Short-term business financing became a very appealing option in the wake of the 2008 recession, when traditional banks were forced to disapprove all but the most solid loan applications. There are some very appealing aspects of short-term financing, especially because capital can be obtained much more quickly than via a traditional loan, and because it has to be paid back much more quickly. This ensures that a small business does not stay indebted for a long period of time to any lender.

There are definite benefits to short-term financing, as well as some potential drawbacks.

Advantages short-term financing

As mentioned above, short-term financing can be arranged in a very short period of time, much faster than any traditional lending institution could possibly accomplish. In fact, most short-term loans can be arranged online, so that borrowers need only wait a day or two before receiving approval. There are also less stringent approval requirements associated with short-term loans, so that even companies with relatively weak credit history can very often be approved.

Many small businesses in startup mode or with no more than a year of credit history would never be approved by a traditional lender, but alternative lenders can fill in the gap and grant approval for loans, even to these companies. Alternative lenders can provide the business financing needed by many small businesses, when banks and other lenders simply cannot help.

Cost of short-term financing

The cost of short-term financing is often higher than it would be on a traditional loan, and there’s a good reason for this. Alternative lenders take a much greater chance by approving companies with brief credit history, poor credit history, and those which are startups. In order to offset the increased risk to themselves, alternative lenders are forced to charge higher interest rates to potential clients. That means borrowers of short-term business financing can generally expect to pay higher interest rates than they would to traditional lenders, in exchange for the higher approval rates. 

Short-term business financing with Bear River Financial 

If your company needs cash, but you don’t want to commit to a long-term loan, we may be able to help with some short-term financing options. Business financing with Bear River Financial will be a big benefit to your company, so contact us today and we can discuss some possibilities.