Accelerate your profitability with short-term business loans
Short-term loan is having a company's customer receivables financed by a lending institution.This is a financial solution to maintain sufficient working capital to cover cash flow needs. A short-term loan is a real management tool which allows the business to considerably develop its activity by supporting the daily financial needs of the company. How does it work and what are the newest solutions available for digital companies?
The implications of a short-term business loan
Short-term loans are a form of financing for working capital needs of companies. They are mainly used to bridge the cash flow gap between incoming and outgoing money flows, such as the collection of invoices and the payment to suppliers.
Typically, this type of financial solution can extend the collection period by 60 to 90 days. Short-term business loans are often available quickly but come at a cost to the business due to the high-interest rates and premiums involved. To take advantage of this type of scheme, it is necessary to demonstrate stable cash flow, good financial management, and an attractive profile for lending institutions.
The short-term professional credit is a solution of financing that takes place in the duration of less than two years and which aims at financing the needs of current cash flow of companies. Regulated by law, its rate was 1.48% in 2022. Other short-term financing solutions exist, such as cash credit, sometimes called overdraft credit. Cash credit is when the bank offers to provide a company with a temporary amount of money to support its normal operations. It is therefore a credit solution that is popular for urgent one-off needs such as the payment of salaries or social contributions.
From an accounting point of view, overdraft facilities are short-term overdraft authorizations. In order to obtain them, the company must give its banking institution a guarantee, generally in the form of a tangible asset: raw materials or stock. The repayment of the cash credit is usually limited in time to 15 days per month and its repayment rate is controlled. It can be used in conjunction with an inventory loan which consists of a cash advance based on the company's active inventory. The amount lent can correspond to 80% of the value of the inventory stock.
In the case of a campaign loan, a bank grants an amount to meet the immediate cash needs of a seasonal activity. The interest rate for this type of loan is indexed to a monetary benchmark. In order to obtain this short-term loan, a cash flow plan defining the monthly financing needs of the structure must be presented.
Different types of short-term business loans
There are various types of short-term loans which can be granted to professionals according to their objectives and their expenditure needs.
- Credit insurance. This relates to the commercial receivables of a company and thus offers to protect the company against the unpaid customers. In case of bad payers, the insurance guarantees the amounts covered by the contract.
- The Daily transfer, or Daily law. This is a method of financing offered by traditional lending institutions. The banks advance the money corresponding to the amount of the company's receivables, which must be repaid on a specific date. These credits consist of temporary overdraft authorizations, since the company's account will be in debt for a short period of time. The maximum amount of the loan as well as the interests are renegotiated every year.
- Bank discount. During a commercial transaction (purchase or sale) the banker pays the amount corresponding to the invoice before its due date. With the discounting system, the bank deducts the fees and interest from the amount repaid and in case of unpaid invoices at the defined date, it will turn against the company to obtain its payment.
- The CMCC (credit of mobilization of commercial receivables). The credit institution grants a professional loan to its client company which itself holds the receivables of a third party. The professional takes out a mobilization bill with a limited maturity date of between 10 and 90 days. This solution avoids the transfer of receivables from the company's end customer to the bank and thus allows a company to take charge of its entire customer relationship.
- Factoring. Within the framework of factoring, a company which holds the receivables of its professional customers transfers them against an advance to a specialized establishment: a factor. This establishment is remunerated in the form of a commission on the amount of the invoices which is between 5% and 15% of the total amount including VAT.
How to get a short-term business loan
Young digital start-ups report difficulties in obtaining a short or even a long-term business loan. Silvr is a neolender that offers a quantified method based on an algorithmic analysis of the company's monthly turnover. Our short-term business loans are thus validated according to the risk profile of the business applying - and we can evaluate companies as young as 6 months.
The short-term loans that our team grants have interest rates starting from 1% - the interest rate depends on the duration of the loan and the risk factor. Our credit simulations are available online and a company's eligibility is clearly and objectively determined according to the formula of our algorithms. In case of a successful application, funds are obtained in less than 48 hours: companies can therefore benefit from a short-term loan to meet their working capital needs. They can also benefit from very flexible repayment terms. The monthly loan payments are either fixed, or paid back depending on the revenue: if they have cash in hand, the customer can choose to pay back a larger or smaller amount each month.
