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Article: Short-term finance types, benefits and costs

If your business requires short-term funding, then you usually don’t have time to waste. You won’t have the luxury of being able to approach each possible lender to find out where you might be able to source the right finance.

A few key facts about short-term finance include:

  • Short-term finance are business (or sometimes individual) loans, used to finance your business over a short time period (typically from 3 months to 1 year)
  • Short-term loans are instant cash boosts which can help businesses in need of working capital and do not compromise the business’ day to day operations.
  • The payment terms for short term loans are flexible and can usually be done daily, weekly, monthly, or in one lump sum at the end of the term.

One of the key features of any short-term loan is that they are usually approved quickly. The criteria can be less stringent since the payment terms are shorter.

Business can benefit from short-term loans to cover costs such as incorporation fees, inventory purchase, expansions, business emergencies, advertising costs, covering damage deposits, recruitment or training of staff and monthly bills.

Some of the disadvantages include smaller loan amounts and higher interest rates.

Many small businesses are not always aware of the different options that could be available to them, and therefore can miss out on finding the right finance simply because of this information gap.

There are other types of short-term loans such as bridging loans, which can be useful for companies (or individuals) who need a specific amount of cash, for a limited time (and often for a specific purpose). A bridging loan can help to ‘bridge the gap’ in cases such as buying a new property before selling the old one.

What are the main types of Bridging Loans?

Closed bridging finance – You need to know exactly how the loan will be paid back –right from the start, referred to as the exit strategy.

Open bridging finance – Open bridging loans are when there is no clear exit strategy. Even though there is a date agreed, how the owed money will be paid back might not be finalised. As lenders because view this as riskier, interest rates are usually higher.

What can I expect it to cost me?

The costs, and the amounts borrowed, can vary depending on the specifics of each loan (time, risk, etc) and can range between 0.5% and 1.5% per month. There may also be other fees depending on the circumstances.

What are the advantages? 

  1. You will receive your money quickly because with these type of short-term loans lenders understands the urgency.
  2. You can borrow money on one asset in order to purchase / fund another asset.
  3. You might value the flexibility to repay the loan, within weeks or months at your choice, if you do not want to (or can’t) take out a traditional long-term mortgage.

Henry Ejdelbaum, MD, comments “applying for finance can be really confusing and therefore it is important to have someone you trust working on your side. Having a broker can help you navigate the process more easily as there are different hurdles that having a broker can help you overcome, apart from the valuable time to be saved for you and your business. “

Luckily, you are in the right place if you are looking for assistance as we have been doing it on a daily basis for over fifty years. We are able to help you secure finance Faster, Simpler, and Better.

 ENDS

For further information please contact:

ASC Finance for Business

Johan Da Silva

020 7616 6634

johan@assec.co.uk

www.asc.co.uk

Notes to editors:

About ASC Finance for Business

ASC was established over 50 years ago; we are independent business finance brokers. We have developed a successful track record helping businesses across the UK secure finance by removing the hurdles put in their paths. We have extensive knowledge of the financial products available from lenders and can approach them to help businesses find the right finance for their projects.

Our local directors are highly experienced and have a strong commercial background which will help your business increase their chances in securing finance.  ASC enables businesses to have more free time to focus on and develop their business.