10 Short Term Business Loan Options for 2024 and Beyond

Are you a business owner in need of immediate capital to get your business started on the right foot? If so, a short term business loan could be the ideal solution to your financial needs. Not only do you have plenty of options when it comes to short term business loans, but you also have the chance to work with lenders that understand your unique needs.

In this article, we’ll discuss the basics of short term business loans and provide a list of top options when it comes to loan products. After reading, you’ll have a better grasp of how to differentiate between the different types of short term business loans. You’ll also know what your next steps are, so that you can get started without added stress.

What is a Short Term Business Loan?

If you’re brand new to the world of business loans, there’s no need to fret. Short term business loans are what they sound like–a type of cash influx that you repay. The biggest difference between short term business loans and other types of loans is that they often require fast repayment, usually within a two-year timeframe.

If you’re a business owner, taking out a short term business loan means that you’ll receive a lump sum of money that you can use for business expenses and other needs. Some business owners even use short term loans as a way to pay off high-interest debt from other sources.

Short term business loans help solve an immediate need for many entrepreneurs. In fact, the National Small Business Association has found that 19% of business owners lack the capital they need to move forward and grow. Short term loans can help owners navigate the tumultuous growing years that are common in new businesses.

How Short Term Business Loans Differ from Other SBA Loans

Are you familiar with SBA loans? If not, here’s a simple definition–SBA loans are backed by the government through the United States Small Business Administration. These loans are often characterized by:

• Higher fees and tougher application rules
• Greater maximum loan amounts
• Longer repayment terms

The Small Business Administration provides a simplified overview of the types of 7(a) loans that business owners can pursue. The options are diverse, and some are targeted toward specific populations, like veterans.

While both SBA and short term business loans can provide great cash options for business owners, the repayment term on an SBA loan could be longer, sometimes up to 25 years. Many business owners prefer a shortened repayment window on loans to keep debts in check.

Benefits of Short Term Business Loans

As you compare short term business loans to other conventional loan options, it’s important to understand the benefits. Business owners may pursue short term financing for any of the following reasons.

• Speed. Short term business loans are generally delivered fairly quickly. This means fast cash right when you need it for upcoming expenses, purchases, and more.
• Simple applications. While you’ll still need to provide important financial information, the application process on short term loans tends to be a bit easier.
• Debt outlook. Some financial advisors warn against taking on long term debts. Short term debts can be easier for businesses to handle and overcome.
• Availability. Short term loans come in clutch during emergencies and rapid growth spurts. In turn, the availability of these loans can generate growth in the economy.

10 Top Short Term Business Loans

Now, you’ve got a basic idea of how short term business loans provide countless benefits to business owners who want to grow, expand, and nurture their business goals. Next, it’s time to go over your actual loan options.

When deciding which type of short term loan is right for you, remember to take into account your current financial situation. Additionally, consider your projected profits and losses. If needed, consult a trusted financial advisor or lender who can provide personalized advice every step of the way.

1. Working Capital Loans

A working capital loan is considered a short term financing option because it is applied to a company’s everyday operations. These loans cannot be used for major long term assets or to make other investment purchases. Working capital loans are excellent options for businesses that have an ebb and flow sales cycle, with periods of seasonal downturns or limited profits.

Working capital is important because it calculates how much money is left to run a business after accounting for short term expenses and liabilities. These loans can cover that difference between those numbers so that owners can maintain positive working capital while growing the business.

2. Business Line of Credit

A business line of credit is a short term option that works similarly to a business credit card. Business lines of credit don’t use physical cards for purchases. Instead, a business owner receives approval to spend up to a given amount of money.

The credit limit is the upper end of what a business owner can spend in this type of loan. Fortunately, businesses are only required to pay interest on the money that is actually borrowed, as opposed to the maximum amount. Until a business hits the maximum limit, this reduces the burden of interest.

3. Term Loans from Online Lenders

Many business owners turn to online lenders for financing options. Several of these lenders offer term loans, which are taken from an established banking institution. The borrowing timeline is firmly set, and the interest rates are either fixed or variable.

Term loans vary by lender and carry different qualifications for approval and repayment. The benefit of a term loan is that it can generally be used for any purpose. Some business owners may prefer term loan options because of the ability to shop, compare, and maintain a predictable and efficient schedule for repayment.

4. Merchant Cash Advance

A merchant cash advance (MCA) is a short term option that is based on the projected cash flow of the business. Merchant cash advances deliver quick cash, but business owners should understand the rules of repayment.

In some situations, business owners repay the loan with a percentage of credit and debit card sales. In other instances, repayment happens through fixed weekly or monthly deductions. Merchant cash advances may also carry additional fees for processing, but they do provide a scaled approach to financing.

5. Invoice Financing

Invoice factoring works by giving business owners an advance on any outstanding client invoices. To begin invoice financing, you are required to sell your accounts receivable information to a third party provider.

Invoice factoring can create a high influx of cash depending on the third party factoring company. Some factors choose to collect an established fee on each paid invoice, while others deduct a weekly amount. With invoice factoring, your personal business clients no longer pay you directly for the product or service rendered.

6. General Short Term Business Loans

In general, short term business loans come in a variety of products and options. A large number of banking institutions offer short term loans in amounts of $2,500 up to $250,000. In many instances, repayment terms are under two years total.

For a list of the top short term loan companies in 2020, check out the our business lenders comparison chart. You can even filter by funding type and business revenue amount to ensure you select the right choice for your exact needs.

7. Term Loans with Variable Rates

Term loans are a type of short term loan for general business uses. The short repayment terms mean that you may have to comparison shop to get the specifics you’re looking for. Term loans have repayment windows that are set for a very specific period of time.

With term loans, interest rates can be on the low or high end. In this case, the interest rate on the loan is variable. A variable rate is also known as “adjustable” or “floating” and can change over time based on the underlying benchmark interest rate. It’s crucial to know what this benchmark is to avoid overpaying on interest rates over the life of the loan.

8. Vendor Credit

A vendor credit works through available vendors that provide goods or services to meet a business need. The credit aspect simply means that the vendor extends a repayment window after the goods are delivered.

This type of loan is also known as a supplier credit. The repayment time is anywhere from 10 to 180 days. On a positive note, vendor credit is a way to finance without paying large sums of interest, as many vendors provide the credit with the expectation of being repaid within a few months.

9. Business Credit Cards

Business owners are typically familiar with the use of business credit cards for everyday operational costs and expenses. Regardless, an owner still has to apply and provide personal background information to qualify for certain cards.

Many business credit cards require a personal guarantee. Fortunately, these cards can work to build a company’s credit history without penalizing the owner personally. Business credit cards should be used responsibly in order to avoid high debt and staggering interest rates.

10. CAPLines

CapLines are provided through Small Business Association programs. According to one financial institution, these lines give business owners “fixed or revolving lines of credit up to $5 million to help owners meet their short-term working capital needs.”

CAPLines are also unique in that they can support seasonal business efforts and help owners who need to cover building and labor costs. In these situations, the use of the financed money is often governed by the Small Business Administration’s requirements and definitions.

Detailed information is available in SBA comparison charts, such as this example of a quick loan view chart for business owners.

Compare Your Short Term Loan Options Today

With a short term business loan, you can achieve more goals and growth for your business. With that in mind–why wait? Getting started on the loan process could be as simple as researching, applying, and getting approved by your lender of choice.

The Credit Review offers a variety of resources to help train and educate you on the path to loan success. Check out our 5 Best Business Loans of 2023 for even more in-depth comparison charts and fact-based evidence on the loan options that are best for you.

What is a short term business loan?

A short term business loan is a lump sum of money that a business receives from a financial institution or lender. The money can be used on various business expenses and administrative costs. A business or owner must pay back the loan according to the repayment terms and interest rate.

Who provides short term business loans?

You can apply to receive short term business loans through many banking institutions and online lenders. It’s important to compare different lenders to see which loans and interest rates are available.

How long is a short term business loan?

A short term business loan is generally repaid in under two years. Some short term loan options have repayment terms as short as a few months.

How can a short term business loan help my business efforts?

A short term business loan can help owners cover costs associated with staffing, operational expenses, equipment, and more. These loans often help fund the startup period for many businesses before they are generating substantial profits.

What types of short term loans are available?

Many of the options discussed above are popular types of short term loans. These options range from traditional loans, to cash advances, to working with third party providers.

About The Author

Ashley Davison

Director of Operations, Credit Saint LLC

Ashley is currently the Chief Operating Officer for Credit Saint, previously working as a Logistics Coordinator at Ernst & Young. She is currently working toward an Executive Leadership Certificate from Cornell University.

With a degree in education, she is eager to teach the world everything she knows and learn everything that she doesn’t already know! Ashley is a FICO® certified professional, a Board Certified Credit Consultant, Certified Credit Score Consultant with the Credit Consultants Association of America and holds a Fair Credit Reporting Act (FCRA) Compliance Certificate.

Articles by Ashley Davison

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