Short-Term Business Loans

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.

SBA Loans

What is an SBA Loan?

The SBA, or Small Business Administration, is a federal agency dedicated to providing assistance to small businesses in order to promote the economy. SBA Loans are business loans guaranteed by the SBA at up to 85% of the loan amount. They’re provided through an approved lender (AKA a bank).

As one of the lowest-cost loan options for business owners, SBA loans are of serious interest. FaaStrak is here to help you understand the requirements and appeal of an SBA loan and to find out if it’s right for your company.

$5K - $5M

Maximum Loan Amount

5 - 25 years

Loan Term

Starting at 7.75%

Interest Rates

As fast as 2 weeks

Speed

How Does an SBA Loan Work?

Despite its name, an SBA Loan isn’t given out directly by the SBA. The SBA backs up a portion of bank loans, giving lenders less of a risk, and giving borrowers a better chance of consideration. This guarantee for the lender lets them offer longer repayment terms, which means lower monthly payments for the borrower. They can also be used for almost any business expenditure.

Pros & Cons

Pros of an SBA Loan

  • Lowest Down Payments
  • Longest Payment Terms
  • Reasonable Interest Rates
  • Suitable for a wide range of business needs

Cons of a Business Line of Credit

  • Lengthy Paperwork
  • Longer Approval Times
  • May require collateral

Most Customers who were approved had:

$180K

ANNUAL REVENUE

680

CREDIT SCORE

4+

YEARS IN BUSINESS

Compared to other loan types

What Qualifies a Business for an SBA Loan?

Getting an SBA loan isn’t an easy process, so how can you help secure one for your business?

The most important factor is your credit score because SBA loans are mainly for business owners with strong borrowing history.

Often, new businesses may be able to qualify for short-term lines of credit while more well-established businesses can receive medium-term lines of credit.

Remember that:

  • SBA loans take longer to receive actual funds
  • They also take more time to apply for
  • Startup companies find it harder to qualify for SBA loans

What Do Your Customers Need for SBA Loans?

Banks take weeks to process SBA loan applications, but FaaStrak offers a quicker and easier way. Apply online and we’ll connect you to the top SBA lenders.

What You’re Going to Need:

  • Driver’s License
  • Voided Business Check
  • Bank Statements
  • Balance Sheet
  • Profit & Loss Statements
  • Business Tax Returns
  • Personal Tax Returns
  • Business Plan
  • Business Debt Schedule

Applying for an SBA Loan

SBA loans are easier to qualify for than traditional bank loans, but regardless, you’re still working with a bank. Even with the government guaranteeing a portion of SBA loans, the process is still slow and tedious – banks review credit, financial statements, legal documents, business plans, and often even expect collateral.

Because your borrowing history is especially important to banks giving out SBA loans, a great credit score will get your application noticed. In addition, you’ll also need a solid business plan, a track record with repaying loans, and most of the time, business profit.

On a brighter note, however, the payoff of SBA loans are usually worth the long process. The low interest rates and long repayment terms are highly appealing, and here’s how you can get these benefits.

How We Choose the Right SBA Loan For Your Customer

The three most popular SBA loan programs are:

  • The 7(a) Loan Program
  • The CDC/504 Loan Program
  • The Microloan Program

To figure out which is right for you and your business, the loan program you’ll apply for depends on your goals, age and size. Below are your options. 

SBA 7(a) is the most popular SBA loan program. It works for most general needs. With it, you can:

  • Purchase new land
  • Repair existing capital
  • Purchase or expand an existing business
  • Refinance existing debt
  • Purchase machinery, furniture, fixtures, supplies or materials

SBA 7(a) loans are for a loan amount of up the $5 million, and offer up to 25 years for repayment.

With the more specific CDC/504 program, they can only be used for purchasing fixed assets – things like equipment and real estate.

CDC/504 loans can be for up to $5.5 million, and allow for 10 to 20 years for repayment.

If you’re feeling overwhelmed by all the SBA loan options, don’t stress, because that’s what FaaSfunds is here for. We’ll help figure out which loan you qualify for and which will work best for you and your business. And even if you don’t qualify yet, we’ll figure out what your business can do to get there.

Not sure if SBAs are right for your customers?

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

What Will an SBA Loan Cost You?

Cost will vary based on the SBA loan type. Here are the fees, interest rates and repayment terms for the aforementioned loans.

There do seem to be a lot of fees associated with SBA loans, but they end up being the most cost-efficient of any other loan program. The amount of money you’ll save is far greater than any spent on fees.

Fees

The SBA isn’t lending to you directly, so it charges a guaranty fee for its loan guaranteeing service. This is originally charged to the lender, but the lender then passses it on to the borrower.

  • Guaranty fee of 1.7% for loans up to $150,000
  • Guaranty fee of 2.25% for loans greater than $150,000

Often, partnered banks will charge fees for origination or loan packaging. These, however, just depend on the bank.

Interest Rates

  • A maximum of 2.75%, depending on your credit score, plus the Prime Rate (which is determined by the government).
  • the Banks determine if the interest rates are fixed or variable for SBA 7(a) loans
  • The SBA restricts how much a bank can make off of a loan by limiting the maximum spread.
    • Greater than $50,000 borrowed and a repayment term less than seven years = Prime Rate + a maximum spread of 2.25%
    • More than $50,000  and a repayment term greater than seven years = Prime Rate + a maximum spread of 2.75%

If you choose to apply for an SBA 7(a) loan with FaaStrak, the banks we partner with offer interest rates of 8.25% total, subject to change with the Prime Rate.

APR

Different than your interest rate, APR will include the guaranty fees and origination fees, which will give you the total cost of your loan.

Repayment

  • Seven years for working capital
  • 10 years for equipment loans
  • 25 years for commercial real estate loans

Fees

CDC/504 loan fees are typically 3% of the loan amount. These can sometimes be paid with the loan. You’ll also need to put at least 10% down on your purchase.

Interest

Interest rates for CDC/504 loan programs can get complicated. In short, the exact rate won’t be known until about 45 days after the loan is secured, but you can usually expect it to be between 5% and 6%.

This is because the CDC/504 loan isn’t just one loan – 50% comes from the bank and 40% comes from a Certified Development Corporation (a CDC). They other 10% is your down payment. They pool their projects and auction them to investors.The sale determines the interest rate, and the sale takes place about 45 days after you close the loan. Historically, it’s been around 4% to 5%, and after bank rate, the total interest usually comes to between 5% and 6%.

This complicated process, thankfully, is all handled automatically.

Repayment

  • 10 to 20 years

Fees

There are no fees with SBA microloans.

Interest

You can expect interest rates for microloans to range from 8 – 13%. Your bank will set the exact rate depending on your business credit score and other specifics.

Repayment

Microloan repayments depend on how much you borrow and what you’re using it for, but the maximum term the SBA allows is six years.

 
 

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.

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