What is Short Term Loan and Its Benefits
14 December, 2022
A business may need funds on short notice. Without it, your business operations may get hindered. If you are looking for a way to access a quick loan that you can repay quickly, think Short Term Loans. Here, we talk about the common Short-Term Loans you can avail of easily and how they can benefit business owners.
What Are Short-Term Business Loans?
A Short Term Loan is a Business Loan that can finance temporary business requirements. You repay the loan amount along with interest before your loan tenure ends. For Short Term Loans, the loan tenure is usually three to five years. It can cover immediate expenses like operation costs, expansion, working capital requirements, etc. Short Term Loans can be secured or unsecured loans. In the case of unsecured loans, the lender may approve the loan based on your business’s running years and financial records. For secured loans, you need to pledge some form of security deposit.
Types of Short Term Loans
Loans on Credit Card: These loans are pre-approved loans extended to select credit cardholders and require no paperwork. You can log into your digital banking portals, check for offers on your credit cards and instantly apply for a loan. You can repay the loan via EMIs within one to five years.
Consumer Loan for MSMEs: For the seamless running of a business, you also need a well-built space. You may need computers, printers, security systems, generators, and so on. Some lenders offer loans wherein you get the buy-now-pay-later option with no-cost EMIs. Therefore, you can buy the right equipment for your business space without additional costs.
Loan Against Gold: Loan Against Gold, commonly referred to as a Gold Loan, is a secured loan. You pledge your gold ornaments in exchange for equivalent cash. You may only pay interest until loan maturity and repay the principal amount after the tenure ends, which is usually three years.
Bridge Loan: Bridge Loans can help you meet immediate requirements. For instance, you are about to move into a new office space for which you are in the process of getting a loan. However, you need to pay a security deposit to the new landlord. Here, a Bridge Loan can be availed to fund the deposit until your initial loan gets sanctioned.
Overdraft (OD) facility: An OD is a short-term line of credit where you pay interest only on the used amount. ODs can meet various short-term business expenditures.
Demand Loans: These are secured loans where you must pledge collateral like Shares or Mutual Funds. You can get high-value loans without having to sell your securities.
Also Read: What is an overdraft and how it can help your business
Benefits of Short Term Loans
Here are the advantages of Short Term Loans for business owners:
Collateral-free loan options: Short Term Loans are usually unsecured loans. Therefore, you are not required to put down any property papers and such to borrow money from the lender.
Easy to secure: Short Term Finances are easy to acquire as the loan amounts and tenure may tend to be shorter. For instance, you can get an instant loan by pledging gold to finance business operations. In the case of Loans on Credit Card, the loan is typically pre-approved, all you need to do is confirm the loan tenure and interest, and the bank will start processing the loan.
Flexible end-use: You can use the loan amount to finance almost all short-term requirements. For instance, money borrowed through OD can be used to pay employees’ salaries, renovate an office space or pay utility bills.
Quick repayment: With shorter tenures, you can repay the loan faster and free up funds for other business purposes.
Also Read: Understanding Fixed Capital vs Working Capital: A Complete Guide
HDFC Bank recognises the challenges entrepreneurs face while acquiring capital. Thus, HDFC Bank has created MyBusiness, a one-stop solution that gives you easy access to loans, digital solutions and provides you with the essential knowledge you need to run your business. With HDFC Bank MyBusiness, you can scale up, expand your operations, and nurture your business.
To learn more about the various products and services at HDFC Bank that can benefit your enterprise, you can check out the MyBusiness page.
*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. HDFC Bank recognises the challenges entrepreneurs face while acquiring capital. Thus, HDFC Bank has created MyBusiness, a one-stop solution that gives you easy access to loans, digital solutions and provides you with the essential knowledge you need to run your business. With HDFC Bank MyBusiness, you can scale up, expand your operations, and nurture your business. Short Term Loan at the sole discretion of HDFC Bank Limited. Loan disbursal is subject to documentation and verification as per Bank's requirement. Interest rates are subject to change. Please check with your RM or closest bank branch for current interest rates.
