Short-term loans are financing options that will generally be repaid in less than six months. Through the lender, you will get a number of funds that must be repaid (along with the applicable fees and interest) in several installments.
With regard to traditional loans, short-term loans are offered in smaller amounts, higher interest rates and shorter payment periods, and sometimes also require weekly payments.
How can a short-term loan help my business?
As the name suggests, short-term loans are for businesses that need temporary capital. This can be caused by various things such as sudden unexpected costs or when cash flow gaps occur due to fluctuations in seasonal consumer demand. With higher interest costs, shorter payment periods and lower loan amounts, short-term loans are not a suitable choice for financing large-scale investments such as total renovation projects or long-term expansion activities.
Is a short-term loan right for my business?
The following are general criteria that can help assess whether a short-term loan is suitable for your business:
You need quick access to funding: Through alternative lenders, the loan application process is faster and more efficient — where the application process is done online, requires fewer documents, and you will find out the loan agreement within 24 hours and gain access to funding as soon as Approved. This makes it a good choice for MSMEs that need funding in a short time.
You need to handle unexpected expenses: Short-term loans can be used to deal with a variety of needs — unlike some other types of loans that regulate how loans can be used. This flexibility, coupled with quick access to funding, makes short-term loans the ideal financing option for handling unexpected business expenses.
You don’t qualify for traditional loans: Alternative lenders often have less complicated borrower requirements; Unlike traditional banks and lenders, this model loan platform does not require a minimum operational history of two to three years, or an extraordinary business credit record. Thus, this can be a viable choice for small businesses or those just starting out – who fail to qualify for traditional financing.
You have a stable cash flow: Instead of monthly repayments, short-term loans are usually paid every week or every day. This is an important factor that you must consider if you are dealing with inconsistent cash flow, because it can be a difficult task in completing your loan payments later.
Tips to help you prepare a short-term loan application
Increase your personal credit score
“Why can a personal credit score affect my small business loan application?” Is a question that many entrepreneurs often ask.
Because your personal credit score is an indicator of how well you are able to manage your personal finances — and the implication, this score is a reference for creditors to assess how reliable you can be to regulate business payments later. Having a strong personal credit score is very important if your company is a newly established company without financial records.
If your personal credit score is not what you want, here are some steps you can take to improve it:
Look closely at your credit report: At a minimum, you review the credit report once a year. Be sure to report the errors you have encountered, because small errors such as miscalculating calculations can affect the credit score.
Always pay on time: A simple step, but it is very important in increasing your credit score. To prevent possible errors, it’s a good idea to set up payment reminder notifications, or pay monthly repayments automatically.
Avoid making too many credit requests: When you apply for a loan, there are two types of checks that are carried out: soft pull inquiries and hard pull inquiries. The first occurs when your credit is reviewed as part of a background check, while the latter when a prospective lender checks your credit as part of a loan decision. Hard pull inquiries will be recorded in credit reports that are integrated with the central bank for two years, and can have a negative impact on your credit score, while soft pull inquiries will be documented as notes in the database. You have to be careful when making multiple loan applications in a short time, because it can give prospective lenders the impression that you only want to find funds without thinking about how to return them.
Having a trusted online reputation is the key
More and more lenders check your profile across online platforms to find out how your business is running, rather than just assessing your application based on factors such as an established credit history or certain minimum annual income. Here are some tips to help you manage your online reputation effectively:
Be responsive: The way you communicate with consumers on social media shows how you do business. If you are responsive and timely in answering messages and comments online, you give the prospective lender that you are able to build positive relationships with customers, provide exceptional and serious service to your business – all of which are a sign that they will invest in the business right.
Request a review: A review or online review of you can show what your business is like — it shows that if your business has a good reputation, your product or service request is good and you engage the customer effectively as a source of input advice and business improvement. Providing reminders via email or notifications and offering incentives is a strategy that you can implement to encourage your customers to give positive reviews.
Building thoughtful leadership: Connecting with influencers in the industry you are in, participating in community events, and investing funds to mix powerful content-based marketing strategies are steps you can take to build your self-image as a leader who has lots of ideas — and your business as a leading company that makes valuable investments.
Where can I get a short-term loan for my business?
Traditional banks and lenders usually have strict loan terms — such as having an outstanding credit record, a minimum of two to three years operational history or an annual income of at least IDR 2,000,000,000.
These provisions often make it difficult for small businesses to qualify for traditional loans. Although there are several MSME funding options for business owners, the emergence of alternative lenders has opened up new possibilities. Offering greater flexibility, an efficient application process and quick access to funding, this creditor can be a viable choice for small business owners in seeking external financing.