Also known as current liabilities, a company’s financial obligations are expected to be paid off within a year. Short-term debt is often used to finance day-to-day operating or unexpected expenses. The repayment period is short, usually 12 months or less, and requires higher monthly payments. Short-term debt may be a good option if you need money for an unexpected expense. Just be aware that the interest rates will be higher than long-term interest rates.
Conquering short-term debt can be tricky. A short-term bank loan is helpful when a company has an immediate need for operating cash. However, overextending can mean paying a high cost to borrow funds. At the same time, you could miss opportunities to grow your business without taking this risk. The ease and convenience of a short-term loan can get small business owners into the bad habit of opting for them whenever cash flow is low. You may end up spending more than you can afford. Also, you do not want to get caught up in a common and vicious cycle of debt.
Both short and long-term debt poses a risk to your business. Finding the right balance is vital to any small business. By leveraging American Finasco, your debt can be managed, reduced, or consolidated while you stay focused on your business. Visit Contact Us and complete our Online Form for a free consultation or call (800) 299-2909. We look forward to speaking with you.