HomeFWJ TakeawayShort term business loans

There are many different types of short term business loans to choose from. As a business owner it is important to work out why you need a business loan, the amount you need to borrow and what assets you may able use provide the lender with security for the business loan. Interest rates tend to be higher on short term business loans than for long term financing to take into account the greater risk that the funder is taking on.

Below is a non-exhaustive list of business loans commonly used for short term financing purposes:

  • factoring – an arrangement under which the factor takes a legal assignment of book debts, future anticipated debts and other monies owing to the company in return for cash. The process works by the company sending copies of its unpaid invoices to the factor and sending the original invoice and notice of assignment to the customer. The factor adds this to the sales ledger, collects the debt and administers the sales ledger. When the customer pays the invoice finance is repaid;
  • invoice discounting – this differs from factoring as the company maintains responsibility for collecting the debts and administering the sales ledger. Invoice discounting also has the advantage of being confidential as the company does not need to inform its customers that the process is occurring;
  • bridging loans – these are typically property backed business loans provided on a short term basis for between 1-18 months. These are often used by those seeking to purchase or develop property to pay off the mortgage on the existing home and as a down payment on the new property. Cash Flow Loans – the lender provides funds using expected cash flows that the borrower can generate as collateral for the business loan;
  • trade finance loans – These operate as revolving credit facilities which finance the business trade cycle between the time a business is required to pay for goods which it has purchased and the time when the business receives the funds from selling those goods. This type of financing is often used by manufacturers, wholesalers and importers.

Our expert team of banking and finance solicitors at Francis Wilks & Jones are here to assist with any issues which may arise from your short term business loan. Our knowledge of commercial lending is exceptional. We have dealt with numerous banking and finance transactions and advised on many aspects of short term business loans. Our practical daily expertise means that we can assist whatever the nature of your business loan enquiry.

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