Where can I get a short-term business loan?

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Short-term business loans, typically those with repayment periods lasting anywhere from three months to 24 months, are a useful tool for companies that need cash quickly. Some lenders offer flexible short-term loans with the most favorable rates and terms, while others may provide fast funding in as little as one to three days.

If you’re in the market for business funding, there are a few places where you can get a short-term loan.

Banks and credit unions

A bank or credit union typically offers the lowest rates and has flexible repayment periods. This includes term loans where you can choose a short repayment period of 12 months or opt for a longer repayment period, usually up to 60 months.

This flexibility gives you more control to decide how you manage your loan and your cash: You can pay off a loan early and save interest, or you can choose to budget payments over a longer period, which may give you breathing room to ensure you have enough cash on hand to cover all of your business’s obligations.

When it comes to disadvantages, not all banks and credit unions offer short-term options on their loans. And they generally aren’t the fastest lenders out there. Some lenders may require you to apply over the phone or in person, and the extensive underwriting processes could mean you won’t see funds for at least a week once you apply. So, this isn’t the best choice if you need a fast business loan.

Banks that offer short-term business loans

If you’re looking for a short-term loan from a traditional bank, here are four top options.

Online lenders

If you’re looking for the fastest possible application, approval and funding timeline, an online lender might be the best option. These lenders specialize in quick funding, often getting cash to you the next day.

Online lenders also tend to offer more alternative financing options, like merchant cash advances or invoice factoring. These are accessible loans that may provide access to funds to business owners who may not qualify for loans from banks or credit unions, like startups and business owners with bad credit.

The downside is that online lenders with low credit score requirements and open to new businesses tend to offer lower loan amounts. Their loans also tend to have higher interest rates and fees and shorter repayment periods that could make it harder to pay off a loan.

Online lenders that offer short-term business loans

If you’re not sure where to look, here is a sample of top online lenders offering unsecured business loans.

Pros and cons of short-term business loans

Consider the pros and cons of short-term business loans before applying for one.

Pros

• Fast funding. Many short-term loans have quick applications and fast funding. You can get the cash you need as soon as the next day.
• Quick repayment. With a short-term loan, you’ll be out of debt relatively quickly.
• Streamlined application. Many short-term lenders allow you to apply online with minimal documentation, helping you get funding quickly.

Cons

• Higher rates and fees. Short-term loans tend to carry higher rates than long-term loans. They may also charge additional fees and factor rates, increasing the cost of borrowing.
• Small loan amounts. Short-term loans may have lower maximum loan amounts than longer term loans, such as $50,000 or less.
• Frequent payments. Most loans come with monthly payments, but some short-term lenders expect weekly or even daily repayment, which could be hard to afford.

Alternatives to short-term business loans

If a short-term loan doesn’t sound right, here are some alternatives:

• Long-term loans. These have repayment periods of 60 months or longer. These are best if you need to borrow money for more than a few years or finance larger purchases.
• SBA loans. The U.S. Small Business Administration insures these loans. SBA loans offer borrowing limits in excess of $5 million and long repayment terms.
• Alternative financing. Some alternative loans, like merchant cash advances, are short-term options. Others, like crowdfunding or peer-to-peer lending, are better for longer-term borrowing and offer perks like minimal credit requirements.
• Business credit cards. If you can pay your balance off each month, the best business credit cards let you borrow money without interest charges. Other perks may include sign-up bonuses and rewards.

Bottom line

Short-term business loans can help your company take advantage of a business opportunity or come up with funds quickly during a cash crunch. If you need funds quickly and are wanting to get a short-term business loan, look to online lenders. If you have a bit more time, a bank or credit union will likely have cheaper loan options.

Frequently asked questions

• How do short-term business loans work?

  Short-term business loans tend to work like any other loan, giving you cash that you have to repay, plus interest. But these loans are paid off quickly, within six to 18 months. Depending on the lender and type of loan, you may have to repay the loan weekly, biweekly or monthly.

• Is it hard to get a short-term business loan?

  If you’ve been in business for at least six months, have reasonable credit and can show that your business is generating revenue, many online lenders offer short-term loans. Just be ready to provide a personal guarantee when applying for the loan. That reduces the lender’s risk in case you default.

• What is the difference between short- and long-term business loans?

  The main difference between short- and long-term business loans is how long the repayment period is. Short-term loans usually have repayment periods of 24 months or less. Long-term loans have longer repayment periods, often 60 months or longer.