Short Term Business Loans

A short-term business loan is a type of term loan where a lump sum is paid out to a borrower by a lender, which
is then repaid over a set period of time with added interest.

Short-term business loans are specifically designed for immediate funding needs and the ?short-term? refers to
repayment terms that range from a few months up to a few years.

How do short-term business loans work?

As with any type of term loan, a short-term business loan works by a lender providing a borrower with a fixed
sum of money, that is then repaid over a set period of time in monthly, weekly, or even daily installments,
depending on the loan amount and the lender.

Why would a business need a short-term loan?

There are a number of reasons why a business may need to take out a short-term loan, all of which fall under an
immediate need:

• to maintain cash flow
• to cover inventory costs
• to hire seasonal staff
• to cover emergency repairs, such as broken equipment
• marketing/advertising
• to cover seasonal income fluctuations
• to build up a good business credit score

How long is a short-term business loan?

A short-term business loan typically lasts anywhere between 3 months and 3 years, depending on the lender and
the loan amount.

Short-Term Loans vs Long-Term Loans

Short-term loans and long-term loans are both types of term loans, but, as you can guess, they vary greatly in
terms of the repayment period and loan amounts.

1. Short-Term Loans

Short-term loans offer smaller amounts than long-term loans as they are designed to be used for immediate
financial needs. They give the borrower less time to make repayments than with a long-term loan and the high interest rates
reflect this. However, you can typically secure funding in only a few days, or sometimes less, which is not true
of long-term loans.

2. Long-Term Loans

Long-term loans, on the other hand, are specifically designed to be used for larger investments, with larger
loan amounts, which is why they have much longer repayment terms, ranging from 1 year right the way up to 25
years. Long-term loans have lower interest rates than short-term loans, but it can take much longer to receive funding,
sometimes even a few months after an approved application.

What are the different types of short-term business loans?

Term Loans

This is the type of loan that has been described above. These are generally not offered by traditional lenders,
such as banks, as their repayment terms are much longer, so your best option is to find an online lender.
Depending on your credit score and which lender you decide to go with, interest rates can range anywhere from 8%
to a huge 99%. If you can only qualify for this type of loan with very high interest rates, you will be better
off considering alternative short-term business loan types.

1. Lines of Credit

A line of credit provides you with a sum of money that you can draw from whenever you need to, as long as you
don't exceed the credit amount.
Most lines of credit will come with long repayment terms, but you will find that some online lenders offer a
short-term line of credit if you feel that this is best for your financial needs.
Interest rates for lines of credit range between 8% and 80%, with short-term lines of credit likely to be on the
higher side.

2. Invoice Financing

Invoice financing is a specialized loan type for businesses that use invoices to collect their payments. If you
haven't yet received payment after sending out an invoice, you can use an invoice financing company to receive
an advance for the invoice amount which will then be given back to you, upon payment by the client or customer,
with the financing company's fees deducted.
Interest will be added depending on how long it takes your customer to pay the invoice, the amount of which will
depend on the invoice amount, the lender, and your creditworthiness. Generally, interest rates fall somewhere
between 13% and 60%.

3. Business Credit Card

A business credit card is much like a line of credit, except you pay off the balance you have used every month.
Interest rates tend to be below 30%, but you will be able to find some that offer interest rates of around 15%.
You will even be able to find some that offer introductory promotions of 0% APR so that you can get about a year
of paying off your credit card debt interest-free.
If you are able to make your payments on time and in full, business credit cards are a great way to build up
your credit score for when you apply for better financing options in the future.

Can I get a short-term business loan with bad credit?

Although many lenders will require you to have a credit score of at least 550, you will still be able to qualify
with some online lenders if you have bad credit. You should be aware though, that a bad credit score often means
you are given higher interest rates, so it is best to build your credit as much as you can before applying for
any type of business loan.

Kabbage

Kabbage offers a line of credit, ranging from $2,000 to $250,000 with repayment terms of 6, 12, or 18 months.
They work a little differently by having a fixed monthly fee of 1.5-10% instead of having an interest rate. This
could result in an APR as much as 90% so it may work out to be a more expensive option.

In order to secure a short-term line of credit with Kabbage, you must have been in business for at least one
year with annual revenue of $50,000 or a minimum monthly revenue of $4,200 in the last three months.

Fundbox

Fundbox offers a line of credit and invoice financing, depending on which fits best for your financial
needs.

Their line of credit allows you to borrow amounts between $1,000 and $100,000 with repayment terms of up
to 3 months. The interest rate varies depending on the terms of your loan and your creditworthiness,
somewhere between 10.1% and 68.7%.

To secure a line of credit with Fundbox you must have been in business for at least three months with an
annual revenue of $25,000 or more. There is no minimum credit score requirement so this is a good option
if you have bad credit.

Their invoice financing allows you to qualify for 100% of your invoice amount as long as it falls
between $1,000 and $100,000. The repayment terms can be anywhere up to three months with interest rates
ranging from 13.44% to 67.7%.

To qualify for invoice financing with Fundbox you must have been in business for at least three months
and have accounting software data for at least that amount of time.

OnDeck

OnDeck offers a short-term loan with amounts between $5,000 and $500,000 and terms from three months to
three years, with payments made weekly or daily. If you are a highly-qualified borrower your interest
rate could be as low as 9.99% although for most their interest rates are around 48.7%, with an added
origination fee.

To secure a short-term loan with OnDeck you need to have a credit score of at least 550, annual revenue
of at least $100,000, and your business must be at least one year old.

LendingClub

LendingClub allows you to borrow amounts ranging from $5,000 to $300,000 by connecting you with
individual investors. Repayment terms are set at one to five years depending on the lender with interest
rates from 9.77% to 35.98%, plus an origination fee from 1.99% to 8.99%.

To qualify with LendingClub you must have a credit score of 600 or above, have had no bankruptcies or
tax liens, have been in business for at least one year, and have annual revenue of at least $50,000.

What is a short-term business loan calculator?

You will be able to find short-term business loan calculators on a number of financial sites that will
help you to work out how much a small business loan will cost you, taking into account the loan amount,
the interest rate, any fees, and the repayment terms.

This is a very useful tool for determining whether you can actually afford the total cost of the loan
before submitting applications.

Can startup businesses apply for short-term loans?

Although most lenders require you to have at least a year in business to qualify for a short time loan
you will find that a handful of online lenders, such as Fundbox, with supply funding to startups as new
as three months old.

How to apply for a short-term business loan?

The process for applying for a short-term business loan will vary depending on the type of loan and the
lender you choose to work with. With an online lender, you may be able to receive funding in as little
as one day, you just need to ensure that you meet their requirements, including credit score, time in
business, and annual revenue.

Although application processes vary, you can expect to need to present the following:

• annual revenue report
• business bank account details
• business credit profile
• business tax ID number
• personal credit score
• three months of bank statements
• time in business

Is a short-term loan right for my business?

Generally, yes, as long as you are sure that you will be able to make the frequent repayments. A
short-term loan will allow you to bridge a gap in your cash flow, cover those seasonal expenses, grow
your business? notoriety using clever marketing, and any other immediate expenses.

A short-term loan could be exactly what you need to keep your business afloat during those quiet
business periods. If you are looking to grow your revenue look no further than Acorn Finance. We can
provide contractors with flexible home improvement financing solutions that will help you to close more
sales and greatly increase your cash flow. Simply fill out our short application form to get started
today.