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Tata Capital > Blog > Loan for Business > Short Term Business Loans – Pros & Cons

Loan for Business

Short Term Business Loans – Pros & Cons

Short Term Business Loans – Pros & Cons

Securing the appropriate means of financing is essential to keep your business thriving. With suitable financing, you can maximize potential profits, minimize operational costs, maintain a healthy influx of capital and promote growth.

Whether it’s hiring new employees or adding a new product to your portfolio, thinking on your feet and coming up with quick solutions distinguishes your business between shutting out the competition and shutting operations. 

When time is money, a business loan is an excellent way to secure funds. It gives you quick access to fresh capital, that if you use constructively, can transform your business.   

Additional Read - 10 Benefits of Taking a Business Loan

Such loans have their pros and cons, and you need to understand each of them carefully before you apply for business loan.

Pros Cons
Quick funding: They’re known as quick business loans because the disbursal of such a loan takes only a couple of days. It’s an ideal tool for times when you urgently need cash.     The loan term: The loan term lasts only for a brief period. You need to ensure that your cash flow is steady, so you’re able to run your business and pay the EMIs.  
Easy approval: With flexible business loan eligibility criteria, you easily qualify for a loan with limited paperwork.    Cycle of borrowing: The flexible, convenient and easy availability of these loans can make you a seasonal borrower. You’ll tend to turn to this method whenever you need an instant business loan. Constant cash flow is excellent but consider the risks too.  
Flexibility: You decide when, where and how you use the money for your business.   Higher interest rates: The nature of this loan is such that it doesn’t require collateral. To protect the lender against any risk, the loan comes with higher rates of interest. Repay the loan quickly to reduce the costs.  
Repayment in a limited duration: With short durations, you get to clear your loans off in a shorter, limited period, making you debt-free soon.  Frequent payments: Contrary to long-term loans with a monthly repayment scheme, short-term loan for business requires daily or weekly payments. You need to consider this, especially if your business has an inconsistent cash flow. 

Make the right decision for your business

Every loan has its share of pros and cons. Sometimes, the benefits may outweigh the limitations. However, the onus is on you to determine if the loan is a suitable fit for your business or not. If yes and you want to apply for a short-term business loan to get you out of a tough financial situation and grow your business, Tata Capital is the best bet. Some benefits that you may get with Tata Capital include attractive interest rate, faster approval and quick disbursal of money, flexible repayment terms, etc.  

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