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Short-term business loans – 4 myths busted!

• Borrowing

Given continued lack of support for SME’s from the banks, especially in the mining-related, property development and construction sectors, SME’s need to consider their alternatives.  Short-term business loans from alternative lenders are often good solutions for business in tough times. To understand short-term business loans better, it’s useful to look at the biggest myths or misconceptions we find small business owners have about this type of funding.

 1. Short-term business loans are difficult to arrange

While the red tape and administration involved in preparing formal bank applications can be overwhelming for a small business, you’ll find that alternative lenders take a much less intensive approach. Although direct access to these funders is easy and their application process simple, it does make sense to work with a specialist commercial broker when applying for short-term business loans. This holds especially true if the need for longer-term finance is identified because they would also be fully tooled to make the next application.

A professional short-term lender will work closely with your broker to ensure that you get the best possible service and solutions to your problem. Being experts at what they do, they’ll take most of the stress away from you.

 2. I don’t have a great credit record

It has long been understood that mainstream banks follow very strict credit policies and they don’t deal well with blemishes on a credit record.  Their decisions are heavily influenced by the number of credit enquiries found or by just one default listing on a credit record.

Many short-term lenders, like Platinum, do not “computer credit score” like so many other financial institutions do. They consider the background to such factors and appreciate that in tough economic times there are some circumstances beyond the borrower’s control and other parties up the business chain shape outcomes. Too many entities are quite willing to threaten a company’s or an individual’s credit rating as leverage to get their way in a dispute.

We base our lending decisions more on the current realities of your business situation and not on your past. We look only at the purpose of the loan, the cash flow needs over its term, the quality of the security available and the strength of the exit plan. Short term business loans are always urgent, so quick decisions are vital.

 3. The bank won’t do a short-term business loan so no one else will

This is simply not true. We often assist businesses experiencing temporary cash flow challenges.

Being profit-driven, banks make decisions on loan applications based in part on what profit can be made from the deal. Of course, the shorter the loan, the less profit they can make. Alternative lenders that specialise in short-term lending have built their business models around cost efficiency and speed and so the term of the loan is not relevant to the success of an application.

So, if immediate access to short-term funding would help you work through a current predicament or access an exciting opportunity it makes sense to approach a specialist in short-term finance. You don’t go to a hardware store to buy an apple!

4. I won’t get the short-term business loan I need – they are only for small amounts and they take too long anyway

This is possibly the biggest myth – you believe you would be wasting your time applying because of the size of the loan you require and the likelihood that it wouldn’t be made available in time anyway.

A business owner needed a $5 million loan to refinance a development – timing was critical. Understanding his situation and with first mortgage security available, we could be flexible and practical in structuring the solution.

We completed our due diligence, property valuation and legal agreement process to arrive at a settlement within 5 business days.