What is a Short-Term Business Loan?

Short-term business loans are meant to be paid back in less than 18 months. They’re quick-turnaround loans – you borrow what you can pay back quickly in order to get on with your business. They’re a flexible funding option for short-term business needs and are ideal for filling a number of cash-flow gaps, like investments and emergency funds.

$2.5K - $250K

Maximum Loan Amount

3 to 18 months

Loan Term

Starting at 10%

Interest Rates

As fast as 1 day

Speed

How Does a Short-Term Business Loan Work?

Short-term business loans are usually smaller in amount and, of course, have shorter payback terms. They’re ideal if you need cash quickly and for an array of business expenses, and can make a big difference for your immediate cash flow.

They don’t differ too much from a traditional loan – you get a principal amount upfront, and you’ll pay it back in incriminates over the next several months. As opposed to traditional loans, however, they may have higher interest rates due to the fact they’re higher risks for the lender. Payments are also often weekly instead of monthly.

Pros & Cons

Pros of a Short-Term Business Loan

  • Set payment structure
  • Very little paperwork
  • Bad credit is not an issue
  • Good for many business needs

Cons of a Business Line of Credit

  • Annual costs are higher
  • Weekly payment schedule
  • Higher interest rates

Most Customers who were approved had:

$150K

ANNUAL REVENUE

600

CREDIT SCORE

2+

YEARS IN BUSINESS

Compared to other loan types

What Qualifies a Business for a Short-term Business Loan?

Short-term business loan lenders place more weight on cash flow, so significant cash flow can help qualify a business for a short-term loan that wouldn’t for a traditional loan. The interest rate, however, will depend on your business history and credit.

What Do Your Customer’s Need for a Short-Term Business Loan?

Short-term business loans are exclusive to online lenders, so they’re a quick and easy application process. You can often receive funding in as little as two days.

What You’re Going to Need:

  • Driver’s License
  • Voided Business Check
  • Proof of Business Ownership
  • Credit Score
  • Bank Statements
  • Personal Tax Returns

What Else Should You Know About Short-Term Business Loans?

Short-term business loans are paid back less time than traditional loans, and they’re a way to receive cash quickly. Here are the fundamentals:

  • They work like a traditional loan in structure
  • Short-term business loans require less time and paperwork but will require higher interest rates and more costly repayments.
  • Often, business history and credit isn’t a huge factor.
  • They’ll usually be paid back weekly or daily.
  • Repayment terms are less than 18 months, and as a result, loan amounts are smaller.

Not sure if a short-term business loan is right for your customers?

Let us walk you through your options and help you decide which programs are best for your customer base

When Should Your Customers Use a Short-Term Business Loan?

Short-term loans are smaller dollar amounts than long-term loans, so they’re good to give your business some extra working capital.

They’re ideal for:

  • Cash flow gaps – if you have unpaid customer invoices but need to pay your supplier within a week.
  • Startup costs and building business credit
  • Seasonal expenses or seasonal cash needs.
  • Refinancing debts
  • Paying taxes
  • Jumping on quick opportunities

Interest rates will start at around 10%, while some short-term loan lenders will use factor rates. For example, if you do a short-term loan of $10,000 for 6 months, and have a factor rate of 1.2, you’ll need to pay back $12,000. If this was to be paid back weekly, you’d be making 24 payments total of $500 each.

Part of the cost for these loans is a convenience fee, and part is due to the high-risk put on lenders. They require little paperwork and not much business history, so they’re easy to qualify for and simple to apply to, but this makes them more convenient – and convenience costs money. They’re higher-risk because of these factors as well – the lender is trusting that you’ll pay the money back in such a short amount of time before they’ve had a chance to vet your business to know if you’re good at making payments or not.

Get a free consultation

Let one of our FaaStrak financial experts help lead you through the process and guide you down the best path for your business financing needs.