If you are running a small business or have just started out on a new venture, then you probably already know that there will be times when you're going to need an additional amount of money for a short period of time.
You may receive an unexpected huge order from a client, or your sales may suddenly increase after the introduction of a new product. Either way, you're going to need more cash to keep the products coming.
Here are some finer points to keep in mind when applying for a short-term loan.
Have Your Documents Ready
Have all your financial documents – especially your previous 3 years profit and loss statements – ready show to your lenders.
If you have just started your business, then you might have a tough time convincing banks to give you a loan, but sufficient collateral might get the job done.
Know What Collateral You Have
Banks and other lenders may require security in the form of property or vehicles to be used as security against your loan.
This will keep their investment safe in case you default and don't pay back the loan on time.
Keep Your Financial Books in Order
Lenders will also need to check out your financial position in the market. So if you have a lot of outstanding invoices that you need to collect from customers, or if you owe lots of money to your suppliers, then you might have difficulty in getting a loan.
Make sure that you collect any money due to your company on time; conversely, make sure that you pay your vendors and suppliers on a timely basis as well.
If Rejected, Try Elsewhere
If a particular bank or lender rejects your application, then try elsewhere. Different banks have different conditions to be fulfilled before they approve any loan.
Make these preparations before applying for a short-term loan; and once you get the money, try to repay it as soon as possible to save on interest.