25 Jul Benefits of short term lending
Regardless of the size of a business, cash flow is a common issue across industries. The SME Growth Index report released in 2018 found that 21.1% of small and medium businesses (SMEs) are unable to take on new work because of cash flow restrictions. Cash flow restrictions were found to have prevented businesses from generating more revenue in the case of 92.7% of SMEs.
Couple that with the fact that borrowers are finding it increasingly difficult to secure funding from the traditional banks and are looking for alternative forms of short term lending. This includes funding from private lenders. The private lending industry has evolved to become a more conventional method of securing funds with less effort required and more appealing features and benefits.
We explore the benefits of short term lending and how it could help you or your clients business grow.
What is short term lending?
Short term lending gives your business the ability to borrow an amount of money, with peace of mind in knowing what your interest commitment will be upfront.
As the name suggests, payment terms are shorter than your average long term business loan, generally having a term of 1 to 12 months for lending amounts up to $10 million.
When might short term lending be the right choice?
If you want to strengthen your business now and into the future, you might consider purchasing a new property, buying an expensive piece of equipment that will improve efficiency or simply seek to fill a cash flow gap.
A short term loan can be an efficient way to access new capital, that when used responsibly, can increase your revenue in the long term. The key here is to ensure you have a clear strategy for how the money is used to grow your business. This helps to negate the risk associated with the loan and puts the focus back on using the funds to fund growth.
Some ways in which short term funding can help include:
- Expansion of your business when you need extra space, equipment or staff to accept new business opportunities that are coming your way
- To even out any cash flow fluctuations due to operating in a seasonal industry that experiences bumper months mixed with quieter months
- When an opportunistic property or stock purchase comes knocking and you need to act quickly
- To pay out an outgoing partner in the business
Why private lenders?
Borrowers are finding it increasingly difficult to secure funding from traditional channels so are looking to private lenders to fill the void.
We assess borrowers on a different set of criteria than the traditional banks. Private lending is exit strategy based, giving you the added benefit of being able to act quickly when opportunities arise. We don’t need to see an extensive background of financials and we aren’t focused on a perfect credit history or seeing a set number of presales for a project. This makes short term lending the smart choice to jump on time sensitive opportunities for long term growth.
Following the Royal Commission, borrowers trust of the big four banks took a hit and businesses are looking for an alternative that offers transparency and reliability. They are seeking straight forward lending processes that are fast and efficient.
Private lending meets that need for borrowers.
Short term lending offers quick access to funds
A short-term business loan is ideal for when the opportunity is here and now. Given the current economic climate and the outcome of the Royal Commission, banks are more risk averse than in the past. A lot of business owners can’t wait up to three months for a bank to look over their financials with a fine-tooth comb in the hope of having a loan approved.
The opportunity will have flown right on by in that time. Leaving your business with a potential loss of income or the loss of a property deposit if a settlement cannot occur on time.
When speed is critical to capitalise on an opportunity or to address a challenge, short term finance can make sense. With flexible terms and competitive rates, this solution can give borrowers a quick decision, quick settlement and an easy application process.
After an initial in-house assessment, we will let you know the likelihood of your proposal being funded. With loan offers generally available within 24 hours.
Short term lending has fewer requirements
Private lenders offering short term solutions are exit strategy based. We put the focus on you and your collateral. With short term lending, you:
- don’t need to provide us with all of your business financials
- don’t need to have perfect credit history
- don’t need to have presales on your project
The end result? An increased chance of being approved to fund your business growth and reap the benefits well into the future of your business.
Because short term lending has a limited payoff term, lenders are often more willing to take on slightly riskier projects than the banks.
Short term lending delivers long term benefits
The early bird gets the worm isn’t just a cute quote. There is a lot to be said for being able to act quickly when opportunity presents itself and reap the benefits over the long term.
Say, for example, you have been eyeing off a warehouse in your local area. You notice a ‘For Sale’ sign has just gone up for the first time in twenty years. It’s in the perfect location and is the exact size space you are after.
Short term lending ensures you have the funds available to move quickly on the opportunity. You secure the property and have up to 12 months to work out a long term debt solution, generally through a traditional funding channel.
Or perhaps your supplier is having an end of year stocktake sale. Buying in bulk will allow you to save 30% on the stock. But you don’t have the cashflow to secure a large order. A short term loan can help you secure the discount, which more than offsets the interest on the loan.
Both scenarios above deliver real and long term benefits to your business over time. Benefits that you may have missed out on if you’d waited for traditional banking approvals.
Want to discover if short term lending is right for you? Click here to get started.