SHORT-TERM LOANS IN DURBAN
One of the most reliable things one can wish for as a small business owner is a short term loan
The market in Durban has spiraled upwards because of the availability of financial assistance to entrepreneurs who serve to improve our country’s economic state by innovating ideas and products. However, one can never be too careful when entering into the realm of borrowing because without the appropriate knowledge, it is easy to fall into debt and lose everything you’ve worked for. You know what a short-term loan is, and how it can help you if you are not able to come up with the capital you need to start and run your business. Think deeply about your business, spending habits and what you’ll need that loan for. Weigh the pros and cons — perform a cost-benefit analysis — and make sure you know if that particular loan will help YOU. That said, here are some general points to think about.
Revenue-generating: Are you pursuing a revenue-generating opportunity? If you want a short-term loan so you can fill a big order or grab hold of a great deal, then your return on investment (ROI) should be worth those interest payments. On the other hand, if you’re looking into a short-term loan so you can make payroll, you’re not in an ideal situation. That interest will be costly no matter what — but it’ll hit you even harder if you’re not making anything extra to compensate.
Cash flow: As we mentioned, daily loan payments can cut into your cash flow quicker than you think. If your business can sustain that debt schedule, then you’ll be alright. But if paying so often will restrict your options or even prove impossible for your model, then a short-term loan isn’t for you. If you only have a few clients, gain revenue infrequently, or have a lot of daily expenses, then consider looking elsewhere.
Early payback: Taking out a short-term loan and knowing you can pay it off early is much less risky. Early payment for short-term loans can be a complicated topic, but the main issue to avoid? Getting stuck in a cycle of short-term loans being used to repay other short-term loans. If you’re going to go down the early payment route, just understand that, first, your interest likely won’t be forgiven, and second, if you’re refinancing that loan, then don’t do so with another short-term loan
Emergencies: A storm breaks down your equipment. An employee gets sick. Or maybe your inventory fell off the back of a truck. Whatever the emergency, sometimes a short-term loan feels like the only option you’ve got. Be sure — 100 percent positive, not a doubt in the world — of how you’re going to pay that loan back, if you take one out. Don’t shrug and leave it to chance — that’s how businesses get bankrupt. Who is more likely to get a short-term loan? Fresh data from The Online Lenders Alliance reveals some interesting data on Durbanites and short-term loans:
The median age of a short-term loan borrower is 41-years-old, up from 39-years-old three years ago.
The median household income for short-term loan borrowers is R30,235, suggesting it ‘s lower-income consumers who are more likely to get a short-term loan.
The median short-term loan amount is R428, up from R388 in 2014.
The median cost for a loan (meaning loan interest and fees) is R113.
Online short-term borrowers are slightly older than offline borrowers (at 43-years-of-age), and have more median household income (at R40,263.) Median loan amounts are higher for online borrowers, at R667 per loan, and median loan cost is significantly higher, at R690, suggesting it’s prohibitively more expensive to borrow online.
Typically, short-term loan borrowers pay off their debt between three- and 12-months after getting the loan. Payday loans usually mandate shorter repayment periods, sometimes as tight as two-weeks. Ultimately, prepare yourself for the eventuality of an unpredictable accident and take out a line of credit for your business in advance. You can pull from that line whenever you need, and will only have to pay on what you spend.