In 2017, the average loan given to businesses in South Africa was R63,000. However, based on the lender and the type of loan sought, the amounts ranged from R13,000 to R120,000.
While seeking loans in a traditional manner (such as through a bank) is a smart option for business owners, sometimes, it isn’t always the best option. After all, it can take quite a while to receive approval and for businesses that need capital quickly, this can present an issue.
A smarter option is a short-term loan online. These online business loans are typically provided by lenders who understand the sense of urgency you have, and who are willing to help you out with the funds you need, faster.
Now, you have to figure out how to find the right short-term loan online for your business. This can be challenging, but it isn’t impossible.
Here you will learn how to find a quality lender and get the loan that best suits your needs.
What is a Short-Term Loan?
A short-term loan is a lump sum loan designed to be repaid within a period that is usually under 18 months.
These loans are a flexible financial tool that is ideal for financing any short-term needs you may have. This includes things such as dealing with unexpected issues, managing cash flow and taking advantages of unforeseen business opportunities.
Before diving into a short-term loan, you also need to understand both the pros and cons it offers.
Advantages of Short-Term Loans
Some of the benefits of getting a short-term loan online include:
- Limited paperwork
- Set payment structure
- Get the funds even with bad credit
- Ideal for many business purposes
These benefits are appealing, especially to businesses that need cash quickly.
Disadvantages of Short Term Loans
Just like anything else, there are also some disadvantages of short term loans you should be aware of. These include:
- The annual costs are typically higher than longer-term loans
- The weekly payments may be difficult to make for some business owners
Make sure to weigh the pros and cons carefully before moving forward.
Now that you understand what a short-term loan is, you can dive into how to find the best one for your business.
After you have made the decision to seek funding, make sure to get your business records in order before you begin the process with any lender.
Be sure you have your business plan and know your cash flow situation. Figure out the amount of money you need to borrow and the types of payments you can afford.
Eliminate any Bad Debt
If you are dealing with a high-priced lender that is keeping you in a debt-trap, you need to put effort into getting out of it.
You can try to refinance your expensive debt, which will trim thousands off of your monthly budget. You can even seek an SBA loan to help you receive lower interest rates.
Keep in mind, if it looks as though you already have too much debt, lenders may not be interested in working with you. That’s why it’s always better to handle this before you begin shopping around.
Research the Loan Provider Options Available
Technology is your friend. As a small business, you have to perform due diligence. Make sure to explore a lender’s history, reliability, and reputation before making a move.
You want to find a transparent lender that offers single-digit interest rates, longer terms, superior customer service and that has verified online security.
Be sure to scour review sites, too, such as Google+ and TrustPilot. You can also ask your potential lender to show you white papers or case studies that help you “feel good” about the company.
Watch Out for Teaser Rates
A legitimate company is going to offer real loans that offer transparent terms and reasonable prices.
There are some lenders who advertise a rate “as low as,” even though there are few borrowers who will actually qualify for it. Don’t be tempted by this type of bait – it’s going to have negative effects in the long run.
Be sure you get what you expect and never ignore the fine details. If you do, you may find the cost of your short-term loan skyrockets after a few months have passed.
Pay Attention to all Costs and Fees
If the lender you are considering using only provides you with an interest rate and no other fees, you won’t be able to figure out the APR. This means you won’t know if you are getting a good deal.
You may also discover that you have to pay processing fees, application fees, and origination fees, along with other costs.
Make sure you fully understand what you are “on the hook for” before signing anything. While short-term loans may get you cash quickly, they won’t be worth it if you have to pay large fees.
Getting the Right Short-Term Loan Online
Remember, when you are trying to find a short-term loan online, it needs to fit your individual company. It should also help you reach your specific goals for growth.
There are more than a few online lenders who offer this type of loan, so make sure to keep looking before you choose one.
Always keep in mind that if something sounds too good to be true, then it is probably going to be bad for your business.