Compare short-term business loans |

Compare short-term business loans

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Top business financing options for quick cash flow fixes.

Sometimes a little bit of financing can make all the difference to a small business. A computer crashes and you don’t make enough revenue to quite cover the cost. Bills are due and your business only has outstanding invoices, not cold hard cash. When your business needs money fast to turn things around, a short-term business loan might be what you’re looking for. We take you through the basics and outline different types of short-term business financing to help you find the right choice.
LoanBuilder, A PayPal Service Business Loans

Top pick for short-term business loans: LoanBuilder, A PayPal Service

Customizable business loans with no hidden fees.

  • Min. Amount: $5,000
  • Max. Amount: $500,000
  • Loan Term: 13 to 52 weeks
  • One-time fixed fee charged over the life of the loan
  • Acclaimed customer service
  • Requirements: $100,000+ annual revenue, 1+ years in business, 600+ personal credit score

    How do short-term business loans work?

    There’s no one way that short-term business loans work. That’s because a short-term loan can be any type of business financing: Fixed-term loans, invoice factoring or financing and payroll funding all involve different ways of borrowing and paying back funds.

    What short-term loans have in common is that they typically come in smaller amounts, have shorter loan terms and more require frequent payments than your standard business loan. With most short-term business loans, you can expect to make daily or weekly repayments and pay it off in a matter of months or up to two years. Interest rates and fees are also typically higher than long-term business loans but they have lower personal credit requirements.

    Short-term business loans are generally meant for emergencies to fix quick cash-flow problems. That’s because high interest rates and fees make them unaffordable to cover large expenses — and you likely won’t be able to qualify for a large amount of funds anyway.

    5 types of short-term business loans

    There’s no one-size-fits-all short-term business loan. The loan type that works best for you depends on your business’s immediate needs and how it operates. Have a lot of outstanding invoices? Invoice factoring might be what you’re looking for. Just need to cover a small one-time expense? A term loan could be the way to go.

    Business term loan

    Business term loans come in one lump sum that you pay back over a set period of time with interest and fees. Loans with a term less than 18 months or two years are considered short-term and often come with daily or weekly repayments, instead of monthly repayments.

    • Who it’s for: Any business with a one-time expense
    • How much you can typically borrow: $2,000–$250,000
    • Turnaround time: As fast as one day.
    • Typical cost: 10%+ APR
    • Eligibility: 580+ credit score, at least six months in business, at least $10,000 monthly revenue

    Pros and cons of fixed-term business loans

    Invoice factoring

    Invoice factoring involves selling your business’s unpaid invoices to a third party for a percentage of their value. Your lender gives your business a smaller percentage of the invoices upfront after deducting a fee. Once your customers pay off the invoices, the lender gives your business the remaining amount.

    You can either sign up for invoice factoring monthly to make sure all of your business expenses are covered or use invoice factoring to cover a one-time payment. You can also either factor all of your business’s invoices or select which invoices to factor.

    • Who it’s for: Businesses that rely on accounts receivable
    • How much you can typically borrow: Depends on the value of your invoices
    • Turnaround time: As fast as one day
    • Typical cost: 5%–20% of your invoice’s value after a factoring fee of around 2%–5%
    • Eligibility: At least six months in business and at least $50,0000 in annual revenue

    Find the right type of invoice factoring for your business

    Invoice financing

    Similar to invoice factoring, invoice financing gives you an advance on your invoices. It’s essentially a loan backed by your company’s invoices. You’ll get a percentage of your invoice’s value upfront, which you pay back with interest and fees. Once the client pays you, you repay your lender.

    • Who it’s for: Businesses that rely on accounts receivable
    • How much you can typically borrow: Depends on the value of your invoices
    • Turnaround time: As fast as one day
    • Typical cost: 12%–60% interest and a 1%–5% servicing fee
    • Eligibility: At least six months in business and at least $50,000 in annual revenue

    The ins and outs of invoice financing

    Line of credit

    Lines of credit give your business access to a certain amount of funds at the last minute, similar to a credit card. You only have to repay what you borrow and your loan term typically starts when you make your first withdrawal. Short-term lines of credit typically come with terms that range from six to 12 months with weekly or even monthly repayments.

    • Who it’s for: Seasonal businesses
    • How much you can typically borrow: $2,000–$100,000
    • Turnaround time: As fast as one day
    • Typical cost: 12%–36% APR
    • Eligibility: In business at least one year and $50,000 annual revenue or higher

    Find out how business lines of credit work

    Merchant cash advance

    Merchant cash advances are quick lump-sum advances on your business’s future sales. Your business can typically qualify for a certain percentage of its annual sales and pay it back with a percentage of your business’s daily sales or with fixed daily withdrawals from your business’s bank account.

    Instead of getting an interest rate, you’ll get a factor rate, which determines how much you’re on the hook to pay back up front. Multiply your merchant cash advance by the factor rate and that’s how much you’ll pay.

    • Who it’s for: Businesses that rely on credit or debit card sales
    • How much you can typically borrow: $2,000–$250,000
    • Turnaround time: As fast as one week
    • Typical cost: Factor rates range from 1.14–1.18
    • Eligibility: 500+ credit score, at least a year in business, at least $10,000 monthly revenue

    How merchant cash advances work

    Compare business loan options from top providers

    Rates last updated January 22nd, 2019
    Unfortunately, none of the business loan providers currently offer loans for these criteria.
    Name Product Product Description Min Loan Amount Max. Loan Amount Requirements
    LoanBuilder, A PayPal Service Business Loans
    Customizable loans with no origination fee for business owners in a hurry.
    Annual business revenue of at least $42,000, at least 9 months in business, personal credit score of 550+.
    Kabbage Small Business Line of Credit
    A simple, convenient online application could securely get the funds you need to grow your business.
    1+ years in business, $50,000+ annual revenue or $4,200+ monthly revenue over last 3 months
    Credibly Business Loans
    Funding to cover business expenses with daily or weekly repayments.
    9+ months in business, $42,000+ annual business revenue, 550+ personal credit score
    LendingClub Business Loans
    With loan terms that vary from 1 to 5 years, enjoy fixed monthly payments and no prepayment penalties through this award-winning lender.
    12+ months in business, $50,000+ in annual sales, no bankruptcies or tax liens, at least 20% ownership of the business, fair personal credit score or better
    LendingTree Business Loans
    Multiple business financing options in one place including: small business loans, lines of credit, SBA loans, equipment financing and more.
    Varies by lender and type of financing
    Varies by lender and type of financing
    Varies by lender, but you many require good personal credit, a minimum business age and minimum annual revenue.
    Lendio Business Loan Marketplace
    Submit one simple application to potentially get offers from a network of over 75 legit business lenders.
    Must operate a business in the US or Canada, have a business bank account and have a personal credit score of 560+.

    Compare up to 4 providers

    How can a short-term loan benefit my business?

    • Covers gaps in cash flow. You need money to keep things running, but revenue has stopped coming in — for now. A short-term business loan can help pick up the slack to maintain overhead costs while you wait for things to go back to normal.
    • Gets you cash fast. Many short-term business loan providers can get you funds in as little as one business day after you submit your application.
    • Designed for emergencies. Your business’s van broke down days before a huge delivery or one of your restaurants’ ovens is on the fritz. A short-term business loan can give you just enough to cover those immediate repair costs so your business doesn’t lose even more money.
    • Doesn’t require good credit. Short-term lenders often accept credit scores in the 500s, meaning you don’t need to have a spotless personal financial past to qualify for this business loan.
    • Minimal paperwork. Not only is the turnaround time quick, the amount of time and effort needed for the application is generally less than your typical business loan, letting you get back to work quickly.

    What to watch out for

    • Can be expensive. Short-term loans come with higher interest rates and fees than other types of loans, especially if they come with lax credit requirements.
    • May have weekly or daily repayments. If your business is just starting out and doesn’t make money every day or relies on large lump-sum payments each month, it could have trouble paying back a short-term business loan.
    • Can be a debt trap. With any short-term loan, there’s a risk of borrowers taking out more short-term loans to pay off the last loan. With high interest rates, it’s not difficult to spiral into a cycle of debt that could ruin your credit and put you out of business.
    • Not good for large expenses. The larger the loan, the higher your repayments will be — and the more interest you’ll pay. With such frequent repayments, a large short-term loan could be the recipe for default and a ruined business.

    How do short-term business loans compare to other loan types?

    LoanTurnaround timeAverage repayment period
    Short-term loansAs fast as one business dayLess than 1 year
    SBA LoansAs fast as three weeks5–25 years
    Lines of creditAs fast as one business day6 months to 5 years
    Long-term loansAs fast as two business days1–5 years
    Merchant cash advanceAbout one weekVaries by sales amount
    Personal loans for businessAs fast as one business day3–5 years

    Bottom line

    Short-term business loans could help your business in a pinch. Their fast turnaround time and relatively effortless applications mean you can get a small amount of funds fast when you need it. But your business will pay for that quick and easy application — they cost more than your typical business loan. You might want to treat them as a last resort.

    Curious about how other types of business financing work? Check out our business loans guide, where we break things down and compare lenders.

    Frequently asked questions

    Image source: Shutterstock

    Anna Serio

    Anna Serio is a staff writer untangling everything you need to know about personal loans, including student, car and business loans. She spent five years living in Beirut, where she was a news editor for The Daily Star and hung out with a lot of cats. She loves to eat, travel and save money.

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