Regardless of how well you plan everything, unexpected business expenses are possible for even the most organized companies. For example, you might need more inventory for filling a large order that unexpectedly came in, or an important piece of equipment might be broken, or maybe you need working capital for paying your employees as you wait for your customers to pay. In any case, you need some money immediately. At times like this, many business owners like you can turn to short-term commercial loans. So, read on to learn more about them.

What Are Short-Term Commercial Loans?

If you are a businessman, you must have found yourself facing some situations where you need short-term loans. These loans are preferred over merchant cash advances with less favorable terms and higher interest rates. Also, getting a short-term loan is much easier than getting a line of credit. They usually have a maturity of 12 months or less, which means that you will have to repay it within a year if you take on a short-term loan. Some short-term loans have to be repaid even more quickly, within 3 to 4 months. For some of these loans, you might need collateral. However, if your business is at least a year old and you have good credit, you won’t need collateral.

Most businessmen, like you, need short-term loans for their companies, of which sales are seasonal. An example of this would be the retail business building up its inventory for the season. A business like that might need a short-term loan for purchasing inventory before the season begins and won’t be able to repay it until after the season has ended. In this case, a short-term business loan will be perfect.

Short-term business loans can also be used to raise working capital for covering temporary deficiency in the funds to meet expenses like payroll. You might be waiting for your credit customers to pay their bills. Another reason why you might need a short-term loan for your business is for paying your bills, like for meeting your accounts payable obligations (what you owe to your supplier). You might be in need of a short-term loan so that you can even out the cash flow, especially if you have a cyclical business.

Qualifying for the Short-Term Financing

If you want to qualify for an unsecured line of credit or a short-term loan for your business, you will have to collect and submit comprehensive documentation to the lender, regardless of whether it is a credit union, a bank, a mutual bank, or any other type of lender. They will ask you for a record of payment history for any other loans you have previously received. This includes the cash flow history of your company for the last 3 to 5 years and payment histories to the suppliers. You should be prepared to submit your income statement as well, in case the lender requests it. The lender will check your credit history and credit score with different major credit bureaus. It is crucial that your credit score meets their minimum requirements. It will be your qualifications that will determine whether you secure the loan with collateral or whether you get an unsecured line of credit or loan.

Such short-term commercial loans are absolutely important for small businesses and for the smooth operation of the economy. Without short-term financing, it will be very difficult for small businesses to operate. They won’t be able to cover their working capital shortages, expand their operations or customer base, or purchase their inventory.

Startup Entrepreneurs