- KVK Redactie
- The basis
- 5 Jun 2023
- Edited 5 Jun 2023
- 1 min
- Managing and growing
Flash credit is another word for short-term loans of up to approximately €1 million that you can quickly apply for online. The money will be in your account within a day. A flash credit can help you, but the interest rate and additional costs are high. It is not a solution if your business has had financial problems for some time.
A business flash credit is a temporary bridging loan for self-employed people and SMEs. It is meant for the short term. There are many providers in the market. The risk for the provider and the speed at which you get the credit determine the amount of charges and interest. With a flash credit, the interest rate can be high. Therefore, prepare yourself well. Compare the costs and terms, and carefully calculate everything before making a decision.
Disadvantages of flash credit
The interest rate and additional costs of a business flash credit are high. For instance, there is no cap on the interest rate. The Dutch Authority for the Financial Markets (AFM) warns against this.
The term of a flash loan is short: 3 to 12 months. During this term, you will also start repaying. If you do not pay the interest and repayment on the flash credit on time, or do not comply with the conditions, costs will be added. Your debt can increase substantially.
Be careful not to pay more than 20% in interest and additional costs on the total amount borrowed. Otherwise, you will pay too much, according to the Stichting MKB Financiering (in Dutch).
Advantages of flash credit
A flash loan provides immediate access to cash, which can provide extra breathing space for your company. Lending platforms will assess your credit application without reviewing your collateral or requiring proof of revenue, saving you a lot of paperwork. Instead, platforms use smart data analysis to examine your bank statements and assess your application. It does not matter if you already have debts and no collateral is needed. You therefore have a better chance of getting a loan than with, say, a bank. The term is short, for example 3 to 12 months.
Not a solution for long-term financial problems
Has your company been in financial trouble for some time? You will not solve that with a flash credit. It may even cause you more financial problems in the long run. Therefore, look at other forms of business financing first. And find out if you can save money and pay off your existing debts to lighten the load.
Are you sure your money problems are temporary and that you can repay the amount including interest and additional costs on time? Then a flash credit may well be worth the high interest rate and fees. In any case, ask for at least 3 quotes from different providers. Then you can compare the interest rate, additional costs, and term. Always read the small print.
More options for financing
You have many more options for a business loan or financing than you might think. Do you want to manage your money better? Check out the KVK Book of Finance for entrepreneurs. It contains all the basic information for entrepreneurs on money matters, finding finance, administration and taxes.