Short-Term Business Loan :

Lack of substantial capital, inadequate infrastructure, and obsolete technology are among the primary issues that hamper businesses’ profit-generating capacity. Quick access to funds thus helps business entities to tackle these issues effectively for streamlined operations.

One of the typical ways to raise instant finance is via short-term business loans that come with considerable funding value and require you to fulfil simple eligibility criteria.

With KredX, businesses can avail short-term business loans via bill discounting to fulfil their working capital needs.

What is a Short-Term Business Loan?

A short-term business loan in India is also known as working capital loan. It is designed to help business owners to fulfil immediate financing needs by providing quick access to the working capital. 

Typically, the loan amount is availed in a lump sum and is paid over set repayment tenure. Such a loan can come with a term ranging anywhere between 3 months to 3 years.  

Though short-term loans come with a high instalment amount due to a limited tenure, they are more likely to accrue interest at a lower rate. Depending on its funding needs, a business entity can select a suitable short-term loan.

Types Of Short Term Loan:

Broadly, there are 5 types of short-term business loans, and each of them comes with a distinct set of features and benefits. Check out some of them:

  1. Line of Credit:

It is usually an unsecured credit option available for both long and short-term. It is designed to cater to immediate cash requirements and ensures continuous access to funding.

Typically, business entities with an exceptional credit history can avail a line of credit from any commercial lender at favourable terms. It must be noted that under this credit option, no outstanding monthly payment is due until a business entity uses the line of credit.

  1. Invoice Discounting:

It is a unique short-term business funding option that helps take care of immediate working capital requirements. Through this type of credit option, business entities can leverage their unpaid invoices to raise funds at a set percentage of the invoice value. 

Business entities need to repay this debt along with interest and fees once they receive payment from their customers. Usually, the rate of interest for a particular borrower is determined based on the invoice and the business’s creditworthiness.

With KredX, businesses can utilise their unpaid invoices to access working capital at a discounted rate.

  1. Invoice Factoring:

Although invoice factoring and invoice discounting are somewhat similar, a distinct difference separates these two credit options - unlike invoice financing, invoice factoring does not involve a credit facility. 

In this case, business entities sell their invoices to a third-party company and in return, receive an upfront payment up to at least 70% to 90% of the bill amount. Hence, the third party, mostly a financial institution, assumes the responsibility of payment collection from customers. 

  1. Vendor Financing:

Also known as trade credit or supplier credit, this financing option is an effective way to manage cash flow. In this setup, businesses seek funds from their suppliers and use the money availed to purchase the lending vendor’s products or services.

Businesses do not have to pay any interest unless they fail to repay the debt by the due date. Vendor financing is a feasible short-term business loan as it enables businesses to convert the cost of products into sales.

  1. Business Credit Cards:

Business entities can avail a business credit card that matches their everyday spending requirements. With the help of a business credit card, business owners not only meet their cash requirements successfully but also enjoy additional perks. 

Such cards extend cashback, milestone bonuses, and reward points on most transactions and help multiply savings. Notably, users are required to pay additional interest and late fees in case of failing to clear all dues within a pre-mentioned payment due date.

It must be noted that business entities need to meet several eligibility criteria, provide required documents, and agree with the financial institutions’ terms of repayment to avail a short-term business loan in India.

Individuals can meet their working capital requirements with more convenient repayment options and simpler eligibility criteria by opting for invoice discounting services from KredX. We help to arrange immediate funds via bill discounting and enable businesses to take care of their short-term requirements and keep their operations running.

How Does Short-Term Business Loan Work?

In terms of short-term business loan, the loan amount availed has to be repaid in instalments within a predetermined repayment tenure. Business entities may negotiate a more frequent repayment option or better terms with their lending institution as per their eligibility. 

Businesses will be required to provide essential documents and go through a verification process for such loan approval. Once all the requirements are met, they may avail a substantial fund to meet their immediate financing needs.

Benefits Of Availing A Short-Term Loan:

Typically, individuals take a short-term business loan to maintain operations or to generate more profits via expansion. Business entities often utilise the funds availed in the following ways –

  • Expand operations
  • Upgrade factories and equipment
  • Hire skilled staff
  • Office space renovation
  • Restock inventory 
  • Fulfil  working capital needs

Other notable benefits of short-term business loans include – 

  • They are easy to avail and require businesses to meet minimum eligibility.
  • They come with scope for sizable funding.
  • Borrowers can utilise them to fulfil the diverse financing needs of their business as the funds come with no end-use restriction.
  • All types of businesses qualify for these loans.
  • They do not create a long-term liability and are easy to repay within a short tenure.

With the help of short-term business credit, entrepreneurs ensure a smooth flow of cash and uninterrupted operations. 

Choose KredX For Working Capital Requirement:

At KredX, we help customers access immediate access to funds via zero-liability, bill discounting service. Businesses can access such funding within 24-72 hours* only against a few basic requirements mentioned below.

  • Eligibility criteria:

Businesses that extend goods and services to large-chip companies can benefit from our bill discounting services. Also, applicants’ creditworthiness plays a decisive role in determining their eligibility and the amount of money they can raise. 

    Sign Up Now to Check your Eligibility for Bill Discounting Services

    • Documents required:

    To back up their eligibility, business owners need to submit essential financial details and related documents like - 

    • KYC documents
    • Proof of income like the latest balance sheet, ITR, Bank Statement, etc. 
    • Proof of address like latest utility bills
    • Invoices and documents to be discounted 

    Get in touch with us to find out about the requirements to benefit from invoice discounting.

    Short Term Business Loan Calculator:

    Since a short-term business credit accompanies limited repayment tenure, businesses need to figure out the timeline that will suit them the most. They can use a financial tool like a short-term business loan calculator to make an informed decision.

    To use the financial tool effectively, one needs to account for the following factors –

    • The loan amount
    • Interest rates
    • Repayment Tenure

    There are many handy financial tools that offer instant outcome and enable multiple adjustments. It thus allows users to compare the different loan options easily to help pick an affordable funding option.

    Businesses must also weigh in their financial standing, creditworthiness, and repayment capability before availing a short-term business loan in India.

    Frequently Asked Questions on Short Term Business Loan:

    A. Short-term business loans help fulfil the immediate working capital requirement. They help business owners to maintain their venture’s operations and maintain cash flow.