Short-Term Business Loans
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(4 Months or more)
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A short-term loan provides your company with working capital in a lump sum that is paid back in 18 months or less. This loan type can be used to fund renovations, seasonal preparations or fulfilling large purchase orders.
No long-term commitments
Variety of uses
Can be expensive
The difference between traditional business term loans and short-term business loans is the length and size of the financing. Short-term loans offer a much quicker payoff structure than the multi-year agreement you would sign with a traditional term loan.
With short-term loans, your business avoids a long-term commitment that can consume your working capital for years after your need for the funds. Instead, short-term loans are quickly repaid in daily or weekly increments. While the intended use of your business’s financing will determine the size and length of the loan, the amount of funding and payments your company feels comfortable making will also play a role.
Short-term loans can be used in a variety of ways to help your business grow or overcome a temporary dip in working capital. An example of when your business could use short-term financing is when your business experiences a delayed or canceled shipment for the upcoming week. A short-term business loan can be used to purchase additional inventory, providing your business more financial flexibility while things are sorted out with the original order.
When you apply for a short-term business loan, your lender will decide if your business meets their qualifications or not by the information you provide. Each application process is slightly different depending on the lender, but the goal is the same. You’ll fill out an online application asking basic information about your company and how much funding you’re looking for.
It’s important to remember that almost every business needs additional working capital at one point or another. Here are some commons uses for short-loans:
Consider this scenario. You have a customer looking to place a sizeable order with your business, but they won’t be able to pay until the end of the month. This is when a short-term business loan makes sense, providing your business with the funds to pay your vendor and not miss out on a huge sale.
Another excellent use for short-term financing is seasonal funding. If your business operates primarily from the income it makes during the holiday season, a short-term loan can get your business the funds it needs to be adequately prepared.
Other businesses might use short-term financing to fund expansion, consolidate loans, pay their taxes or take advantage of new business opportunities. It can be expensive, but quick and easy funding like this is a fantastic financial tool.