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Small businesses in need of immediate financing can receive fast funding through short-term loans.
TIME TO FUND
The following lenders offer business financing for terms of 12 months or less.
6 months-7 years
Min. credit score
Time to funding
As fast as 3 days after approval
Funding Circle offers a short-term loan from $25,000 to $500,000.
Min. credit score575
As little as 24 hours, once approved
Kapitus offers a business cash advance with terms up to three years.
As fast as same day after approval
OnDeck offers short-term financing with terms of up to 18 months.
Up to $250,000
6 or 12 months
As fast as 24 hours after approval
BlueVine’s short-term line of credit come in six or twelve-month terms.
As little as one day
Raistone offers short-term invoice factoring with terms from one to three months.
What is a short-term business loan?
A short-term business loan provides a lump sum of fast funding to small businesses in need of financing. These loans typically have a term length ranging from three to 12 months, although some lenders may offer terms up to 18 months.
Short-term business loans come in various forms. Let’s define each type:
It is important for businesses to research and compare these different options before deciding on the best fit for their needs.
Short-term business loans typically involve a simple application process, quick approval times, and fast funding. Once approved for a loan, the borrower receives a lump sum of money and agrees to repay it within the specified term length. Repayments are typically made on a weekly or monthly basis, depending on the terms set by the lender.
Short-term business loans can be an ideal solution for businesses needing to bridge cash flow gaps, handle unexpected expenses, or finance small-scale expansion projects.
Short-term business loans are often used to provide an influx of working capital. This can be especially useful for businesses that are experiencing a slow season or are waiting on slow-paying customers. The immediate cash flow can be used to cover regular expenses like payroll, rent, or utilities.
For retail businesses or those that sell physical goods, short-term loans can be used to purchase inventory. This can be particularly beneficial ahead of a busy season or a large sale, allowing the business to stock up on products without depleting their cash reserves.
Unexpected expenses can arise at any time in the form of necessary equipment repairs or replacements. A short-term loan can provide the funds to address these issues promptly, minimizing downtime and potential loss of revenue.
Like any financial decision, obtaining a short-term business loan comes with both advantages and drawbacks. Understanding these can help businesses make informed decisions about their financing needs.
Quick access to funds – Short-term loans can often be approved and funded quickly, providing immediate access to capital when businesses need it most.
Easier approval – Compared to long-term loans, short-term loans may have less stringent eligibility criteria, making it easier for some businesses to qualify.
Debt paid quickly – As these are short-term loans, businesses can repay the debt swiftly and be free of it sooner compared to long-term loans.
Helps manage cash flow – Short-term loans can help businesses manage operational costs during downturns or slower business periods.
No long-term commitments – Short-term loans allow businesses to avoid long-term financial commitments, which might not be ideal in certain situations.
Higher interest rates – Short-term business loans often come with higher interest rates compared to long-term loans.
Frequent repayments – Some short-term loans may require weekly or even daily repayments, which can be challenging for businesses with irregular cash flow.
Risk of debt cycle – If a business is not careful, it can find itself in a constant cycle of borrowing to cover its costs, leading to a potential debt trap.
May not cover large expenses – Given their nature, short-term loans may not provide ample funding for major business investments or large-scale projects.
Impact on credit score – If a business fails to make repayments on time, it could adversely affect its credit score, making future borrowing more difficult or expensive.
The eligibility criteria for obtaining funding may differ based on the type of loan and the lender.
Credit score requirements will vary. While some options are available for scores in the 500’s, a minimum credit score of 600 will make it easier to qualify for a loan.
Lenders will want to see a minimum threshold of monthly revenue. Like the other requirements, the exact minimum will vary by lender and loan type.
TIME IN BUSINESS
While some lenders may allow for three months and others may require 1-2 years, six months is a good rule of thumb to follow to improve your chances of qualifying for funding.
Sure, you can go the bank route with a long application process and 75% rejection rate. But if you’re looking for financing in this lifetime, Lendio offers a faster, easier application process.
It’s secured with bank-grade encryption and SSL technology, so you know your information is safe.
We pair you with loan options from our network of 75+ lenders. Our dedicated funding managers can help you weigh the pros and cons of each option.
Once you’re approved, you’ll be able to access your capital in as little as 24 hours.
funded through us
lenders in our network
Sterling HannemannCo-Owner of Seven Brothers
Chloria ChandlerOwner of Bobbee O’s BBQ
The term for these small business loans is right in the name: short-term. Short-term business loans typically have repayment terms of 18 months or less.
The interest rate for short-term business loans can vary depending on the lender, the borrower’s credit score, and the loan amount. Generally, interest rates for these loans tend to be higher than those of traditional long-term loans, due to their shorter term lengths.
Some short-term funding products will use a factor rate instead of an interest rate. Unlike interest rates which are expressed as a percentage of the principal loan amount, a factor rate is usually expressed as a decimal figure.
To calculate the total amount you will need to repay on a loan with a factor rate, you multiply the loan amount by the factor rate. For example, if you receive a $50,000 loan with a factor rate of 1.2, you would have to repay a total of $60,000 ($50,000 x 1.2).
If you’re in a bind and need a quick cash flow boost, some loans can provide you with cash in hand in as little as 24 hours after your application is approved. Having all of your application materials ready to go when applying can help speed the process along.
Yes, a startup business can potentially secure a short-term loan, although it can be more challenging than for established businesses due to the perceived risk. Lenders typically require a solid credit history, a detailed business plan, and sometimes personal collateral. Some lenders specialize in startup loans and may have more flexible criteria, but interest rates may be higher to offset the risk. It’s crucial for startups to carefully evaluate the terms of any loan and consider the impact on their business finances.
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