During economic downturns, having access to short-term financial solutions is essential for small businesses to keep up and running. Without short-term financing, a business’ growth or expansion might be impeded, and new businesses might never be erected.
A key feature of short-term loaning is that it is not costly, and the process for acquiring it is not drawn out, or arduous. The borrower’s needs are prioritised which means if an emergency or unforeseen event makes it necessary for a business to have ready access to capital, they have it through short-term financing.
The inherent flexibility of short-term financing makes it well suited to businesses in need of leasing or renting equipment. While long-term financial institutions do provide funding for equipment costs – to can be paid back over several years – sometimes they are not willing to provide long-term solutions because of the potential risk involved in financing equipment long-term. In this instance, short-term loans have the flexibility to provide finances for a business’ equipment needs.
There are many reasons why people choose a short-term financial investment to help them meet their needs, such as if a person has unmortgage-able properties, or if they need to secure a property. Other reasons include those who need a quick cash flow cover, funding for property renovation, raising capital, and business obligation requirement.
Essentially, by investing in short-term loans, individuals or businesses can take advantage of the opportunities they are given, which without a loan, they would otherwise not be able to benefit from.
It is good to keep in mind that short-term loans do need to be repaid promptly in comparison to long-term financial investments.