Title: The Disadvantage & Advantage of Short-Term Financing | Budgeting Money - The Nest
Headings: The Disadvantage & Advantage of Short-Term Financing
The Disadvantage & Advantage of Short-Term Financing
Lower Interest Rates
Lines of Credit
Use of Alternative Lenders
Increased Risk and Costs

Content: Lower Interest Rates
Short-term interest rates are usually lower than long-term ones. You therefore pay less interest for a short-term loan because of both the lower interest rate and the shorter amount of time you’ll be paying interest. Short-term loans can be faster to obtain if they are relatively small, as they often are, because lenders do less underwriting (that is, evaluating your creditworthiness) for small loans. These loans can be used to plug cash shortages resulting from unexpected expenses, sales shortfalls, seasonal effects or other reasons. Lines of Credit
Frequently, businesses set up lines of credit that allow them to borrow money quickly when it's needed and then pay it back at their own pace. A line of credit allows you to borrow and reborrow money up to the credit limit and only pay interest on the money you actually borrow. This is a convenient and flexible short-term borrowing technique that lets you minimize your interest costs. However, the interest charged on these lines can vary over time. Use of Alternative Lenders
Banks are the usual source of long-term business loans, but short-term loans are available from alternative sources, such as online and peer-to-peer lenders. A peer-to-peer loan is arranged on a website where borrowers and lenders come together and negotiate terms.