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Ways to Use a Short Term Business Loan

When you find yourself in need of a quick influx of cash for your business, getting approval for a traditional bank loan may take too long. Short-term loans have a faster approval period making them exceptionally useful when you want to jump on an opportunity.

restaurant employee finance

Here are just a few ways that small business owners are using short-term working capital loans and lines of credit to grow their companies.

Pay for Seasonal Expenses

Many businesses experience a boom around the holiday season, which means stocking extra inventory and taking on temporary employees. Short-term loans are ideal for covering these seasonal expenses and for boosting your marketing campaigns to bring in even more revenue.

Update Your Equipment

What do you do if you run across the deal of a lifetime on new equipment but don’t have the cash on hand to pay for it? As long as what you’re looking to purchase will have lasting benefits for your business, you can use a short-term loan to cover the cost instead of hurting your current cash flow.

One of our clients, a franchisee, was required to purchase new equipment for his locations within a time period of four months. The franchisee needed $100K to cover the cost for his multiple locations. By taking out a short-term working capital loan he was able to buy the new equipment without hurting his cash flow!

Start Expansions and Renovations

restaurant bar

Whether you need to update your current location to provide a better customer experience or your business is growing enough to warrant opening a second storefront, short-term loans provide the financial support that you need. In fact, such a loan is likely to more than pay for itself with increased sales and an influx of new customers.

For example, one of our clients needed $75,000 to conduct renovations that she was able to complete after hours. It took her less than a month to finish the project and those renovations helped her increase sales by $900,000 in one year!

Prepare for Unforeseen Expenses

Unforeseen equipment troubles, structural damage from fires or floods, a sudden shift in the market or a sharp economic downturn can all put your business in a tight spot financially.

It doesn’t matter how careful you are or how well you plan; there’s always the chance for something to pop up that you didn’t see coming. Opting for a business line of credit in these circumstances can mean the difference between keeping your business going and having to shut down.

One of our clients needed funds to remodel his current establishment. By taking out a business line of credit he was able to take up to 5 separate loan drafts to pay contractors in increments over the course of the remodel. The convenience of taking 4 loans of $5,000 each rather than $20,000 all at once made the financing an attractive option. 

Pay Off Unfavorable Cash Advances

Because many small business owners don’t know that they can get approved for short-term business loans many take out cash advances to pay for expenses. Unfortunately cash advances often come with predatory rates that ultimately hurt cash flow instead of improving it.

merchant cash advance

One of our clients had taken out a cash advance carrying a 6-month term. Due to the short time frame for repayment his monthly cash flow was hurting. This business owner decided to take out a short-term business loan, carrying a 12 month term, to pay off his cash advance. Extending the term combined with lower interest rates allowed this merchant to significantly reduce his monthly payments resulting in substantial savings.

Since taking out a loan even in the short term means going into debt, it’s essential to weigh the benefits against the drawbacks before making your decision. The interest rates on short-term loans are higher compared to long-term options, but you’ll pay the loan back sooner. If the changes you’re planning to make will support continued growth for your business and you know you’ll be able to cover monthly payments, a short-term loan may be your best choice for financing.

Contact ARF Financial today if you would like to explore short-term loan and business line of credit options for your company. 

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