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Short-term Business Finance

Published on 4th July 2019 - Last update on 1st July 2020

Sourcing a finance solution that’s compatible with your goals and everyday operations isn’t always straightforward. There are so many factors to consider, plus you need to be able to move forward knowing what it is you’re hoping to achieve which, sometimes, might just be additional financial support over a short period of time. Yet thanks to the growing prominence of the Alternative Finance Industry, there are many more funding solutions available to SMEs - which can mean singling out the most appropriate short-term agreement for your business can become confusing and time consuming. Nevertheless, by making sure that you’re armed with all the facts and a realistic set of expectations, you could discover a suitable finance arrangement to fit in with your business' needs going forward. So if you’re looking for a short agreement but don’t know where to begin, here’s what you need to know about Short-Term Finance.

What can Short-Term Finance be used for?

Generally speaking, because many of the finance solutions that are available aren’t subject to any usage restrictions or borrowing limits (other than what lenders are able or willing to lend) Short-Term Finance can be used for any number of purposes, including paying utility bills, resolving corporate tax demands, replenishing supplies, staff training, new hires, funding an existing project or even purchases. However, some short-term products are more suited for specific purposes, such as purchasing property, buying out a partner or releasing capital in unpaid business-to-business (B2B) invoices. This highlights the importance of identifying what your business requires going forward and researching what finance solutions are applicable before making a decision.

Looking to raise funds for your business for only a short period of time? Unsure of what finance solutions are available to you? Apply for Short-Term Business Finance or learn more about how your business could benefit

How long do Short-Term products last for?

Naturally, this all depends on what type of solution you’re considering. Whilst a short-term (secured or unsecured) business loan could be arranged for a couple of months or even up to 3 years, others finance solutions need to be repaid within 120, 90 or even 30 days. Plus, when you're thinking about the duration of an agreement, it is also important to take into account what repayment method you will need to use.

Although making Fixed Monthly Repayments is the most common form of repayment, that’s not the only scheme available. In fact, by taking a closer look, you’ll find that some products offer Flexible Monthly Repayment, Deferred Payments, Rolled-up Interest and so on. As such, in order to check whether your business can afford the agreement or whether it's even suitable in the first place, thoroughly examining how each product works needs to be one of your top priorities. Besides, by doing so could you could even save your business money in the long run.

What products are available?

Just because you’re searching for Short-Term Finance, it doesn’t necessarily mean that your options are limited. In fact, there is a wide range of finance solutions available that could provide you with the funds your business requires going forward. Plus, depending on the agreement and the complexity of your request, agreements could be established in as little as 48 hours, with funds being dispensed soon after. So to help make an informed decision that benefits the whole of your business, some of the Short-Term Business Finance products on offer to you includes (but isn’t limited to):

Business Loans

Business Loans can be established as either Secured or Unsecured products, that can be arranged on a short or long-term basis. Yet since you’re looking for a short-term arrangement, you could apply for a product that will last for a few months up to 3 years, during which your business must keep up with a Fixed Monthly Repayment scheme, plus interest. However, it’s important that you can also tell the difference between Secured and Unsecured Business Loans as well.

  • Secured Business Loans could offer you a lump sum ranging between £5,000 - £1,000,000, which will need to be backed against your business’ unencumbered assets (equipment, machinery, vehicles or property. Although presenting collateral could improve lender confidence, your assets will be at risk of repossession should your business default.
  • Unsecured Business Loans, on the other hand, could allow your business to borrow anything from £5,000 - £250,000 without putting your assets at risk. However, this, in turn, exposes the lender to a greater amount of risk, causing them to impose stricter application requirements and charge more interest (compared to a secured arrangement).

Overdraft Replacement

If you’re looking to raise funds for an upcoming tax bill, Overdraft Replacement gives you access to a line of credit which provides you with an allowance based on your previous income. You’re not obliged to make use of any of these funds but anything you do use will be subject to interest and needs to be fully repaid within 30 to 90 days, depending on your agreement. Once you’ve repaid what you’ve borrowed, you’ll regain access to the allowance and will be able to withdraw and repay funds on a revolving cycle, much like a personal credit card.

Merchant Cash Advance

A short-term unsecured finance solution, Merchant Cash Advance enables you to receive an advance based upon your future predicted card sales. In order to be eligible, your business must be able to accept credit and debit card payments and provide at least 3 of your latest consecutive sales reports. Using your reports, lenders will work out how much your business earns each month on average - so if you generate £25,000 in card-based revenue, you could receive an advance for a similar amount, if necessary. Plus, a Merchant Cash Advance is repaid using flexible monthly repayments which grant lenders the ability to automatically intercept an agreed percentage from each of your card sales until the debt has been fully repaid. Because of how the repayment scheme works, a Merchant Cash Advance isn’t subject to a set repayment term, but because most borrowers tend to resolve the agreement within 6 or 12 months, it’s considered a short-term product. Plus, your cash-based revenue is unaffected.

Invoice Finance

Meanwhile, Invoice Finance allows you to harness the funds tied up in your business’ unpaid business-to-business invoices. Regardless of whether the customer is late in paying or you need the money sooner than expected, you could release up to 90% of the capital held within any invoice, which is needed to be repaid by the debtor (your customer) within 120 days. As such, in order to qualify, your business must be able to maintain up-to-date ledgers and, depending on the agreement, exercise sufficient credit control processes. Nevertheless, there are two types of Invoice Finance available: Factoring and Discounting.

  • Factoring requires your business to have a minimum turnover of no less than £100,000. However, using this option does allow you to let the lender pursue the debtor on your behalf, whilst being confidential about the fact that you’re using their services. In addition, some lenders may provide bad debt protection as standard, safeguarding your business in the event that the debtor doesn’t pay or falls into liquidation. Once the debt has been repaid, the lender will release a balance (e.g. the remaining 10%) minus costs and fees.

  • Discounting requires your business to have an annual turnover in excess of £25,000 and be able to collect the debt using your own credit control procedures. But instead of the debtor paying your business, they will pay directly into a lender-controlled facility. Once the debt has been repaid, the lender will release a balance (e.g. the remaining 10%) minus costs and fees to you.

Looking for Short-Term Business Finance?

As well as making sure that you have the ability to grow, run successful day-to-day operations and meet the demands of your customers, you also need to ensure that your business has access to capital. However, if you’re an SME owner managing a tight budget, you may have to look for solutions outside of your business. So if you need support for only a limited period, know that there are plenty of Short-Term Business Finance solutions available. All you need to do is source a suitable agreement from a lender you can trust, which is where we can help.  

At Rangewell, we’re an Access to Finance specialist who’s mapped over 400 lenders to offer you an overview of more than 23,000 business finance products. Our services are free to use and we’ll also guide you through the application process. So if you’re looking to raise funds for only a short period, apply for Short-Term Business Finance today or find out more with Rangewell.


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David Harrison

David Harrison

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