Most businesses experience slow times now and then. In the retail industry, seasonal products must be ordered — and paid for — months before they will be sold. A short-term business loan can help even out cash flow when your accounts payable schedule is shorter than your sales cycle.

Short term business loans can also help you as you expand your business; for example, you can use it to increase your inventory in anticipation of a “strong sales month” or to buy much-needed equipment that can help you improve your productivity. You may also need short term business loans to cover unexpected expenses that occur before your payments come in; let’s say a vehicle is damaged or the restaurant you are running needs to have the roof repaired. You can also use it to fund much-needed improvements (e.g. repainting the inn you are running right before tourist season) or to finance an extended out-of-town business trip to talk with potential clients.

Short-term business loans can be a good way to raise working capital and cover accounts payable. Short-term loans can have maturations of as little as 90-120 days or as long as one to three years, depending on the purpose of the loan. In general, banks require very specific repayment plans for their short-term loans. For instance, if you took out a loan to even out your cash flow until your customers paid you, the lender would expect you to repay the loan as soon as you receive your money. In the case of short-term loans for inventory purposes, you would pay off your debt when you sell your inventory.

Short-term loans are appropriate for both new and existing businesses. When dealing with new businesses, some banks will grant only shorter-term loans, because short-term loans are less risky than loans with longer terms. That’s why it can be relatively easier to apply for a short term loan, making it a viable option even for smaller businesses.

Before a lender will grant a short-term loan, it will review your cash-flow history and payment track record. Most short-term loans are unsecured, meaning they do not require collateral. Rather, the bank relies on your personal credit history and credit score for approval.

Secured loans require collateral such as property, equipment, or accounts receivables. If you have substantial assets and are comfortable using them to secure a loan, you may get more favorable terms and interest rate. Short-term loans tend to have higher interest rates overall, but the rates usually are fixed so your rate will not rise. In addition, since the loan is repaid quickly, you pay less interest than you would on a long-term loan.

Occasionally people confuse short-term loans with business lines of credit, where you can pay off a balance and borrow funds as you need them. But a short-term loan gives you a fixed amount of money in a lump sum, and once you have paid it back, you cannot borrow more. These are just some of the factors you have to weigh while deciding whether or not to take a short term business loan.