Short-Term Business Loan – Know Tenure, Interest Rates, & Benefits

Running a business requires financial stability to meet various needs like working capital requirements, expanding operations, and marketing expenses. This is where short-term business loans come in handy. These loans have a shorter tenure and can be repaid within a few months to five years.

This article explores short-term business loans and their advantages and disadvantages compared to long-term loans.

Understanding short-term business loans

Short-term business loans are designed to cater to the immediate financial needs of businesses such as working capital requirements, product launches, or business expansion. Business loan tenures range from one to five years and are usually approved and disbursed quickly.

Benefits of short-term business loans

a) Fulfilling working capital requirements:

Short term loans are ideal for bridging gaps in working capital needs. 

b) Improving credit score:

Obtaining a short term loan and repaying it on time can help you improve or build your credit score. 

c) Quick approval and disbursal:

Short term loans are known for their quick approval process and disbursal.

d) Collateral-free loans:

In most cases, short-term business loans do not require any collateral.

Short-term loan interest rates

Interest rates for short-term business loans can vary from lender to lender, ranging from 10% to 30%. Calculating the EMI using a business loan EMI calculator can help you plan your finances better.

Sample calculation:

Let's say you are taking a short-term business loan of ₹10 lakh at an interest rate of 15% per annum for a tenure of three years. Using a business loan EMI calculator, the monthly EMI would be approximately ₹34,898.

Short-term loan tenure

Short-term loans have a shorter tenure compared to long-term loans. Depending on the lender, the tenure can range from one to five years. It is important to evaluate your business requirements and choose a tenure that aligns with your repayment capabilities.

Additional read: Funding For Short And Long Term Business

What should you do when facing a financial crunch?

When facing a financial crunch, evaluate your business needs to identify the financing solution that suits you best. Here are some steps to help you choose the right loan offer:

1. Determine your business needs:

Identify where the financial gap lies in your business. Do you need funds for working capital? Or do you need funds to purchase new machinery? Understanding your requirements will help you choose the right loan option.

2. Research and verify loan schemes:

Visit nearby banks and NBFCs to explore different loan schemes that suit your business needs. You can also use online platforms like Tata Nexarc to check your eligibility and get loan offers from different lenders.

3. Shortlist suitable loan schemes:

Shortlist the loan schemes that match your requirements and compare them based on factors like loan amount, business loan interest rate, tenure, EMI, collateral, etc. Choose the one that best suits your business needs.

Conclusion

Short-term business loans can provide immediate financial assistance for businesses in need of working capital or other short-term needs. These loans offer quick approval, and minimal documentation, and can help improve your credit score. However, it is important to carefully evaluate the interest rates and tenure before applying for a loan. 

If you're considering a short-term business loan, make sure to use a business loan EMI calculator to calculate EMIs and plan your finances accordingly. Mahindra Finance offers customised short-term business loans with competitive interest rates and flexible repayment options. Visit their website to apply for a business loan that fits your requirements.

FAQs

Q: How do I calculate my EMI for a short-term business loan?

A: You can use a business loan EMI calculator available on lender websites or financial portals. Simply enter the loan amount, interest rate, and business loan tenure to calculate your monthly EMI.

Q: Can I apply for a business loan online?

A: Yes, many lenders and financial institutions offer online application facilities for business loans. You can visit their websites, check your eligibility, upload the required documents, and apply for a loan online.

Q: What is the tenure for short-term business loans?

A: The tenure for short-term business loans can range from one to five years, depending on the lender and your repayment capabilities.