If you’re planning to start a business or expand an existing one, short-term business loans can provide the necessary funding. To know more about short term business loans from Breathe Pay
What Are Short-Term Business Loans?
Short-term business loans are designed to provide financial support to businesses for a limited period. These loans can help with business expansion, staffing, or operational expenses. True to their name, short-term loans must be repaid within a year and are often unsecured, meaning no collateral is required. This makes them ideal for situations where longer-term financing is unavailable.
Interest Rates on Short-Term Business Loans
Interest rates for short-term business loans vary by lender and loan type. The Annual Percentage Rate (APR) can range from 3% to 150%, depending on the specifics of the loan.
Key Features of Short-Term Loans
- Quick Disbursement: Funds are typically released swiftly.
- Eligibility for Different Occupations: Both self-employed and salaried individuals may qualify, subject to lender terms.
- Paperless Transactions: The application process is largely digital.
- Flexible EMI Tenure: The loan term and EMI amounts are based on the borrower’s income and repayment ability.
- Customizable Loan Amounts: Borrowers can choose their loan amount and EMI within the one-year limit.
- Higher Interest Rates: Interest rates are often higher than personal loans, but the shorter term means less overall interest paid.
Types of Short-Term Business Loans
- Trade Credit
Trade credit functions like a business credit card, with a set limit on spending. Repayment is done monthly, similar to credit card billing, based on the total spending and interest rate. - Bank Overdraft
A bank overdraft loan requires a current account and allows withdrawals within a specified overdraft limit. This option can be useful during cash flow shortages, though it often comes with extra fees that borrowers should discuss with their lenders. - Demand Loans
Demand loans are short-term loans for working capital needs. They may last as little as seven days or extend over several months, with an open-ended repayment schedule that allows early repayment without penalty.
Ensure the following documents are prepared for a loan.
- Application Form: Fill in all required fields and provide an acknowledgment to the customer.
- Self-Attested KYC Documents: Include entity proof, such as a partnership deed, certificate of incorporation, or shops and establishment certificate. Additionally, attach PAN card copies for the entity, proprietors, partners, directors, security providers, and guarantors. Provide address proof for the entity and relevant parties (like proprietors and partners).
- Financials: Submit audited or provisional financial statements for the last three years, including the balance sheet, profit & loss account, schedules, notes to accounts, tax audit report, and statutory audit report. Also, include the current year’s performance and projected turnover on the entity’s letterhead, along with last year’s income tax returns, computation, and acknowledgment.
- Bank Statements (dated within 45 days): Provide the latest six months’ statements if applying as a first-time borrower, or twelve months for takeovers. For entities with multiple accounts, statements should cover at least 75% of banking turnover.
