be high because of the short term involved in repaying it, have a repayment formula.