The Pitfalls of a Short-term Business Loan

Are you thinking about getting a short-term business loan in the near future? If the answer is yes then it’s important to know just you are getting into.


Practically, every business at some point or another needs additional financing or a business loan. But, what many business owners simply do not realize is the important differences between short-term loans, standard bridge loans, hard money loans, etc. In fact, many business owners often go into the situation relying solely on what their potential lenders tell them or have promised; this, of course, can lead to confusion down the line as lending, at the end of the day, is also a business.

Clearly, you do not want to be one of those business owners who secure additional financing without all the facts i.e. you will do the necessary research to find the most advantageous business loan you can. If you have already done your research then congrats, you are one step ahead of the game. But, ask yourself this— are you sure that you know everything you need to know about short-term financing for businesses? The truth is, obviously, you cannot know all there is to know about anything. But, that’s why the question asks if you know everything YOU need to know. In other words, do you have enough information to make an advantageous and informed decision that is right for you as well as your company? Do you understand the pitfalls of short-term financing? Well, these are things you absolutely need to know in order to move forward with this particularly kind of business financing.

Of course, if you need financing sooner rather than later and do not necessarily have loads of time to spend comparing offers, interest rates, and terms then the very least you can do is become clear on the potential pitfalls. Thus, without further ado, let’s go over the major pitfalls of short-term loans for businesses.

The Real Deal on Short-term Financing

The major pitfalls of short-term financing are unsurprisingly the over-the-top interest rates and ultimately how this extremely expensive financing will affect your company’s bottom line. For example, you will see fairly quickly how needing even an extra month or two can significantly impact the amount of interest you will end up owing i.e. a loan of $50,000 at a three percent interest rate not only will run about $1,500 in interest but with that extra month or two the number quickly increases. Moreover, many lenders often penalize or add additional fees for extensions. In regards to your company’s bottom line, if for whatever reason you are unable to meet the terms or obligations of your short-term loan you can very easily put your business and its future at risk.

A Little Business Advice

Ultimately, if you are the position to secure a short-term loan and you are fairly positive that you will be able to cover future terms or obligations in spite of very high-interest rates and you have explored all your options then this kind of financing may be, in fact, right for you.

Happy senior business man making his notes at workDennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC 
Private Hard Money Lender

Arizona Tel:  (623) 582-4444
Texas Tel:     (512) 516-1177
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

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About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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