Short-Term Business Loan – Know Tenure, Interest Rates, & Benefits

Published On Jul/28/2024

One key requirement for running a business successfully and smoothly is financial stability. This, in turn, allows business owners to have sufficient working capital, expand their operations further, and meet marketing expenses. This is where a short-term business loan can come in handy. As the name says it all, short-term loans have a shorter repayment duration.

In this guide, we explore the different aspects of short-term loans.

What is a short-term business loan?

The short-term business loan was specifically created to help businesses meet their immediate financial requirements and lend them funds for a short duration. Generally, lenders do not have any restrictions on how the business uses the funds. So, as a business owner, you can use the funds to meet any business expense you want, like increasing working capital, hiring new employees, taking care of operational expenses, etc.

Unlike traditional business loans, short-term loans are usually used as a makeshift financial arrangement and must be repaid quickly. Nowadays, many NBFCs (non-banking financial companies) offer short-term loans for all kinds of businesses, with a special focus on SMEs (small and medium enterprises).

Short-term business loan duration

The short-term business loan tenure ranges from one financial institution to another and is also based on the type of short-term loan you avail. If you are applying for a short-term business loan with Udyog Plus, which is part of Aditya Birla Finance Limited, you can get the loan for a tenure of 12 to 36 months.

Short-term business loan interest rates

The interest rates for short-term business loans can vary based on factors like credit history, the loan amount, the lender’s policies at the time of the application, and so on. Generally, short-term loans have a higher interest rate than traditional business loans because of their shorter repayment duration.

However, nowadays, there are many lenders in India, especially NBFCs like Udyog Plus, that offer short-term loans at competitive interest rates, starting from 8% per annum. Their main objective is to help small business owners get timely financial assistance and meet their business expenses.

As a business owner, it is paramount that you carefully compare the interest rates of different lenders before you submit your application form.

Benefits of short-term business loan

Short-term business loans can come in handy for small business owners in more than one way. Here are some of the benefits of short-term business loans –

Fast access to funds
As a business owner, you may understand that time is of the essence in business. When you see a potential opportunity to expand your business and lack funds to capitalise on it, short-term business loans can be very useful.

With lenders like Udyog Plus, the simple online application process, minimal documentation, and same-day approval and disbursement allow you to access funds immediately.
Minimum documents required
This is another significant benefit of applying for a short-term business loan. Compared to the traditional business, lenders in India have a simple and minimal documentation process for short-term loans. This facilitates quick and convenient loan processing for business owners.

Reputed NBFCs like Udyog Plus understand that dealing with complicated paperwork can be quite overwhelming for SME owners. Also, every minute you spend on paperwork may prevent you from focusing on your business. So, to facilitate an easy and quick borrowing experience, they require you to submit only a few basic documents. For loans under Rs. 2 Lakh, you don’t even have to submit any documents.
No security needed
Quick access to funds is key for small business owners, and short-term business loans offer exactly that. Also, as a start-up or SME owner, you may have substantial business assets. So, to help such small businesses, lenders like Udyog Plus offer unsecured business loans for a short duration.

This means you need not provide any collateral or pledge an asset to get the funds. You can get a loan of anywhere from Rs. 50,000 to Rs. 10 Lakh for a period of up to 3 years.
Easy application process and quick approval
Nowadays, many SME and start-up business owners rely on a short-term business loan to meet their financial needs; it is their go-to funding option. One reason is that most lenders have a simple and uncomplicated application process for short-term loans.

As a business owner, you can apply for this type of loan online with just a few clicks. With leading NBFCs like Udyog Plus, you can get instant sanctions. Once you submit the necessary documents and comply with other processes like e-NACH registration, you get the disbursement on the same day.
Simple eligibility requirements

The importance of relaxed eligibility requirements to get a short-term loan cannot be stressed enough. While the criteria may differ from one lender to another, leading lenders like Udyog Plus have simple requirements, including –

You must be aged between 21 and 65 years at the time of applying for the loan
Your CIBIL score must be more than 675
You must be an individual owning a manufacturing, trading or services business or you must be and you must be a sole proprietor

Final Word

Short-term business loans provide a quick and convenient financial solution for your business and meet the immediate requirements. These loans have minimal documentation requirements, and you get quick approval.

If you are looking to apply for a short-term business loan, it is advisable to use the business loan EMI calculator to compute the EMIs (equated monthly instalments) payable on the amount you want to borrow and make an informed borrowing decision accordingly.

Udyog Plus offers a wide range of business loan solutions at competitive interest rates, flexible payment terms, and favourite terms and conditions. Visit the website to learn more about the loan and apply for it online!