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Expert

Frequently asked questions

about short-term finance

Guest Author
October 30, 2018

You should never take out any type of loan

without knowing everything about it. Here are
the common questions about short-term finance
that you need the answers for.

You have a lot of options available to you when it

comes to financing. For example, Max Funding,
one of the leading non-bank lender in Australia
offers different packages for you to check. Plus,
you have a choice between long-term and short-
term financing. Each of these comes with their
own pros and cons that you need to understand.

It’s particularly important that you do more

research when considering short-term finance.
Such loans often come with different acceptance
criteria than long-term loans. As a result, you need
to understand exactly what you’re signing up for.

So, where do you start?

This list of frequently asked questions will help

you to figure out what you stand to receive with
short-term finance.

Question 1 – What are the different types of

short-term finance?

Many types of finance fall under the short-term

banner. The following are the ones that business
owners are most likely to consider:

Short-term loans. This are perhaps the most

common solution. As the name implies, short-
term loans require you to repay the sum of the
loan within a short period of time. Typically,
this can be within one year. However, some
lenders, such as Max Funding, offer up to 36
months for repayment on some of their short-
term loans.

You may also find it easier to access a short-

term loan than you would a traditional
business loan. They have different acceptance
criteria that often make them available to
those who have bad credit.

Trade credit. A business may use this type of

finance to help them to pay for goods that
they’ve already received. Typically, they’ll
repay the loan within one month, usually upon
sale of the goods.

However, you may be able to secure trade

credit with a longer repayment period.
Businesses use these loans to help them
balance their cash flow. They’re particularly
useful for growing businesses that need to
expand their inventory but don’t have the
required capital.

Overdrafts. If you have a business bank

account, it’s likely that you’ve received an
offer to create an overdraft. An overdraft
allows you to draw money out of your account
even if you don’t have money in it. Overdrafts
have their limits and usually come with high
interest rates. However, you only pay these
rates if you dip into the overdraft.

They’re useful for businesses that anticipate

running into invoicing issues. They give you
some breathing space while you wait for
payments to clear.

Credit cards. This is another common form of

short-term finance. A business credit card
allows you to charge purchases against a line
of credit. You then make repayments based
on your agreement with your credit provider.
These repayments have interest attached,
again at a rate agreed with your provider.

Credit cards can prove useful in a pinch.

However, the high interest rates attached can
cause problems. This is especially the case if
you don’t repay than the bare minimum. Over
reliance on multiple credit cards can also put
you in severe financial difficulty.

Question 2 – When might I need short-term

financing?

Running a business comes with all sorts of risks.

There may be times when you struggle to balance
your cash flow, for whatever reason. These are
usually the occasions where you can benefit from
short-term finance.

You may use this solution in any of the following

circumstances:

You’ve experienced a sudden surge in demand

that means you need to buy more inventory.

Something’s gone wrong with your equipment

and you don’t have the funds needed to fix it.

Clients haven’t paid on time, which means that

you don’t have the cash you expected to have.

Furthermore, you may find that one of your

project’s experienced unexpected issues. Such
was the case with one Max Funding client. His
construction project ran into several obstacles
that he didn’t anticipate. This led to delays, which
inevitably increased costs.

He required an extra $200,000 to cover those

costs.

Max Funding helped the client to use his

construction project as security on short-term
finance. He received the money he needed to pay
the extra costs. Plus, he boosted his credit limit to
give him some more breathing space.

So, as a general rule, you’ll take out short-term

financing to deal with unexpected issues.

Question 3 – Should I apply online?

Many short-term finance providers allow you to

apply online.

This is perfectly safe as long as you check that

the website takes the proper precautions.

Check the URL first. You should see that it begins

with https://. The “s” is important because it tells
you that you have a secure connection. As a
result, you can feel safe sending personal
information.

If the “s” isn’t there, don’t send any personal

details to that website.

It’s also worth contacting the lender to ask if they

use SSL encryption. This technology encrypts the
information that you send so that only the
intended recipient can read it. You’ll usually find
mention of this technology in the provider’s
privacy policy. Be wary of applying online with any
providers that don’t use it.

Question 4 – Do I have to have good credit?

Short-term financers may take your credit score

into account. However, they’re often more flexible
than traditional lenders. That means you can often
access short-term financing if you have bad
credit.

The trade-off is that you’ll usually face higher

interest rates than you would with loans that
require you to have good credit. Still, this makes
short-term finance a potential solution for those
who have credit-related issues.

Question 5 – How much can I borrow?

This depends on the lender and the type of short-

term finance you require. Your circumstances also
play a role.

Some lenders, such as Max Funding, can offer

short-term finance of $1 million or more. Others
restrict you to a few thousand dollars.

Typically, the lender will determine your maximum

financing amount after reviewing your application.

Question 6 – How long does it take to apply

Again, this depends on the lender and the type of

finance.

However, you’ll often find that you can complete

an application online and get pre-approval in a
matter of minutes. It then might take a day or two
to receive full approval.

Question 7 – Can I change my mind?

As long as you haven’t signed a contract, you can

change your mind on any type of short-term
finance.

That makes it all the more important that you read

and understand the terms of the finance. In most
cases, you’re locked in after you put pen to paper.

However, some financers offer a grace period of

24 hours after you sign the contract. You may be
able to cancel the loan within this period. Check
with your lender to see if you have this option
open to you.

Question 8 – Can I take out multiple types of

short-term finance?

The answer to this depends on several factors.

These include your circumstances and your
lender’s criteria.

It’s certainly possible that you could, for example,

take out a short-term loan and get a business
credit card. However, it’s crucial that you
understand the potential implications. Using
several types of short-term finance at the same
time increases your repayment burden. It also
means you have to pay interest on several sums
of money.

Question 9 – How do I know the lender/financer

is legitimate?

Legitimate lenders have to obtain a license to

offer credit under the National Consumer Credit
Protection Act 2009. You can also check with the
Australian Securities and Investments Commission
(ASIC). Legitimate lenders usually carry ASIC
accreditation.

It’s also worth checking for mentions of the lender

in respected financial publications. You can also
check to see if they’re registered with the Better
Business Bureau. If they are, they’ll usually have a
rating attached to them. Finally, spend some time
researching what others have to say about the
lender.

Combine all of that and you should get a good

idea of whether a lender/financer is legitimate.

The final word

With these questions answered, you’re now in a

better position to determine which type of short-
term finance suits you. You should also be able to
see if the lender you’re considering can offer what
they claim.

Always consider your own circumstances before

using finance of any kind. After that, make sure
you choose the right lender.

Max Funding can help if you need short-term

finance. We offer:

Pre-approval within five minutes.

Flexible approval criteria

Tax-deductible interest.

Loan repayment periods of up to 36 months.

Financing for people with bad credit.

Low-doc loans.

Early repayment.

The ability to borrow anywhere between

$1,000 and $1 million.

You just need to apply from Max Funding to get

started.

What do you think?

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#Business Finance #Funding #Max Funding

#short-term finance

Guest Author
Dynamic Business has a range of highly
skilled and expert guest contributors, from a
wide range of businesses and industries.

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