Short-term Small Business Loans
Cash gaps in business are normal. These are brought about by emergencies, unforeseen events such as political unrest, and natural calamities. Such will likely put your business in immediate need of cash.
That’s where short-term business loans come in. These inject cash to help your business face its immediate cash needs amicably. The funds can also be the reason you bag the business deal of a lifetime.
We introduce short-term small business loans, the quick-turnaround loans that’ll help fix your business cash needs in the shortest time. We’ll cover everything about them and the best lenders in the market today.
- Est APR
- Min Credit Score
BlueVine
- 15.00 - 78.00%
- 650
OnDeck
- 9.00 - 99.00%
- 600
Credibility Capital
- 19.99 - 24.99%
- 650
- APR range
- Fees
- Terms
- Amounth
- Unemployment protection
Bank 1
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Bank 2
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Bank 3
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Table of Contents
How to get short term business loans
Short-term business loans are loan products that let you borrow the much you can repay within the shortest time possible.
While there are a couple of short-term business loan options to explore, not all of them will serve your business needs. You want to prioritize loans with lower loan costs, interest rates, and flexible repayment terms.
You also want to seek lenders with a less strict approval process with less paperwork, requirements, and a faster approval process.
Traditional lenders like brick and mortar banks tend to be more conservative with their application and approval processes. And, that often means a stricter, longer, and tedious application process.
Go for online lenders and other private lenders instead. They’ll ensure faster funding and affordable loans.
Requirements to qualify
Like in the case of other loan products, different lenders have different qualification requirements for potential borrowers. The most basic across all lenders is that you must have attained the age of majority to qualify for a loan.
You must also be legally residing in the United States. Similarly, your business must have been operational within the US’s jurisdictions in the past 6 months. The easiest proof of this is the business registration, sales records, receipts, tax returns et cetera.
The borrower’s credit history also plays a crucial role in your approval. A credit score of 650 and above will get you a short-term business loan at lower rates and favorable terms with most lenders.
Make-no-mistake, borrowers with poor credit scores can still qualify for these loans. However, due to the increased lender risk, they’ll most likely part with higher rates.
Most short-term small business loan lenders pay minimal attention to the business’s annual revenue. As such, having a lower annual revenue shouldn’t be the reason you chicken out from applying.
When ready, find a suitable lender. While at it, use interest rates, loan terms, and possible loan limits in mind. The idea is to find a short-term small business loan in the fastest time possible, at the lowest rate and with the most flexible repayment terms.
The lender will need such basic information as the owner’s names, address, social security number, and profession if any. The lender may also need to know the applicant’s percentage ownership of the company.
The lender will also need your bank statements, the company’s, and a description of the business’s line of operation.
Once you find your potential lender, send a formal application. This can be done online or physically, depending on the institution in question.
Best Types of short-term business loans
If you are looking for short-term financing for your business, any of the following options;
Business loans short-term
These are issued in a lump sum, upfront. They come with fixed repayment terms. As the name suggests, they are short-term, ranging from 6 to 18 months. But, mostly between 3 and 12 months.
This is often an excellent option for borrowers who don’t qualify for other loan products. The approval process is less strict, and requirements fewer than those of other traditional loan products.
You’ll mostly be required to repay your loan weekly, basically Monday through Friday to reduce the risk of default. These loans are, therefore known to have a higher rate of approval.
Quick summary
- Interest rates: between 1.09% to 1.35%
- Loan term: 6 – 18 months, but mostly 12 months or less.
- Fees: 0% to 3% origination fees
- Repayments: weekly, bi-weekly
- Minimum credit score: none
- Approval duration: 24 hours
Business lines of credit
This is a revolving loan type. With this, a business owner can make purchases to the set card limit. The loan attracts a rather lower interest rate. And they don’t have a fixed repayment term. However, they are mostly renewed annually and semi-annually.
Quick summary
- Interest rates: between 1% to 2.5%
- Loan term: 6 – 18 months, but mostly 12 months or less.
- Fees: 0% to 3% origination fees
- Repayments: weekly, bi-weekly, monthly
- Minimum credit score: Good to excellent. Others could be considered, too.
- Approval duration: 24 hours
Business cash advance
This loan type is given by a lender against your future sales. Getting the loan makes the lender entitled to a fixed specified amount, usually higher than the loan amount. You’ll also pay a factor rate – the difference between the advance and the payback amounts.
The lender ensures repayment by taking an agreed percentage of your future sales. These are automatically deducted from the business’ bank account weekly or biweekly. Reconciliation is done every end of the month if deductions were in excess.
Quick summary
- Interest rates: between 1.09% to 1.35%
- Loan term: None.
- Fees: 0% to 3% origination fees
- Repayments: weekly, bi-weekly
- Minimum credit score: None
- Approval duration: 24 – 48 hours
Merchant cash advances
Also called the purchase of future sales agreement, merchant sales advances are yet another form of business financing, but with a bit of a different repayment process.
What makes them stand out is the fact that instead of future sales, they are connected specifically future credit card sales. These are deducted on the agreed terms till the loan is fully repaid.
Merchant cash advances are known for the flexibility of repayments.
Quick summary
- Interest rates: between 1.09% to 1.45%
- Loan term: None.
- Fees: 0% to 3% origination fees
- Repayments: Not fixed
- Minimum credit score: None
- Approval duration: 24 – 48 hours
Invoice financing
This loan type funds unresolved invoices the company has issued, have in their books as outstanding yet still unresolved.
Such funds reduce the overreliance on specific customer payments. This sees the continuity of business, taking advantage of on-time business deals.
The lender issues the funds in exchange for nominal fees. The responsibility of collecting the invoice is then relinquished by the issuing company. This bridges the possible cash flow gaps.
Quick summary
- Interest rates: None
- Loan term: None. No limits.
- Fees: 1% to 3% depending on the invoice in question
- Repayments: Not fixed
- Minimum credit score: None
- Approval duration: 24 – 48 hours
Short-term small business loan
Small business short-term loans are an excellent source of financing for new businesses looking to start. And already established businesses looking to bridge the gap of continuity and constant cash flow.
These loans are easy to apply for and require less paperwork. Similarly, the approval process is less strict, unlike other loan products, especially those from the brick and mortar banks.
As the name suggests, the loans are short-term and range from 3 months to 3 years. But, most of them are typically 12 months or less. This is geared towards helping you service the loan as fast as you can so you can get back growing your business.
However, this can act to your disadvantage, especially if your business hasn’t picked and you can hardly keep up with the repayments.
Similarly, shorter repayments mean higher monthly repayments, plus higher interests and fees. That’s why most of the lenders usually carry a higher APR. however, they have online tools that can help you know your repayments, interests, and fees in advance.
Short-term small business loans are known for frequent repayments, mostly daily, weekly, and biweekly unlike monthly repayments like in the case of most traditional bank loans.
Please note that the ease of application and approval and repayment of these loans can prove dangerous. They can approve addictive, easily placing you in an endless debt cycle which can severely hurt your credit score.
Further note that the process of acquiring funding shouldn’t be rushed. Choosing the wrong loan product could mean a deeper financial mess.
Whenever possible, consult with professional financial advisors. Most lenders have such, and you can use their services for free.
You wil want to take your time to fully understand a product before you dive in.
Short term business loans working capital
One of the main uses of short-term small business loans is to serve as working capital, basically taking care of operational costs. Such include salaries, rent, inventory restocking, and even large order fulfillment.
Since they have shorter repayments, they come with extra convenience to easily bridge financial gaps in your business.
However, the loans aren’t suitable for long-term investments. You, therefore, want to look for a different loan product if you’re planning on getting into real estate or acquiring a vehicle, machinery, or plant.
Working capital loans attract among the lowest APRs in banks. However, they tend to be stricter on credit score requirements than online lenders.
Apart from banks and online lenders, you can also get working capital loans in credit unions. Banks and credit unions are recommended for established businesses with strong credits and collateral.
Online lenders, on the other hand, are an excellent option for those with negative marks on their credit profiles. However, they tend to charge higher APRs compared to banks and credit unions.
For working capital loans, you can choose between SBA loans, term loans, business lines of credit, or invoice factoring.
Bottom Line
Short-term small business loans are sources of financing for operational costs. Because of these funds, paying rent, employee salaries, adding stock or fulfilling orders can be even easier. The funds are also perfect for unforeseen expenses and emergencies.
The good thing about short-term business loans is their rather easy repayment arrangement that’ll have you Paying your loan faster. This way, you’ll hardly have cash gaps, and your business activities will flow smoothly. It could even open more business opportunities.
However, they are not suitable for long-term investments. And, you risk going into a deep debt cycle if you don’t resist the urge to keep borrowing after repaying, especially when you don’t have a genuine reason to do so.
Frequently Asked Questions (FAQ)
Short-term business loans are loan products that enable businesses to meet their short-term cash needs. A lender releases the funds in a lump sum with a fixed short repayment period so the borrower can quickly finish repayment and concentrate on growing their businesses.
Short-term small business loans typically range from three months and three years. Most, however, are known to range between three and eighteen months. However, this could be more dependent on the lender in question and the borrower’s credit history.
Anything above 650 is desirable in the eyes of most lenders. Such will likely win you lower rates, longer and more flexible repayment terms. You can also qualify for a loan with a poor credit score. However, you’ll part with higher rates.
Short-term business loans are among the fastest methods of financing that’ll help you inject funds into your business. Plus, their application and approval are easier and more straightforward compared to other loans. they also come with shorter repayment terms so you can quickly service your loan and concentrate on the growth of the business.
Any business operating within the US jurisdiction and operates a bank account can qualify for a short-term small business loan. Other requirements such as the owner’s credit history and the business’s financial muscles vary from one lender to another and depending on the relationship between the borrower and the lender. Search for one with more friendly requirements and apply.
