Short-term business loans

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Whether it’s to help with the cash flow or to pay for expansion costs, here’s how a short-term loan can provide the ideal solution for your business.

What is a short-term business loan?

Much like regular loans, a short-term business loan means you’ll receive an advance in funds which will need to be repaid with interest within a specific period of time. In the case of short-term loans, you’ll likely have between 3 months and a year to repay your loan.

 Is a short-term business loan right for you?

A short-term business loan can be a good solution if you need access to funds and without making any long-term commitments. Often used for financial relief, the funds tend to cover working capital, cashflow, and a variety of expenses.

Short-term business loans give you a way to source funds for time-sensitive ventures and financial emergencies you might face while running your business. To make sure you’re getting the best deal, it’s a good idea to find out which lenders are offering the lowest annual percentage rate (APR) for you to benefit from.

Advantages of short-term business loans

The biggest advantage of opting for a short-term business loan is that your business will only have to make repayments for a limited period of time – this way the loan won’t affect your business finances in the long-term.

Applications for short-term loans also tend to be practical and hassle-free, requiring less information for you to fill out than when applying for a long-term loan. Due to the time-sensitive nature, you’ll receive the funds quickly - often in one or two working days.

Disadvantages of a short-term business loans

Choosing to take out a short-term business loan may mean you’ll be able to pay off your balance quickly, but bear in mind that your repayments are likely to be higher than if you opted for a medium or long-term loan. Interest rates are also often notably higher with short-term borrowing, so it’s worth making sure you find the best deal for your specific business needs.

What else you need to know

With the unpredictable economic conditions in recent years, lenders tend to be more selective about the applications they accept - particularly for smaller businesses.

As a result your business may be required to have a minimum monthly turnover and meet a number of other conditions, specific to the lender in question.

It’s also worth noting that the actual rate of interest you will be charged on a short-term business loan will depend on:

  • Your business’s individual circumstances
  • The amount you want to borrow
  • The period you intend to pay off what you owe

You will often be able to request individualised quotations for a rough estimate to get a clearer picture of what kind of deal you’re looking at.

Alternatives to a short-term business loan

  • If you don’t think your business will be able to pay off any loans over a year or less, then you might want to consider a medium or long-term business loan. This way you’ll receive a longer repayment period and are also likely to pay lower interest rates in turn.
  • You might also consider using a business credit card for any immediate expenses, which can be a useful way to manage staff spending, while a business overdraft can also provide you access to funds as and when you need them.
  • You can set this up by speaking to your business bank account provider, where you can arrange an overdraft for a 12 month period. You’ll be able to renew your business overdraft whenever you need to.
  • Businesses can also raise funds through cashflow finance, which is also known as invoice financing. This allows for a third party such as a bank to buy off your unpaid invoices. Alternatively, the third party can also lend you money against the value of these invoices.

Compare short-term business loans

To find the best finance providers and deals on the market, make sure to head over to our business finance product comparison tool to get tailored results to your specific needs. Simply tell us a little about your business and what you’re hoping to use the loan for and we’ll give you the best ways to get your business funded.

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