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How Short-Term Cash Loans Can Help a Business

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Cost is always a key factor for all businesses. The theory of business runs like this – create or procure at low cost and sell at a higher price, the difference being the profit. So when procuring a loan, a business will want to keep the cost low, to keep the margin high. However having said this, “quick” and “easy” could be equally important.

Loans from banks are good as it helps the business keep the costs down. But the problem is, the application process is very lengthy. There is also the long and complicated underwriting process, which can mean that it could be months before the business eventually gets the funds it needs. Businesses cannot wait that long quite often. For instance, there could a need to carry out emergency repairs, without which production might come to a halt. There could be an inventory order for which funds are required fast. Or the business might want to make a timely acquisition.

Picture These Scenarios

You are running a busy clothing store. The holiday season is approaching fast, and you must hire more workers. The cash register just broke, and you don’t have the extra money to hire more people.

A short term cash loan can be the right solution here. The application process is easy. The approval process is even easier. You will get the funds you require now, and can repay after making the profits. Quite simply, if this additional fund was not available, then the business wouldn’t be able to make the profit. And many of them could even lose out to competition and have to wind up. In fact, for many businesses that are almost always starved of liquid money, this is the only way they can get the money needed to prosper from an opportunity. This is why they will often go this route.

The good news is that, there are many private lenders from where the business can get these cash loans legally and quickly.

Short-term cash loans are in small amounts typically, just like it is with payday loans for individuals. Yes, the borrowing cost is higher than a bank loan, but then, it’s a great way for the business to get the much needed funds when it needs it. There are a lot less hassles, and the process is very quick as well, which every business appreciates.

Now Compare Them with Long-Term Business Loans

In comparison to short-term cash loans, long-term loans are larger typically, and the term is also longer, as the name suggests. The repayment period can be between 5 and 15 years and even more. These long-term loans are thus better for refinancing debt, real estate purchases and such others. But the problem is, businesses that haven’t yet established an operating history may not qualify for these loans. And those that cannot provide collateral are also denied.

Also, it must be mentioned here that many businesses are wary of taking a long-term loan because of the long-term commitment to repayment that they have to make. The business world is changing fast. A new discovery or development can change things very quickly. So what may work today may not do so in say 5 years time. If you have taken a long-term loan for a venture, you are stuck with it, though the venture may be redundant for all practical purposes. That is why, the short-term cash loan could be a better alternative for many businesses throughout the world.

Is a Short-Term Cash Loan Right for Your Business?

Here are some situations when a short-term cash loan could be the right option.

Finance your small expansion – As compared to a long-term loan, the cash advance makes more sense if you are not keen on carrying the debt for years for a small expansion like buying equipment or hiring employees. There is reduced financial risk if the business can get rid of the debt earlier. Plus, there is better cash flow as well. The business appreciates if there is no obligation to repay.

For managing cash flow gaps – Seasonal businesses almost always face uneven cash flow situations. Short-term cash loans could be the better alternative for paying the bills than a home equity loan for paying bills or expensive credit card debt to manage the slowdown.

For emergencies – Every business faces emergencies. In fact, many of them live from one to the next. There can be an emergency in many ways like broken equipment for instance. A short-term cash loan can be the right solution in emergencies. You will get the money you need quickly to rectify the situation. No long-term business planning is needed as the debt is only for the short-term. This way, you don’t have to worry about setting aside funds each month for several years towards repaying the debt.

For buying inventory – Often business must purchase more inventories to meet the growing demands from their customers. There could also be the opportunity of purchasing inventory from suppliers at a discount that the business might not want to miss. The short-term cash loan could be a great solution, as long as you are sure that you can eventually sell the inventory and cover the loan cost.

Where Can You Find a Short-Term Cash Loan?

There are actually many providers that can give you these loans. You should be able to meet the requirements for qualification quite easily really. Your business should be operational for at least a year and should have achieved a minimum turnover which is not steep for most. There shouldn’t be any bankruptcy in the last couple of years. If you achieve this, then it should be easy for you to get the loan. And you can be sure that your application will be approved quickly so that you can get the funds required soon.

Are There Any Risks in Taking a Short-Term Cash Loan?

There are no risks, but having said this, you must take it for the right reason.

Some critics have pointed out that the percentage of interest and the fees is more than long-term loans. That is true, but the fact is that, the business is not affected all that much as the loan is only for a short period of time. So how much more outflow can there be towards debt repayment? There is also a lower risk of falling into a debt trap. There are other advantages too, such as meeting the liquidity crunch.

So all things considered, it often makes better sense for the business to take a short-term cash loan. That is precisely why so many of them are taking them now.


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