Securing government aid certainly saves money for an expanding business in the long term. But sometimes the wait time for receiving that funding can damage a business’s growth prospects.

In this case, acquiring a short-term loan that can be repaid with the government assistance allows a business to capitalize on the immediate growth opportunity and to gain the benefits of the government-backed assistance in the longer-term.

Though short-term loans come at a higher cost, your business’s ability to remain agile and adapt quickly to market conditions often can make up for that cost while waiting on longer-term government aid loans to come through.

Short-term vs. long-term loans

Short-term loans are exactly as they sound: loans designed to be paid off over a shorter period of time, like a few months to a year. They can, however, have flexible repayment plans. For example, a merchant cash advance is paid back through a small percentage of a business’s sales.

Long-term loans typically are term loans that are paid off at a fixed monthly payment over a period of three to five years, or longer.

Short-term loans often are smaller loans designed to help a business bridge a cash-flow crunch, but MobyCap has business loans available up to $5 million, much higher than many short-term lenders are willing to handle. Short-term loans of this size can be a vital tool for growth among businesses that can put the funds to work quickly and generate a large profit.

The great advantage of a short-term loan is the speed of the application process. Short-term lenders normally have you fill out an online application, then a representative will discuss the application with you on the phone and a final loan decision is made the same day, so your business typically receives the funds the next business day.

A Small Business Administration loan can take from 30 days to 6 months to process and fund, as you must work first through a local or online lender, who reviews your application then submits it to the SBA for a guarantee review.

Your business could lose out on an opportunity to expand to a new location, purchase much-needed equipment or buy out a competitor if loans are delayed too long. At worst, you could be looking at missing out on 3 to 6 months of profit these expansion plans could provide.

Pandemic-related programs

If your business is working through programs the government has established to help small businesses damaged by the pandemic, short-term loans also could provide a bridge that could help you survive, especially if you are seeking funding through the Economic Injury Disaster Loan programs. Processing for these loans was extremely slow in the beginning because of the high volume of applications. Since the program’s extension through December 31, 2021, the process has been speeding up closer to the SBA’s traditional 21-day processing time then 5 days to make payment once the application is approved. SBA is reaching out to businesses that previously applied but were not funded or were funded at lower levels than currently available.

You should be aware that if you did use Paycheck Protection Program funds to pay off a short-term loan, the interest you paid cannot be part of the qualifying expenses you must meet to have these loans forgiven. Short-term loans are considered unsecured loans, and these interest costs are not a qualifier under the PPP regulations.

If your business is playing the waiting game with a government assistance program, consider spending a few minutes today filling out our online application and discussing your options with our lending experts.

Call (737) 577-1180 or email info@mobycap.com to discuss how we can help you grow your business.