Short-term loans: The long and short of it

What is short-term loan?

Typically a short-term loan is taken to fulfill an urgent cash requirement in business. Short-term loan refers to the duration of the repayment of loan inclusive of the interest and not to the speed with which a loan may be processed. This period usually lasts from 6 months to 18 months maximum.

Requirements for availing short-term loan:

  • The business should have been in existence and running for a year at least.
  • Personal credit score should be more than 550.
  • Annual turnover of the company should meet the minimum requirement set by the bank.


  • Instantaneous cash requirements can be fulfilled at a short notice.
  • Short term loan by ArgentDirect are easier to obtain as compared from taking them from banks
  • Even though the rate of interest is higher as compared to long-term loans, the cost of capital ends up being low due to quick repayment of loan with interest.
  • Short-term loans are less risky for banks or lenders and so they are more willing to sanction them.


  • The rate of interest is much higher than when opting for a long-term loan.
  • The loan amount will always be on the lower side and so it is not possible to finance or fund your business for long durations.
  • Repayment in short term loans is either on daily, weekly or bi-weekly basis, which can become quite painful as you need to make sure cash flow in the business is adjusted to meet the payment requirements.

Kinds of short-term loans:

In general short-term loans by ArgentDirect can be divided into four categories.

  • Invoice financing:

Here the banks provide a loan against outstanding invoices of the business, and as and when the invoices get recovered the loan amount with interest is adjusted.

  • Lines of credit:

This concept is based exactly on the model of a personal credit card, wherein a certain credit limit is offered to businesses, which they can use as per their requirements and repay as and when it suits them.

  • Merchant cash advances:

In this case the lender buys all future credit card sales of the borrower, deducting the advanced amount as and when a credit card sale is swiped.

  • Short–term loan:

This is essentially a long-term loan that is for a small amount as well as will be paid back in within 18 months maximum.

Short-term loans come with their pros and cons. Depending upon your requirements you can choose the best option suiting your pockets as well as your needs.

Related Articles

Back to top button