What is a Short Term Loan?

2009-11-11T10:41:49+00:00

Definition

In lending and financial markets, a short term loan is generally a loan with a term of less than 365 days.

Characteristics

Generally speaking, short term loans share the following characteristics:

Some form of real property is utilised by the lender as security
A caveat and/or mortgage is utilised by the lender to protect their interest in the security property
The interest rate charged is significantly higher than a 'normal' mortgage
Application process takes days not weeks
Generally no financials or credit checks are required

Advantages

Compared to a 'normal' loan, a short term loan may provide the borrower with the following advantages:

Speed: Generally, once a short term lender has all the information they need, the approval and settlement occurs within 72 hours. This will never happen with a 'normal' lender where you will often wait weeks until settlement.

Flexibility: Generally a short term lender is not as constrained with credit policy rules and regulations as a 'normal' lender. This often means that a loan a 'normal' lender will decline may be approved by the more flexible short term lender.

Disadvantages

A 'normal' loan in contrast to a short term loan, may provide the borrower with the following disadvantages:

Cost: The annual interest rates applied to short term loans are significantly higher.

However, paying a high interest rate on a small loan for a short period, may well be less expensive than refinancing an increasing the size of an existing loan and paying a lower interest rate on a larger loan for a longer period.

Labels

Short term loans are also often called or labelled:

short term finance
short term funding
caveat loan
caveat finance
bridging loan
bridging finance
private finance
private mortgage
second mortgage loan
second mortgage finance

For more information, or to apply for a short term loan, simply call 1300 844 851.

Tips to Manage Your Cashflow

2009-11-02T15:12:34+00:00

Cashflow is an important vital sign for businesses, so it's important to ensure you're keeping the cash flow river running. Here are some easy tips to manage your cashflow better...

Offer Incentives to Pay Early

If you change your payment terms from 30 to 14 or 7, you may need to offer your customers something of value to switch to the new terms.

Make Payment Easy

Do you offer BPay, credit card payments and the like? Sometimes offering an easy payment method is enough to encourage customers to pay in a timely way.

Setup a Quality Brand from the Get Go

By setting up a quality brand, you will be able to develop stronger customer relationships and charge more for your business. People are often willing to pay a little extra to deal with brands they know and trust.

You Don't Have to Follow the Industry

Just because your competitor’s payment terms are flexible doesn’t mean you have to be. Even more importantly, just because your competitors charge less doesn't mean you have to be the cheapest either.

See if Customers are Willing to Share in Your Cost Savings

Sometimes, customers may be willing to buy in bulk from you so that you're not forking out extra money on inventory. Also, if you’re a service based business, you may want to look at ways to manage demand so you can make better use of your fixed costs.

Focus on Key Customers

Looking after the big customers will keep them hanging around with your business longer - often giving your business some stability as smaller customers come and go.

Don't Put All Your Eggs in One Basket

Despite the previous point, if your business has one or two big customers supporting it, you may get yourself into some trouble when things get shaken up. Finding new customers will allow you to diversify and minimise your risk.

Aim for Quality over Quantity of Business

It's often hard to avoid the allure of business growth. Many owners make the mistake of taking on quantity rather than quality business, but it's a lot better to have healthy and personal client relationships.

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