Short-term loans, like what the name suggests, are short tenor loans that need to be repaid between 1 to 8 months, although some funders might be willing to stretch it to 9 months or even 1 year. This is compared to the 4 to 5 years for typical business loans. Some of the more popular short-term loans in Singapore include credit lines, invoice financing and bridging loans. Short-term loans can be offered by both banks and other financial institutions, such as private funders.
Short-term loans are especially valuable for small businesses and start-ups as typically it is hard for them to receive financing from banks given they do not meet the minimum operating age requirements that most banks have for longer tenor loans. Companies can also take up short-term loans if they find themselves in a sudden need for money.
As short-term loans are of short tenors, they are usually less risky and thus, lenders take less time to process the loan and borrowers can obtain the needed funds more quickly. Short-term loans also generally have easier requirements compared to longer-term loans. Downsides of short-term loans, however, are that approved loan amounts are usually smaller, significantly higher monthly instalments and potentially higher interest rates.