Short-term business loans typically have terms of three years or fewer — and can be a good choice when you need fast cash to keep your business running smoothly. Short-term loans include term loans, lines of credit, merchant cash advances, invoice factoring, equipment loans and more. Here’s a closer look at the best short-term business loans by category.
Our lending experts analyze dozens of business loan providers to narrow down the best short-term options for business owners. We weigh lenders against 12 key metrics:
Application process
Credit score minimums
Customer service reviews
Eligibility requirements
Extra features
Fees
Funding turnaround times
Lender reputation
Minimum and maximum loan amounts
Products offered
Rates
Willingness to work with risky industries
We also search for lenders that cater to a range of needs, including those that work with bad credit and newer business owners.
How to compare short-term business loans
Here are the top things to keep in mind when comparing online business loans:
Repayment terms. Each loan type has its own set of loan repayment terms. While term loans usually have monthly payments, merchant cash advances might require weekly or even daily payments. Make sure you understand how your loan’s repayments work to avoid a cash crunch.
APRs. APRs on short-term business loans can range from 6% to 80%+ — and depend on the loan type, your credit score, revenue and time in business. Compare multiple quotes for the same loan type to make sure you’re paying a reasonable APR.
Origination fees. Depending on the lender and your credit score, you may be charged an origination fee up to 10% of the loan’s value. However, not all lenders charge these, and you may not have to pay them if you have good to excellent credit.
Other fees. Ask about any additional fees you may be responsible for, including prepayment penalties, late fees and ongoing administrative fees. Not all lenders charge these, but some do.
Customer support options. Many lenders have experienced loan officers who can answer your questions and walk you through your loan options. You may qualify for loans you didn’t know about, but could still work well for your situation.
Digital experience. Most lenders on this list offer a fast, streamlined digital application. But if having a mobile app to help manage your loan and repayments is important to you, be sure to check the app’s reviews on Google Play or the App Store.
Customer reviews. Customer reviews on sites like Trustpilot and the Better Business Bureau (BBB) website are a great place to research previous customers’ experiences with a particular lender.
How short-term business loans work
Short-term business loans typically come as either a lump sum, where interest starts as soon as the money hits your account, or a line of credit, where you only pay interest on what you borrow. Terms are usually three years or less, and repayment can be monthly, weekly or even daily depending on the lender. Payments are higher than with long-term financing, but you usually pay less total interest.
Short-term loans work best for immediate business needs like covering cash flow gaps or funding quick opportunities. If you’re financing a long-term investment and want a longer repayment schedule of up to 25 years, a long-term business loan, such as an SBA loan, may be a better fit.
Quick highlights:
Lump sum or line of credit options
Terms under 3 years
More frequent payments with less total interest
Good for short-term needs, not long-term projects
Pros and cons of short-term business loans
Pros
Many loan options available
Can help smooth over cash flow during slow periods
Can be used to take advantage of quick business opportunities
Provides working capital for a range of needs
Cons
Some loans may have high APRs
Frequent repayments may be required
Repayments higher than with a long-term loan
Balloon payment may be required at the term's end
Compare other short-term business loans
Use our table to compare lenders, and then select Learn more to visit the lender’s site or More info to read our review.
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How we picked these
What is the Finder Score?
The Finder Score crunches 12+ types of business loans across 35+ lenders. It takes into account the product's interest rate, fees and features, as well as the type of loan eg investor, variable, fixed rate - this gives you a simple score out of 10.
To provide a Score, we compare like-for-like loans. So if you're comparing the best business loans for startups loans, you can see how each business loan stacks up against other business loans with the same borrower type, rate type and repayment type.
Businesses that need equipment and don’t want to tie up cash and other loans
In addition to these short-term loan options, business credit cards can be a great way to track business expenses and earn rewards while you increase your working capital for ongoing expenses.
Short-term vs. long-term business loans
Short-term business loans tend to offer lower amounts and shorter repayment terms than long-term loans. Here are more key differences:
Exact requirements depend on the lender and loan type, but this is the minimum basic criteria most lenders look for.
Here are the general steps:
At least $10,000 monthly revenue
In business for six months or more
Credit score requirements can vary widely, with lenders on this list ranging from 525 to 650. Or some options, like MCAs and invoice factoring, may not even consider your credit score.
How to apply for a short-term business loan
Applying for a short-term business loan typically follows these five steps:
Determine the financing you need. Short-term business loans come in many forms. Choosing the right option ensures you have enough cash, in the right form, when you need it. Talk to a loan officer if you need guidance in picking the right loan.
Check your eligibility. This step involves checking your personal and business credit scores, tallying your revenue, verifying your time in business and determining if you have any collateral to pledge if you choose a secured loan.
Gather your documentation. Required documents typically include bank statements, tax returns, financial statements and other documents. You may also need to provide a business plan and personal guarantee if you’re a newer business owner.
Complete the application. Fill out the full application and upload the required documents or link to your financial accounts. Be sure to review the application for accuracy before submitting to avoid processing delays.
Wait for approval and funding. Online lenders tend to have fast approval and funding times — which means if you’re approved, you could have a decision same-day and funds in 72 hours or less.
Short-term business loans are available from online lenders, banks and credit unions.
Banks and credit unions. You may be able to secure a lower rate with a bank or credit union if you’re an established business and have good personal credit.
Online lenders. Online lenders stand out for a few reasons:
Higher approval rates. Online lenders rely on technology to assess your business’ overall financial health — not just your credit score — and are usually willing to work with lower-credit borrowers and newer businesses.
Quick processing time. Because they rely heavily on technology to make underwriting decisions, same-day approval and next-business-day funding are common with online lenders.
A wide range of loan types. Online lenders are known for their wide selection of short-term loan types to suit a range of financing needs. A bank may only have a couple of options, like term loans or LOCs.
What should I do if I was denied a business loan?
If you’ve been denied a business loan, here are three steps you can take to potentially correct the situation:
Ask the lender why they said no. Call the lender to discuss your application and ask why it was turned down. You may be able to correct the problems and resubmit the application.
Take corrective action. Once you know the reason, try to rectify the situation. For example, there may have been missing or inaccurate information on your application, or your credit score might have been stronger before you applied.
Prepare a new application. When you’re in a position to reapply, try applying with the same lender or consider an alternative form of financing where you’re more likely to get approved.
It’s often easier to get approved for a secured loan backed by business assets. You could also apply for a personal loan.
Alternatives to a short-term loan
Not ready to take out a short-term business loan? Consider these alternatives:
Personal loan. Some lenders let you use a personal loan for business expenses. Personal loans aren’t dependent on your business’ financials or time in business, making them ideal for new business owners.
Business credit card. For small cash flow needs, consider a business credit card. They help boost your business credit score while you earn perks like points or cash back on your business expenses.
Grants. Business grants are free money through federal and state government agencies, as well as private corporations. But grants are competitive, and if you get chosen, the money could take months to receive.
Investor financing. If you’re an entrepreneur, money from an angel investor can give you the cash you need to get your business started — but you must give up equity in your company in return.
Crowdfunding. Crowdfunding is a popular marketing tool and a good way to judge interest in your product or service and gain potential customers while you drum up funding for your business.
Home equity financing. If you’re a homeowner with at least 20% equity, you could use a home equity loan or home equity line of credit (HELOC) to fund your business. But keep in mind, this option puts your house at risk if you can’t make the payments.
Frequently asked questions
The best type of financing depends on why you need the money. For example, if you're making renovations and aren't sure how much it'll cost, a business line of credit may give you the flexibility you need. Or if you need to replace old machinery, an equipment loan might be a better move.
Many short-term business loans require more frequent repayments than long-term loans, such as daily or weekly repayments, which can make it easier to fall behind and miss a payment. Shorter terms also typically mean larger payments, and some options also have higher rates than longer-term business loans.
Sometimes. Providers that offer MCAs or invoice factoring, for instance, typically don't report your payments, so they won't help you build credit. But if you get a term loan, line of credit or equipment financing, your payment history is reported and will help you build credit.
Kat Aoki was a personal finance writer at Finder, specializing in consumer and business lending. She’s written thousands of articles to help consumers make better decisions on their home loans, bank accounts, credit cards, cryptocurrency and more. Kat is well versed in working with leading brands in the real estate, mortgage and personal finance industries, and her expertise has been featured on Lifewire and financial comparison sites like iSelect and realestate.com.au. She holds a BS in business administration from California State University, Sacramento and enjoys hiking and yoga in her spare time.
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