What is a Short-term Business Loan?
Short-term Business Loan is a loan option or short term funding offered to cater urgent or short-term business requirements. This loan can be availed to cover any business expenditure, such as meeting working capital needs, business expansion managing business cash flow, covering operational cost, etc. Short-term loans are collateral-free loans that can be repaid within a tenure of 12 months with flexible EMI options. Short-term loans can be availed by Small Finance Banks, Micro Finance Institutions, NBFCs and private sector banks.
Features and Benefits
The features and benefits of short-term business loans vary from one lender to another; however some of the common points are given as below:
- Anyone can apply: One can apply for this loan as an individual or as a business
- Minimal paperwork: The lack of scrutiny in acquiring short-term loans translates directly to less requirement of paperwork. As a result, this can be a completely digital process
- Quick access to funds: The minimal inclusion of paperwork due to digitisation results in faster access to short-term loans
- Fast loan approval: Based on a scheme’s or the company’s policy, the time taken for the loan approval can be less than a minute
- Secured and unsecured loan options: Depending upon the lender, the applicant have both secured and unsecured options on these loans
- Need specific loans: Short-term business needs can be tended through these types of loans
- Short repayment period: The repayment of short-term loans usually extends up to 12 months
Also Read: Types of Business Loans in India
Documents Required for Short Term Loans
The document requirement for short-term business loans vary from one lender to another; however some of the common documents are given as below:
- PAN card of an individual or the business
- Bank statements of the last 6 months
- Copy of address proof, such as telephone bill, electricity bill, bank statements, voter ID card, Aadhaar card, passport or driving license
- Copy of identity proof, such as voter ID card, Aadhaar card, driving license and passport
- Copy of age proof such as 10th Grade Education Board issued the certificate
- Certification of Company Incorporation or Establishment Certificate is required
- Memorandum of Association and Articles of Association of the company
How to avail a Short-term Business Loan?
The process to avail short-term business loans involves the following:
Step 1: Check if you are eligible for the loan.
Step 2: Prepare the documents necessary to avail the loan.
Step 3: Check and compare from the loan deals by visiting paisabazaar.com
Step 4: Choose and pick the loan deal by submitting the loan application form online
Step 5: Once the documents are verified, the bank will approve the loan
Step 6: After loan approval, the loan amount will be disbursed in the mentioned bank account
Frequently Asked Questions
Q1. Why should I take a short-term business loan?
Ans. In the initial stage of your business’ growth phase, you might find yourself in need of funds. While most of it is manageable through personal capital but you can’t wait around for finances. Short-term business loans ensure that critical matters are met properly.
Q2. Can a credit limit for a business loan increase?
Ans. Yes, the credit limit for a business loan can be increased. However, it is subjective to the criteria of the scheme you have chosen and the bank you have chosen to take the loan from.
Q3. What are the benefits of Short-Term Business loans?
Ans. The benefits of Short-term business loans are as follows:
- The loans are flexible
- Under the government scheme, they don’t require any collateral
- These loans can be approved pretty fast.
Q4. How long do I have to repay a short-term business loan?
Ans. A short-term business loan is usually repaid within one year.
Q. Can I get a short term business loan with bad credit?
Ans. To get a short-term loan with bad credit or low CIBIL score, you need to first try to improve your credit score to further secure your financial future. CIBIL or credit score above 700 is considered good by private and public sector banks. Rest, to avail short-term loan you can apply with Non-banking Financial Companies (NBFCs), Small Finance Banks (SFBs), Micro Finance Institutions (MFIs), crowd funding, POS loans providers, peer-to-peer lending, etc. These institutions offer business loans on behalf of your current financial health, source of income, business stability and repayment capability. Credit score or CIBIL score is not the primary factor of these institutions in offering business loans.
Q5. How do I check my eligibility for the loans?
Ans. You can check the eligibility for the loans at the bank websites.
Q6. Can I get a short-term business loan to get new equipment for my factory?
Ans. Yes, you can take a short-term business loan to get new equipment for your factory.