Short-Term Financing: Is It For You And How To Do It?

A short-term loan is a form of loan that is generally arranged to be returned within one year. However, this is not always the case as the expected timeline of repayment is not carved in stone but is flexible to an extent. A number of lending companies consider a time period of less than or equal to two years as short term. These loans operate in the same manner as the more commonplace five-year or fifteen-year medium and long-term loans except for their much shorter schedule for repayment. The lender provides the demanded amount of capital all at once. The borrower has to return the full amount borrowed within the set time period for their particular loan.

Differences Between Short-Term And Long-Term Loans 

It is similar to the other forms, the only notable difference being the shorter repayment period of approximately one year. Because the repayment period is much shorter, the repayments are to be made every week unlike other loans where repayments are scheduled for every two to three weeks or once every month. This also affects the amount to be repaid in every instalment. This fee is higher than the other forms of loan which are spread over a longer duration. Short-term loans are an extremely simple investment product, easy to obtain, with very clear terms of lending, borrowing and repayment all of which takes place within a year making it substantially more efficient.

Advantages Of A Shorter Repayment Schedule 


If we were to compare short-term loans to the ones that are paid off over a longer time period, short term loans, which are generally paid off within a year, do not lead to the accumulation of heavy interest payments. That is, since the loans are to be paid off quicker and mature faster, there is less left to be paid on the future. One can better assess payments to be made within a year or two. On the other hand, long term loans lack foreseeability. To assess how an individual’s or firm’s finances will be doing 10, 15, 20 years into the future would need for someone to invent a time machine. Even psychics can’t pretend to manage and shape coherently, this many years of varying possibilities and account for all the possible failures and successes that can be encountered.

Lack Of Excessive Processing And It’s Merits 

The fact that short term loans mature early has even more advantages to it. Individuals looking to withdraw capital as quickly as possible without the hassles of lengthy processing and getting the loan approved, this is a lucrative deal. This is because short term loans are much less prone to being a risk than long term loans are as a result of their shorter repayment period. The time taken for the lender to process the loan is reduced significantly. Without the excessive and complicated administrative procedure, the borrower can access the required funds more quickly. This makes short term loans not only more advantageous but also more easily accessible to those with a death of time to spend on unnecessary protocols.

Ease Of Accessibility To A Wider Range Of Borrowers

There is more to the worth short-term loans have come to possess because of this presumed lack of risk. It is undeniably the easiest way to obtain capital without having to worry about less than stellar credit scores. These loans easily come to be recognised as lifeboats by smaller businesses and individuals who do not wish to suffer the consequences of bad credit history as the requirements are easier to meet. The application process is way more efficient. It is not only easier to apply but loans get approved faster with minimum fuss. Short-term loans can be processed within a single day when applied for with reputed lenders online. Those, as mentioned earlier, with problems regarding credit and in need of money quickly, short-term loans are a very good option. Lenders will often prefer cash flow than credit history when assessing a short-term loan application. But the rate of interest on the loan will certainly take into account the credit history, along with other criteria.

Doubts Regarding Short-Term Financing

Coming to a frequent doubt borrowers seem to possess about the repayment, short-term loans do indeed tend to charge a considerably higher rate than loans expected to be repaid over a longer term. This seems like a deal-breaker on first glance but considering the fact that the time period for repayment is quite short with the added incentive of a much smaller amount being paid as interest, borrowers would find short-term loans to be worthwhile. Because of the reduced payments attributed to interests, borrowers end up paying less than the amount they would have to pay with medium and long-term loans. One should also consider the stress that has come to be associated with paying off a 10, 15, 20, 30- year loan. It is burden that would have to planned around for as long as the loan is not completely repaid.

Should You Take A Short-Term Loan?

The major disadvantage associated with short-term loans is that they provide relatively smaller loan amounts. As the loans are to be returned sooner, they usually involve small amounts so that the borrower won’t be burdened with large monthly payments. Short term loans are very useful for both businesses and individuals. Businesses that require cash to finance unprecedented payments or reimburse unexpected costs and losses will definitely find short-term loans to be an excellent option. Individuals in need of urgent capital due to sudden personal needs like medical emergencies, wedding expenses, higher education and more should certainly consider short term loans.

How Debt Consolidation Works

Debt consolidation can help by essentially rolling all your debt payments, like credit card bills, into one with a single due date and a fixed interest rate that is typically lower, depending on your credit score. A debt consolidation loan is any type of loan that is used to pay off all existing debts, which allows you to focus on just paying one monthly payment opposed to several.

Step By Step Guide To Voluntary Liquidation

Liquidation is a method using which a company is shut down by redistribution of the assets in the company. Terms like winding up as well as dissolution are also used to refer to the process of Liquidation. However, dissolution is generally the last nail in the coffin in the process of Liquidation. This article gives a step by step guide to Voluntary Liquidation.

1. Ascertain That The Company Is Suitable For Voluntary Liquidation

The first step of the process of Liquidation consists of the directors of the company deciding the agreeing upon the suitability of the company for a voluntary liquidation. To decide whether the company is suitable for liquidation, they should make sure that whether the company in question is solvent or not. In some places, for the company to be declared as solvent, the company should have the assets in place to be able to pay all their due debts within the time period of a year. If it is the case that the company cannot pay their debts within a year then the board of directors should seek help of another entity like an investment manager. They can help the company to legally become insolvent and make them eligible for voluntary liquidation.

2. Declare That The Company Is Solvent

After the first step is complete, the board of directors should hold a meeting in which they formally state and document the the fact that the company in question is indeed solvent. All the directors of the company should sign the Declaration of Solvency. This Declaration of Solvency will then be submitted to the Registrar of Companies.

3. Pass A Special Resolution

Once the second step of legally declaring submitting for solvency is complete, the company’s board of directors or preferred shareholders should pass a special resolution that states that the company is officially being winding up. This resolution will also approve the amount of fees allotted to the voluntary liquidator organisation and which organisation will act as the voluntary liquidator for the company.

Once this special resolution is passed, the company in question will be formally in the process of voluntary liquidation. If it is the case that your company has not previously issued a share that gives the shareholders voting and management rights or if these shares have been repurchased by the company at some point then the voluntary liquidator of that company will draft a special board resolution which will issue a single share that will have voting or management rights that will bring the company to a voluntary liquidation.

4. A Liquidator’s Consent Should Be Signed

The Liquidator will sign a consent form (to be filed with the Registrar of Companies) notifying the Registrar of the appointment. The Consent will be filed along with a Notice to the Registrar of the liquidation and shareholders resolution which will inform them that the company is in the process of liquidating voluntarily.

5. A Notice Should Be Sent To The Creditors Of The Company

The company under liquidation should officially issue a notice in the local gazette or any official newsletter informing about the voluntary liquidation of the company. This will inform all of the creditors of the company to inform the company of any claims that are remaining. In some cases, the company should publish notices out of their jurisdiction.

6. Notice Of The Final General Meeting Will Be Published

Once the creditors of the company have been notified about the company going under voluntary liquidation, the company should inform the creditors to submit all the pending invoices addressed to the company as well as other claims before the final general meeting of the company takes place. The final general meeting should typically take place within a month of the publication of the notice.

7. All Pending Claims Against The Company Should Be Settled

After the notice of the final general meeting is issued and the creditors send their claims and invoices, the company and in most cases the voluntary liquidating firm will take a look through the claims and see if they are valid invoices and claims or not. The reviewers will check for the authenticity of the invoices and other accounting work.

8. The Voluntary Liquidator Will Compile A Report

The voluntary liquidating firm will be compiling a report regarding the whole process of the liquidation of the company since the day the company formally declares the company is going to formally liquidate to the day the notice of the final general meeting is sent out. They will also prepare an account of all the invoices and claims of the creditors that are deemed genuine.

9. The Final General Meeting Will Take Place

Once the whole report of the liquidating process is compiled by the voluntary liquidator and the date of the Final General Meeting arrives, all the shareholders and people with preferred stock will assemble for the Final General Meeting. In this meeting, the accounts and reports compiled by the voluntary liquidating firm will be reviewed and will be approved by the shareholders. The shareholders are not required to be present in the meeting in order to vote, they can be represented by a person acting as their proxy.

10. A Final Notice of Liquidation Will Be Sent

Within a week of the final general meeting taking place, the voluntary liquidating firm should file a final notice of liquidation to the Registrar of Companies which will confirm that the final general meeting has taken place and the process of liquidating the company is finally complete.

Final Thoughts

The process of liquidating a company can take between two to three months. The process is a long one and the companies should hire a firm that can act as a voluntary liquidator for the company. They will carry out all the important steps like checking the validity of the pending invoices addressed to the company, compiling and filing necessary reports and notices and many other crucial tasks required for the liquidation of the company.

What Happens To Stock After Liquidation?

Liquidation is the process of selling the assets of a company that is not able to pay the invoices made to them. By liquidating the assets of a company it is able to pay any outstanding debts that they owe. If they not able to pay their debts even after the liquidation process is completed then the company has to file for bankruptcy.

What Happens When A Company Declare Bankruptcy

If the company that declares bankruptcy is a publicly traded then the assets of the company are entitled to the people who own the shares of the company. Thus the shareholders are entitled to the value that is generated when the assets of the company is liquidated. The shareholders are entitled to the value generated by the assets according to what portion of shares of the company they own. But, the stocks or shares of the company in itself will have no value as the company is liquidated.

This is why the owners of the stocks of the company cannot sell the stocks of that company if they want to as their shares have become defunct. This is why, to pay the shareholders of a company, the company has to pay the owners from the value that is generated when the assets are liquidated.

Who Gets Paid First?

When the company declares bankruptcy, then the company is supposed to sell all of their hard as well as soft assets to pay all of their creditors. The order of preference in which the debts will be paid off will be as follows. First, the company is supposed to pay any debts they owe to the government.

After that, they have to pay any banks or other financial institutions that they owe money to. When the banks and financial institutions are paid, the next in line are any other businesses that the company owes to like any utility traders or other suppliers. After the other businesses are paid, the company is supposed to pay the people who hold bonds of that company. And after that, the preferred shareholders of the company are paid. At last, the common shareholders which are the employees who hold employee stock ownership plan as well as the owners of the company.

The general holders of stocks get paid at last  due to the fact that they only have a residual claim on the value of the assets that are liquidated. The common stocks are a level below preferred stocks in the hierarchy of distribution of assets when the company is liquidated. This is the reason why, when most companies are liquidated the people who own stocks that are not preferred stock rarely get paid any amount after the firm has cleared all of their debts that they owe to the creditors.

What Happens If Your Stock Goes Bankrupt?

If it is the case that you have a money market fund with margin abilities, which means you can get debt against the stocks in your account, you are in charge of reimbursing the loan that you took, regardless of whether your whole brokerage account becomes null. Along these lines, in a far fetched model, in the event that you claimed $100,000 worth of any company which goes bankrupt later. And if you get a loan amounting $25,000 against your offers to purchase another vehicle, you will in any case owe the $25,000 to the loan provider as the stock of the company has gone bankrupt.

What might almost certainly happen is the point at which your offers tumbled to $50,000, your merchant would call you and request you store more cash in your record (this is known as a margin call). If you didn’t go along and rejected their request then they would pitch your stock to reimburse the debt in full to ensure that their own firm doesn’t go to loss.

On the off chance that your investment fund has no marginal debts, at that point no, you won’t owe if the organization goes bankrupt in for all intents and purposes all cases. That is on the grounds that most stocks today are known as “completely paid and non-assessable.” If you have stock declarations, you’ll see that composed some place on the offers.

There are a couple of organizations that have assessable offers, despite the fact that these are amazingly uncommon relics of past ages. Thinking back to the 1960’s, for example, American Express had assessable offers amid the Salad Oil outrage that seriously hurt the organization.