Business owners sometimes find themselves in a situation requiring a financial infusion. In such a situation, traditional financial institutions may be unable to provide the loan due to conventional processes. Here, one can prefer applying through lending institutions and NBFCs that offer short-term small Business Loans with instant approval and quick disbursal. However, one should be aware of the application and approval processes.
Short-term Business Loans are typically quicker to get and easier to apply. You might receive the money within 48 hours after submitting your paperwork from new-age lenders like Hero FinCorp. Let us find out more about the benefits of short-term financing options.
What Are Short-Term Business Loans?
As the name suggests, short-term Business Loans are provided for a short term, say, a year or two. The company can use the loan to handle smaller expenses, like office renovation, needed to operate smoothly.
Compared to credit cards, the interest rates of short-term business finance are lesser. Numerous businesses employ short-term borrowing to regulate their operations when there are fluctuations in cash flow.
Features of Short-Term Loans:
SMEs can apply for this sort of business finance without worrying about putting up any collateral, so there is no added pressure. They receive the required expenditure through a digitalised process and can conveniently repay it as per their chosen tenure. The following are some of the fundamental characteristics of a short-term loan in India:
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Short-term loans are available to both businesses and self-employed individuals.
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Short-term business finance terms are usually negotiable and flexible.
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Typically, this form of loan has an exponentially shorter disbursal time.
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A borrowing corporate entity's repayment capacity might be considered when customising the EMIs due.
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Both entrepreneurs and self-employed professionals can apply for this loan, depending on the lender's requirements.
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Typically, the credit amount received has no end-use limitations.
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No collateral or guarantor is necessary as these loans are unsecured.
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Modern lenders eliminate paper from the application and sanctioning processes for short-term business finance.
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Most lenders like Hero FinCorp allow online applications with minimal documents.
Types of Short-Term Business Loans:
In India, you need to be aware of many types of short-term finance options. A few of the common ones are:
| Trade Credit | Trade credit is one of the short-term financing options through which a borrower can purchase products or services while deferring payment to the supplier until a later time. |
| Bank Overdraft | By extending a credit line, a bank overdraft is a sort of credit that enables borrowers to spend more money than is available in their accounts. |
| Demand Loans | Demand loans, also known as working capital loans, are a form of secured credit that can be used to swiftly access money for urgent company needs like paying staff, purchasing supplies, or paying rent. |
Short-Term Business Loan Rates
The interest rates of short-term Business Loans are competitive yet affordable. The interest rates are lower than that of credit cards. At Hero FinCorp, the interest rate for short-term small Business Loans starts at just 15%. Depending on the borrower’s credit profile and eligibility criteria, the interest rates can go up to 30%.
Also, Check: Long Term Business Loan : Interest Rate & Eligibilty
Eligibility for Short-Term Business Loans
It is wise to confirm your eligibility before applying for short-term small Business Loans. This is because the eligibility requirements differ from one lending institution to another. However, they do, to some extent, depend on the type, profile, and needs of the business. The following general requirements must be met to qualify for a short-term Business Loan:
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The borrower must be an Indian resident.
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SMEs must have at least five years of business experience.
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Must be between 25-65 years.
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The business owner should have the last three years' audited financial statements and projections.
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They should also have a good credit score.
Documents Needed for Short-Term Business Loans
You must provide specific supporting documents when applying for short-term business finance. Like:
| Application: | Complete the loan application with the required information and upload one passport-size photo. |
| Proof of Age: | PAN card, Passport, or voter ID. |
| Address Proof: | Voter ID, Aadhaar card, phone bill, ration card, lease, or an electricity bill. |
| Financial Records: | P&L and balance sheet for the past three years, audited by a certified accountant (CA), bank statements for the past six months. |
| Proof of Applicant's Identity: | Voter ID card, Passport, PAN card, and driving licence. |
How to Apply for a Short-Term Business Loan?
By following the few easy procedures listed below, you can apply for short-term business finance:
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Go to the unsecured Business Loan page on the Hero FinCorp website and click "Apply Now".
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Fill out the essential fields and upload relevant documents.
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Enter the Business Loan amount and tenure.
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If your information meets our eligibility requirements, we will provide a reference number. Keep the reference number for future use.
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Our representative will contact you for additional information.
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Post verification, you will receive a personalised loan offer that includes the loan amount and interest rate.
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After approval, we will disburse the amount to your bank account.
Conclusion
Lenders only want a promise from borrowers when lending the short-term Business Loan that they will repay their debts. When approving a loan, lenders consider several factors, including the applicant's profile, repayment history, income level, business stability, financial history, and credit score. Borrowers may have trouble qualifying for the best Business Loans if they don't meet the requirements. Therefore, reviewing the eligibility requirements and using the term loan calculator before applying for the loan is wise.
FAQ
How long is a short-term Business Loan?
Short-term loans get their name from how quickly they must be repaid. These loans are available for a minimum tenure of 12 months and can go up to 60 months.
Are short-term loans risky?
Compared to long-term financing, short-term loans may have bigger EMIs which may be a problem for businesses with irregular cash flow. If for any reason, the borrower fails to pay the instalments on time, they may have to pay penalties, which can affect the credit score. This can make the loan costlier.
