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By: rkapur
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Short-Term Business Loans: Ultimate Guide & 5 Best Options Of 2022

Short-term business loans can provide the funds you need to cover commercial expenses and grow.
They are typically repaid within one to two years, making them a good option if you need quick access to capital.

In short, they are viable financing options to fund new opportunities that could boost your company’s profits.

This article will help you understand short-term loans, their features, and how to use them to strengthen your business.

Top 5 Short-Term Loans For Businesses

Here are some of the top short-term business lenders in the market:

Camino Financial

At Camino Financial, we offer competitive business lending. Our microloans have tenors of 24 to 36 months. You can apply for amounts ranging from $5,100 to $35,000.

A microloan from Camino Financial can help your small business grow.

You can use it for almost any purpose, which makes it a versatile and valuable financial tool for small businesses.

Some examples are financing equipment or inventory, expanding your operations, or covering the cost of temporary business expenses.

At Camino Financial, we understand that every business is different. That’s why we offer a variety of small business loan products to meet your specific needs.

  • We don’t require collateral.
  • You can apply with your ITIN if you don’t have an SSN.
  • We have minimal requirements.
  • If approved, you can receive funds in 2 to 10 days.

Complete an application to see if you prequalify.

Apply For A Business Loan!

Kabbage

Kabbage offers lines of credit and short-term loans with simple, flexible repayment terms, and you can get the funding you need quickly and easily without the hassle of traditional loans.

They offer loans up to $150,000 with 6 t 18 months terms. They do not require a personal guarantee.

Some of their benefits include:

  • Fast and easy application process: you can apply for a loan online in just minutes.
  • Flexible repayment terms: you can repay your loan for six months to two years, with no prepayment penalties.
  • No collateral required: their unsecured loans don’t need you to put up any collateral.
  • Competitive rates: they are an affordable option for small businesses.

Credibly Capital

Credibly Capital offers short-term loans with low-interest rates, an excellent choice for immediate business expenses. With this lender, you can get up to $400,000 with 3 to 15 months to pay.

Here are some of the features and benefits of their financing:

  • Low-interest rates: so you can save money on interest payments.
  • Flexible repayment terms: Depending on your needs, you can choose to repay your loan over 3 months to 2 years.
  • No prepayment penalties: If you want to pay off your loan early, you can do so without penalty fees.
  • Fast and easy approval: Make an online application process to quickly get the cash you need.

Fundbox

If you need some quick cash, a Fundbox short-term line of credit could be the perfect solution.

Their lines of credit provide businesses with the capital they need to cover immediate expenses. You can get up to $150,000 with 12 to 24 weeks to repay.

  • They only require that you have a minimum annual revenue of $50,000 to qualify. This makes them an ideal solution for businesses that may not have the best credit score.
  • They’re very flexible. You can use the loan for any business purpose, covering unexpected expenses or investing in new equipment.

Blue Vine

Short-term lines of credit can provide the funding you need to cover unexpected expenses or take advantage of business opportunities. The amount is up to $250,000 with 6 to 12 months repayment terms.

BlueVine offers several features that make its short-term lending product attractive, including:

  • No require a personal guarantee
  • Simple application process
  • Fast funding – as soon as 24 hours
  • Flexible repayment terms
  • Competitive rates

What Is A Short-Term Business Loan?

A short-term business loan is a financing product that can provide your company with cash.

What makes short-term loans different is that they have a shorter payback period: usually one year or less. That said, some short-term lenders offer up to 24 months or sometimes more.

Because of the shorter period, the loan amounts are usually lower too.

#DidYouKnow
On the other hand, a long-term business loan has repayment terms of 3 to 10 years or even up to 25.

How Do Short-Term Business Loans Work?

Like most loans, you’ll receive a lump sum of cash upfront, which is repaid to your lender over a set period (plus interest and fees): usually within one year.

This financial product is a favorite for business owners who want to raise cash quickly and at reasonable interest rates.

Short-term business loans typically cost between 7% and 60%. You could make the repayment in monthly payments over a period that ranges from 24 months to 60 months.

Pros And Cons Of Small Business Short-Term Loans

Advantages:

  • Short-term business loans can provide much-needed capital to help a business grow or expand.
  • Lenders usually offer a quick turnaround.
  • It is possible to complete a significant portion of the loan application process online. This is fast and convenient; you don’t need to visit the lender’s office.
  • A short-term loan can be a lifeline for businesses struggling to get by. It can provide the funds necessary to buy inventory, pay rent, or make other essential purchases.

Disadvantages:

  • They typically have high-interest rates, making them difficult to repay.
  • There is always the risk that a business will be unable to repay the loan. This could lead to default, damaging the business’s credit.
  • The lender might even demand that the business owner personally guarantee the loan, putting their assets at risk.
  • You should take basic precautions to protect yourself from online fraud when applying online.

Requirements To Apply For A Business Short-Term Business Loan

Here are the most common conditions you need to meet.

  • Your business should have existed for a minimum of one or two years.
  • You will need a bank account to submit your financial statements online
  • Your annual revenue should be at least $50,000 or more annually.
  • A credit score of at least 640
  • Collateral required
  • Have a business plan

At Camino Financial, we have minimal requirements. You need:

  • To have been in business for 9 months.
  • An annual revenue of $30,000.
  • You don’t need to put collateral or present a business plan
  • You can apply if you have no previous credit history
Apply For A Camino Financial Loan!

Factors Behind The Cost Of A Short-Term Business Loan

If you’re considering taking out short-term financing, you need to understand what influences the cost.

Interest Rate

Interests on short-term loans are typically higher than those on long-term loans, as lenders consider them higher risk.

The interest rate will depend on many factors, including if you have a good or bad credit score, the amount you’re borrowing, and the term of the loan.

Fees

These fees vary significantly from lender to lender, for example, traditional or alternative lenders. So it’s essential to compare different options before you choose a loan.

Lenders charge standard fees, including origination, application, and closing costs.

Repayment Terms

Loans with shorter terms tend to have lower interest rates than those with longer terms but typically have higher fees.

Your Credit Score

The higher your credit score, the lower the interest rate you’ll likely qualify for. This could mean significant savings over the life of your short-term loan.

If your credit score is on the low end, you may still be able to get a loan, but you’ll probably pay a higher interest rate.

Some lenders may also require a cosigner if your credit score is below a certain threshold. A cosigner is somebody who agrees to repay the loan if you can’t. Having one with good credit can help you qualify for a better interest rate.

How To Get Short-Term Business Loans

Short-term loans can be an excellent option for small businesses that need quick funding.

Follow these steps to be on your way to securing the funding you need.

Decide How Much You Need

Small business owners should know that the loan amount should not exceed a sum they cannot easily repay.

In other words, you should be very sure you can afford the monthly installment you are committing to.

#CaminoTip
It may also be a good idea to extend the loan period. This will lead to lower monthly installments and will help minimize the chance of default.

If you find it confusing to estimate the repayment amount for various loan amounts and payment periods, you can use our Business Loan Calculator.

Term Loan Calculator


Research Your Options And Choose A Lender

There are many types of short-term business loans, so it’s important to research and find the best option for your needs.

Try comparing both traditional and online lenders.

Also, research decisive factors such as interests, repayment terms, and fees.

By understanding the terms loan terms, you can ensure you get the best deal possible.

Once you’ve decided on the type of loan you need, it’s time to compare lenders.

Make sure you understand the terms and conditions of the short-term loan before you even apply.

The best option for your business will depend on many factors, including the amount of money you need to borrow, the length of time you need to borrow it, and their eligibility requirements (like minimum credit score).

Apply For The Loan

It’s time to apply for a business loan. Ensure all the required documentation is ready before beginning the application process.

The process will vary depending on the lender. Still, you’ll generally need to fill out an application and provide financial information such as:

  • tax returns
  • business and personal credit history
  • business plan
  • financial statements

The lender will also want to know if you have a positive cash flow by reviewing your bank account.

Once you’ve applied, the lender will review your application and decide. The length of the loan approval process varies per lender.

If your application receives approval, the lender will deposit your loan funds. Make sure you use the funds as intended and make your payments on time to avoid penalties.

Apply now!

Common Uses Of Short-Term Commercial Loans

Some of the most common uses include:

To Cover Unexpected Expenses

You can use these products just like emergency loans. Surprise expenses can happen at any time and can be challenging to handle if you don’t have the cash on hand. A short-term loan can help you cover these costs without putting too much strain on your business’s finances.

To Finance Inventory

If you’re running low on inventory, short-term financing can help you restock quickly so that you don’t miss out on sales.

To Take Advantage Of Opportunities

Sometimes, opportunities come up that you need to act on quickly to capitalize on them. A short-term loan can give you the funds you need to seize these opportunities.

To Smooth Out Cash Flow

If your business is going through a slow period or has cash flow gaps, this financing can help you keep up with expenses until things pick back up again.

To Pay Taxes

Many businesses find themselves in a position where they must take out a loan to pay their taxes. This is usually because they’ve had a good year, and their tax bill is higher than usual.

A short-term loan can help you meet this financial obligation without putting too much strain on your business.

#DidYouKnow
You can also use short-term loans for debt consolidation.

Types Of Short-Term Business Loans

There are some types of short-term business loans for small businesses: line of credit, working capital loan, inventory financing, merchant cash advance, and microloan.

Lenders design each type of loan to meet a specific need that businesses may have.

Microloans

These small business loans are typically much smaller than others, and you can use them to finance specific commercial expenses. These are great options for businesses that need a little extra cash.

When choosing the right type of short-term loan for your small business, it is important to consider your unique needs and financial situation.

There is no one-size-fits-all solution for business financing, so working with a lender that can tailor a loan specifically for your business is vital.

Apply For A Microloan!

Business Line Of Credit

With a line of credit, you have a credit limit you can borrow against as needed. This option can be great if you need flexibility in using the funds.

However, lines of credit typically have higher interest rates than other types of loans, so you’ll want to be sure you can afford the payments before taking one out.

Working Capital Loans

A working capital loan is perhaps the most common type of short-term loan. As the name suggests, these loans provide businesses with the funds to cover their everyday operating expenses.

This can include payroll, rent, utilities, and other similar expenses.

This loan typically has fairly low-interest rates, and you can repay over a relatively short period. This makes them an ideal option for businesses that just need a little extra financial assistance to get through a tough patch.

Inventory Financing

You can use it to purchase inventory or raw materials that a business needs to produce its products or services.

It’s a great option for businesses expecting a large influx of orders and needs to ensure they have the necessary supplies to fulfill them.

Merchant Cash Advance

With these business loans, you sell a portion of your future credit card sales in exchange for a lump sum of cash upfront.

This option is for you if you need a quick infusion of cash but don’t necessarily have the collateral to qualify for a more traditional loan.

Invoice Financing

Another popular type of short-term business loan is the invoice financing loan. You use your outstanding invoices as collateral for a loan. This can be a great option if you have customers who are slow to pay their invoices.

Short Term Business Loans vs. Credit Cards

If you can’t get a short-term business loan, another alternative is to get a business credit card. But which one is better for your business?

Short-term business loans are better for businesses that need a large amount of money and can repay the loan within a year. Companies that require a smaller amount of money and can repay the loan within a few months may be better off with a credit card.

They are better suited for one-time expenses or significant investments.

Credit cards are also a good option for businesses that need money quickly and can’t get a loan. They can also provide emergency cash to help you through a challenging period.

They’re better if you need to make constant smaller expenses.

#DidYouKnow
You can use a business loan to pay off credit cards.

Is Short-Term Business Lending The Right For Your Business?

If your needs match the following criteria, small business loans of this type may be among the most suitable loan options.

  • You want to repay the money you borrow over 1 to 3 years tops.
  • You need a lump sum of cash quickly. A short-term business loan can provide the money you need to take advantage of a new business opportunity. It is a type of term financing that is repayable over a fixed period.
  • You don’t want a loan that carries confusing terms and conditions. You’re the type who likes to understand the exact nature of what you agree to before you sign on the dotted line. In this way, short-term loans are easy to get.
  • You want to be sure you can meet your repayment commitments. Short-term business loans have fixed repayment amounts and periods. That way, you won’t get any unpleasant surprises.

At Camino Financial, you can get term business loans with low requirements and friendly terms.

Apply today!

 

FAQs

Are there short-term loans for startup businesses?

There are short-term loans for startup businesses, but most come with high interest.

Startups typically have difficulty securing financing from traditional sources such as banks and venture capitalists, so they often turn to alternative financing options like this type of loan.

Which are the best short-term lending companies?

A few different short-term lenders focus specifically on small businesses. These include Camino Financial, Kabbage, and OnDeck.

How do I get short-term business loans?

You can go through a traditional bank, or you could try to get small business loans from an online lender.

If you’re looking for traditional bank loans, you’ll need good credit and present your business plan to the bank. The process can be long and complex, and you may not receive approval if your business is still in its early stages.

Online lenders are often more willing to work with new businesses and typically have faster approval times. However, the interest rates on online loans tend to be higher than those of traditional banks.

What is the easiest loan to get to start a business?

Some loans are easier to get than others, depending on the applicant’s credit history and financial situation.

That said, the consensus is that online loans are the easiest. Lenders can approve them approved within minutes and fund them within a few days.

Which are the best short-term business loans?

The best short-term business loan is the one with the lowest interest rate, the shortest repayment term, and the lowest fees.

How long is a short-term business loan?

A short-term business loan is a loan with a repayment period of 1-2 years or less.

 

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