Short-term finance can help businesses in need of a cash boost to cope with unexpected events, cash flow problems, expansion costs, or for a large single purchase.
Often provided in the form of short term second mortgages or caveat loans, short-term finance might be an option for your clients who are experiencing difficulties in their business that could be alleviated by a one-off cash injection.
Unfortunately when it comes to thinking about short-term finance, there are a number of misconceptions floating around, and these can be off-putting. Here are three of the most common misconceptions we have encountered concerning short-term finance.
1. Short-term finance is astronomically expensive. The interest rates on short term business loans are often believed to be too high to make them worthwhile. The truth is, while there are some products with high interest rates, if you shop around it is possible to find some very competitive short-term finance options for your clients. At Interim Finance, most of the rates we can achieve are around 1-2% per month, while less regulated market players may be held to a higher rate of up to 4% a month.
2. Short-term finance is difficult to obtain. While there is no magic ingredient to getting short-term finance, if a client has a good track record and the business is stable, there’s a good chance they will be successful. Even businesses with less stability can get short-term finance in some cases, although they may be required to pay a higher interest rate.
3. Short-term finance is only for start-ups. While it is commonly used to cover the costs of starting up a new business, short-term finance can also be appropriate for more established businesses. There are plenty of uses for short-term finance in businesses that have been up and running for a while, including expansion costs, covering cash flow issues and allowing businesses to meet their tax obligations.
As a broker, it is up to you to make sure your clients are aware of all the options out there that can help them. Short-term finance can be an ideal option for businesses that are experiencing temporary financial difficulties for many reasons.
By understanding how short-term finance works, and avoiding many of the common myths and misconceptions about who it is for and what it costs, you can help your clients find a way to get past their short-term financial difficulties and get their business on a stable footing.