Whether you need a short-term business loan to expand your business or buy a piece of equipment, choosing the right lender is critical. For example, a short-term business loan can help you as a business owner purchase more inventories, make some improvements, and pay payroll without the commitment of a longer-term loan. It can be found online or at a bank and comes in different forms with varying rates and qualifications.
Short-term business loans can give your business the fast cash it needs to bridge cash-flow gaps, handle emergencies and other immediate financing needs, or take advantage of a business opportunity.
Think of them as quick-turnaround loans: Borrow what you can pay back relatively quickly so you can focus on running your business rather than managing debt.
Depending on your situation and the lender, short-term loans can be paid off in a few months or extend from one to three years.
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When you are looking for short-term business loans, several factors will play into your decision. You will want to consider:
Loan and origination fees
Prepayment penalties (if any)
You also will want to consider the type of loan and objectives for taking out a short-term business loan in the first place. Here is a roundup of some of the top short-term business lenders based on these factors.
Kabbage offers multiple short-term business loans with fast approvals, quick funding times, and a simple online review process.
Kabbage requires you to be in business for at least a year, have a business checking account, and previously been approved for funding by Kabbage, or have a current American Express business card relationship. Kabbage is an American Express company founded in 2009 as a technology company that connects small businesses with cash flow solutions, including short-term business loans and payment processing loans. It also offers online banking services and small business tips and resources. It was started to help small businesses get the cash they need quickly and less paperwork than a typical bank.
You can apply for a short-term business loan online and get an automatic financial review with approval the same day. You can also use over the phone with a representative if you have questions. Typically funding is completed within three business days, sooner if the funds are deposited into your PayPal account. Terms vary but are usually between six and 18 months.
Once you get funded, you can draw from the funds as often as possible and won’t be charged prepayment penalties. Kabbage doesn’t charge loan origination fees but charges monthly fees that are a percentage of your balance. You can review the payment schedule before accepting the loan so you know what to expect.
Kabbage doesn’t have a minimum credit score requirement but does require that you be in business for at least one year and have revenues exceeding $50,000. After that, short-term business loans are available up to $250,000.
Kabbage has a positive industry reputation and primarily positive customer reviews, with customers appreciating the quick funding times, but some customers found it hard to get in touch with someone.
OnDeck offers same-day funding on some of its loans and a simple application, and multiple types of loans to choose from.
Since its founding in 2006 in New York City, OnDeck has funded more than $13 billion in loans. It uses proprietary software and an algorithm to compile its financial data and determine its eligibility. The company offers term loans and business lines of credit and multiple loan types, terms, and repayment options. In addition, there’s a team of U.S.-based loan advisors to answer questions and assist you throughout the loan process. It has funded more than $13 billion in loans.
You can apply for a short-term business loan online or over the phone, and the application generally only takes 10 minutes with same-day approval, and some loans even fund as quickly as the same day. This is helpful if your business has an emergency and needs the money soon. If you apply for a business slime of credit, the loan amount will be between $6,000 and $100,000 with a 12-month repayment term that resets after each withdrawal.
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Term loans are between $5,000 and $250,000 with a lump sum of cash upfront and the option to apply for more once the loan is halfway paid off. Terms are up to 18 months. OnDeck requires a year in business, annual revenue of $100,000, and a personal FICO score of at least 600. Credit score, minimum time in business, and rates vary depending on the type of loan, industry, and location of your business, but rates typically start at 9%. It has positive reviews, with customers praising its fast approval times.
Lines of Credit
BlueVine offers lines of credit up to $250,000 with no prepayment penalties, allowing you to draw as you need and pay for only the credit you use. Businesses need a minimum of 2 years in business, monthly revenue of $25,000 or more, and a personal credit score of at least 650.
Cash can be available within 12 to 24 hours.
Multiple term lengths for different financing needs.
Short repayment term results in higher payment amounts.
Requires personal guarantee.
Fundbox also provides revolving lines of credit with no prepayment penalty. Businesses need to have $100,000 in revenue, at least six months in business, and a FICO scores above 600.
Credibility Capital offers low-rate short-term loans. Credibility Capital funds loan up to $350,000 with terms of up to 48 months. It requires two years in business and current revenue generation. Note: It has some geographic limitations.
Competitive rates among online lenders.
No prepayment penalty.
Extra monthly payments can save interest costs.
Requires high minimum credit score and revenue.
Requires business lien and may require a personal guarantee.
Best for Startups
Accion offers short-term small business loans and a community of support without minimum time in business or revenue requirements. Accion is a nonprofit that provides funding from pre-seed to growth-stage.
Accion was founded in 1961 by a law student in California as a grassroots community development initiative. It has grown into a global nonprofit company that is dedicated to helping entrepreneurs generate income, create jobs, build assets, and achieve financial success through business ownership. It offers personalized service, trained lending specialists, and custom repayment plans and prides itself on being a company that goes beyond lending.
Loans are typically six months to three years, and to qualify, you need to be caught up on your debts. No minimum credit score is specified, but one in the mid-500s is usually required. The company looks at the overall financial picture and needs instead of having concrete qualification criteria. As a startup, you will typically need to show that you haven’t had a recent bankruptcy or foreclosure and have a solid business plan.
Short-term business loans are available from $300 to $250,000 and are ideal for startups because there are no revenue requirements and no minimum amount of time in business. Additionally, the company will tailor loans, terms, and repayment schedules to the business’s needs and will offer advice and support throughout the process.
Best for Bad Credit
SnapCap offers short-term business loans with low credit score requirements, fast approvals, and seamless application processes.
Founded in 2012, SnapCap was created to help growing businesses get the financing they need. Their parent company is LendingTree, and they have provided more than $975 million in funding in more than 375 industries since the company started.
SnapCap is a LendingTree business and offers loans from $10,000 to $1 million with terms ranging from 3 to 36 months. To qualify for a short-term business loan with SnapCap, you will typically need a credit score of 500, $100,000 or more in annual business revenue, and at least one year in business. Rates vary based on the type of loan, overall business financials, industry, and loan term. The company requires daily or weekly payments to repay the loan, which is done as ACH withdrawals.
The company offers unsecured loans up to $1 million with terms between three months and three years. You can look for loans on the site and inquire without it affecting your credit. You can also answer the questions on the Express Review page and get approval the same day.
After the online application, a lending specialist will call you to go over loan details, rates, terms, amount, and repayment structure. Funding can happen as quickly as the next day. The process is meant to be streamlined and paperless with an online processing system. The dedicated loan specialist will work with you during the duration of your loan.
Best for low Annual Revenue
StreetShares is a community lending platform that offers short-term business loans and lines of credit to newer businesses with lower revenues.
StreetShares was started by an army veteran in 2013 who was tired of lending traps and wanted to help veterans and other small business owners access capital. While it’s based on a peer-to-peer lending model, it does things a bit differently. It uses affinity-based lending and matches lenders to borrowers with something in common like alumni of the same school or veteran status. The company uses this model because the borrower is more likely to feel more connected with the lender and more obligated to pay them back.
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You can apply for a small business loan or a line of credit online and then get matched with a lender if you qualify for a loan. You can instantly get pre-qualified online and be asked to fill out a personal statement about why you need the money and anything unique and exciting about your situation and business.
To qualify for a loan or line of credit, you need to be in business for at least one year and make $75,000 or more in annual revenue. This is lower than most lender’s requirements and is more realistic for most small businesses that are just starting out.
Rates vary depending on the type of loan but typically start at 8%. A minimum credit score of 600 is usually required for a business line of credit, and a credit score above 540 is needed for a term loan. Short-term business loan terms are three months to three years.
Best for Large loans
LendingClub offers larger short-term business loans than most other lenders. In addition, it quickly funds loans and doesn’t charge prepayment penalties.
LendingClub is a peer-to-peer marketplace that offers business loans and lines of credit in all U.S. states except Iowa. The business was founded in 2007 and pairs both individual investors and institutional investors with borrowers. It offers personal loans, business loans, auto refinancing, and patient solutions.
The company often offers business loans to small businesses that have been turned down by banks. Business loans range from $5,000 to $500,000, making these a good solution for businesses that need more than $250,000, the cutoff for most short-term business loans.
You can get a quote within minutes online, and it won’t affect your credit score. Once you apply online, if you’re approved, you can select a loan offer, review the rates and terms, and then confirm your details and provide any documentation to a client advisor who will guide you through the entire loan process. After this, the funds are automatically deposited into your bank account. Times vary depending on the type of loan and the loan amount.
Interest rates are competitive and start at 4.99%, and payments are made monthly, which customers like. In addition, there are no prepayment penalties, and terms range from one to five years.
Pitfalls of short-term loans
While short-term business loans provide fast cash, they do come with some disadvantages, including:
Higher cost: Short-term business loans typically carry a higher annual percentage rate, or APR, than long-term loans. Use NerdWallet’s business loan calculator to figure out how much a loan will cost you.
More frequent repayments: Some lenders require payments daily or weekly as opposed to monthly. Although these payments are smaller, their frequency can be an issue for businesses with uneven sales or who don’t always hold much cash in a bank account.
Risk of debt trap: The speed and ease of short-term business loans can become addictive. Instead of repaying the debt in full, business owners may be enticed to refinance and roll over the debt into a new loan.
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Short-term loans can help bridge the gap while you’re waiting for customers to pay you what they owe or to fund growth initiatives. While you will most likely pay high interest rates for the privilege of getting a short-term business loan, if you pay back your loan on time, you may pay less interest in total than you would with a long-term loan.
Before taking out any loan for your business, however, you must be able to pay it back. Failing to do so can hurt your credit score and limit your ability to get future financing or credit with your vendors or suppliers.