Regardless of the shape and size of your business, When talking about short term loans- they come with shorter repayment term that generally has its own repercussions. Here, some are good and some are a little bad, but they all are helpful to consider and can be used as per your requirements.
Let’s dig a little more inside and know some common perks of these types of loan
Low Cost of Capital
The first and the most noticeable perk of these funding types is that there is the low cost of capital involved when going for one. Well, it all makes sense only if you think about it, even at a higher rate of interest, short term loans can easily accumulate interest for a shorter period of time as you repay them.
Generally, you will also come across several short term loans with its cost expressed as a factor rate which can also be a decimal number- that s when added to your loan amount can tell you how much your short term loan will cost you approximately. Also, as the rates can be a little high for such type of loans, these funding options mostly end up costing you less than a longer-term loan, even if it involves particularly low rates.
East and Quick Time to Funding
Furthermore, when we talk about most types of short term loans then they will certainly get you funded way too faster when compared to the long-term funding sources and options.
Well, this is due to the underwriting process on Short Term Loans which is typically very less. So, the longer the repayment time period of your loan, the riskier it will be for the lender. Whereas, the shorter the repayment time on a loan, the less risk it will for the lender.
As a result of which the application processing formalities are somehow less comprehensive as well as the paperwork is heavy when we talk about short term loans. To be a little more precise- the borrower of a short term loan can also go through much faster because of the steps involved in here (when applying for one).