When starting a business, most small business owners face the hurdle of getting initial funding. Previously, few of them managed to surmount this leading to a lot of collapsed and shelved business ideas. Nowadays, most small business owners manage to overcome the hurdle and start off their businesses. That said, another roadblock that stands in the way of small businesses is securing working capital to cover their day to day operational expenses.
Working capital is simply the sum of your accounts receivable, added to your other current assets less the monies that you owe your creditors and the employees’ salaries. For your business to thrive, you need a continuous supply of working capital to cover both your marketing and payroll expenses.
Some businesses may be lucky to have a stock of financial resources they can always turn to, to meet these business needs. Others may not have that privilege and therefore opt for same day business funding to stay afloat. Whatever its form, short term business financing has its advantages as far as your small business operation is concerned.
Helps to Cover Emergency Expenses
It doesn’t matter how prosperous your business is or the massive amounts of assets it has, emergencies come and these may land you into trouble. By our very nature, human beings cannot predict the future with accuracy. This is because things happen which are beyond our control, but still need our resources.
In business, you may come across inflated monthly bills, unexpected vehicle breakdowns, or any other unplanned for, but necessary expenses. This is when short term financing comes in to ease the pressure on your company and avoid late payment penalties which may harm your business credit rating.
Do Not Demand Company Ownership
If you seek financing from equity investors, they will ask for an exchange of your company’s ownership. Depending on their assessment and your desperation, they may hive off a huge chunk of it thereby leaving you with little claim. Short term small business loans allow you to access capital without the need of sacrificing your company ownership and decision-making power.
No Need of Collateral
Although not all, a majority of short term working capital loans require no security. This means you do not need to provide any collateral to the lender for them to approve the loan facility. If you have a good credit history, chances are high that lending institutions will approve your loan for the amounts you have applied for, at the terms requested, and within the expected time. It is up to you to look for the right institution.
Short Repayment Period
While this may seem burdensome to small businesses, paying your loan faster or having plans for quick repayment, not only lifts your credit history, but also relieves you of the loan burden faster. Longer repayment periods though desirable tend to add lots of interest because lenders commit their amounts for a longer period of time hence the time value of money concept.
To add to the above benefits, short term small business loans tend to have a quicker approval because the need is urgent and you may not endure a lengthy application. Same day lending institutions have sprung up to advantage of this lending opportunity while supporting businesses with urgent financing needs.