Despite having several perks the short-term loans are well established in the market these days. Also, it is the time to dig a little more in order to find little less-desirable features of short term loans. Though they have shorter repayment time period the length makes these types of loans an ideal source to take money from when it comes to the cost capital, accessibility and the funding speed. But, shorter repayment terms can also have a fair share of disadvantages.
Read on to know more:
It Involves Smaller Loan Amounts
Most types of short-term loans are generally smaller than the loans with the longer repayment terms. This is because- it is generally not possible for a business to pay off a larger amount of loan within a shorter repayment time period.
So, by keeping a short term loan on a smaller side, a lender will make sure that you are not saddled with unaffordable payments that you have to make on weekly basis or even daily basis sometimes. In case you need a large amount of funding, then you will probably need to seek the longer term loans as an option for your business because the short-term loans are generally unable to fund small businesses with a large amount of money to borrow.
More Frequent Payments Options
This is one of the biggest downsides of a short-term loan- because you will have to repay the loan amount in quite a shorter period of time. Also, you will have to make more frequent scheduled payments against your loan amount. This means that you will repay your loan on a weekly or even on a daily basis.
Here, this can be a little complex for your business when we talk about the cash flow. Also, with a weekly obligation to pay the loan amount back to the lender, you will have to some more serious yet very effective adjustments to the budget of your business.
High Amount of Payments
With several types of Short term loans, you will have to make much higher amount of repayments. This means that even repaying the loan amount more frequently, you might still have to make comparatively lager amount of repayments within the scheduled time. This could lead you to cost more than thousands every month than a general longer term loan option with the same size.