Short term small business loans help you get the funding you need to keep your business afloat. According to Forbes, 80% of small businesses survive their first year, but of that 80%, only half will remain open within the first five years. Why is that? The second most common reason cited is a lack of capital. Oftentimes, small business owners are not able to obtain the funds they need to continue operation from tier one banks. This can be because of a lack of business history or low credit score.
This is where short term business loans come in. Most large banks and financial institutions that offer business term loans have very stringent requirements that don't allow most small business owners to be approved. Short term small business loans were created to solve this problem.
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A business term loan allows a business owner to receive a lump sum of capital to use for business purposes. The loan is repaid over a short period (18 months or less) compared to traditional term loans. Short term small business loans do not require a high business credit score or lengthy business history like big banks do.
Short term loan capital can be used for:
To qualify for a short term business loan, you must:
Ask your lender for their qualification requirements, as each provider will have different needs
There are a wide variety of short term business loan providers, but some of the most common products offered are:
When you can’t get approved for traditional business term loans or other funding methods, a short term loan is a great way to obtain the capital you need to continue operations. The repayment term for these loans is often between 6-18 months. You can choose to pay back the loan amount in daily, weekly, or bi-weekly payments. Interest rates are often higher than a term loan to account for the higher risk.
A more flexible option is the business line of credit. This allows a business owner to be approved for a lump sum of cash that they can draw upon at any time they choose, up to the set limit. In this case, the business only pays interest and fees on the amount used. You can continue to use this line of credit so long as you renew this service semi-annually or every year.
If you need cash quickly, a merchant cash advance, also known as a business cash advance, will provide a lump sum of money relatively fast. This type of short term small business loan allows you to use a percentage of your future credit card transactions to repay the loan.
This short term loan option allows a business owner to obtain funds so that they can pay their suppliers upfront once a purchase order is made. When it comes to purchase order financing, the financial provider will pay the supplier directly once they have the order fulfilled and ready to ship. The customer will then pay the finance provider directly for their order. That money is placed in a reserve and after deducting fees, what remains is given to the business owner.
Some businesses rely heavily on invoicing clients to collect payments for goods or services rendered. With invoice financing, invoices are used as collateral. This is a viable short term small business loan option for those businesses who have significant outstanding invoices. Here, a business will essentially sell their invoices to the financing provider in return for a lump sum of cash (typically 80%-90% of the invoice amount) and as invoices are paid in full, the money is placed into a reserve. Once fees and other deductions are made by the financial provider for their services in collecting balances from customers, what is left goes back to the business.
Working CapitalTransportation Company
Merchant Cash AdvanceBar Restaurant
Line of CreditPPE Wholesale
It’s time to analyze your financial position. If you have tried the traditional loan route and have been denied by the bank, gather up any business documents from the loan application and submit them. It is important to have an experienced small business loan provider that understands your unique needs and circumstances. Start the journey to obtain the capital your business needs to survive with a short term loan.
If you’re ready to apply for the capital your business needs, fill out our application in as little as 5 minutes. Questions? Drop us a line and one of our trusted capital partners will help you determine whether a short term business loan is right for you.