As the name suggests, a short term loan is money that you can apply for and receive quickly. Maybe your business is having cash flow problems. A short term business loan does not even require a large collateral. But it comes with high interest rates and hefty fees. Payday lenders also lend smaller amounts than larger banks.
What is a short term loan?
These are different from long term loans in another way. They usually have to be repaid after six months to a year. For these shorter varieties, the loan period can be as long as 18 months. Keep in mind that most of these lenders want you to pass a minimum credit score.
Can you get a short-term business loan?
Short-term business loans are great for cash flow gaps and inventory purchases. These are also good for unexpected emergency expenses and payroll.
This type of short-term financing requires good documentation.
Advantages of short term small business loans
Entrepreneurs can use these short term business loans to their advantage. Keep in mind that these are different than credit options. Various loan terms are included. Here are five advantages of this type of small business loan over other lenders.
Business owners get fast funding
Get an early loan with this type of financing. Such short term business loans are approved quickly. In some cases, small business owners can have the money within a day or two.
You can apply quickly
The process is quick and easy. In most cases, you will be dealing with online lenders. Gather documents to make the process faster than with traditional lenders. Consolidating credit history and annual income figures makes the process faster. Don’t forget bank account numbers.
You can build credit scores
Qualifying for one of these loans can help you get a line of credit or a long-term product. Maybe you’re a new business with a low credit score. Small businesses in general and start-ups in particular can benefit from short-term loans. Keep in mind that brand new businesses may not meet the minimum credit score requirement for longer loans.
These bring cash
It only takes a few minutes to apply. And a quick application process can help with cash flow issues. Traditional banks offer business lines of credit products and lines of credit. But unpaid invoices can cause emergency spending problems when mortgage and utility payments are due. There are same day financing opportunities, but you have to be careful with them. There is no financial protection with them.
These are flexible
These loans have different repayment options, interest rates and repayment terms. A longer term loan may have a lower interest rate, but they have longer repayment terms.
Here’s another bonus. You can make monthly payments on these loans. Although they are short-term, you don’t need to pay it all back in one go. Weekly payments can be helpful so you can move any remaining interest balance toward principal.
Types of short-term loans
You may need one of these loans for an unexpected expense or unforeseen business opportunity. There are several types, including bank overdrafts, car title loans and payday loans. Check points such as repayment terms for different loan amounts. Short term personal loans are also available.
There may be credit score penalties for taking out a short-term loan. Some companies may do an inquiry so your credit will go down a bit. Your credit score can also take a hit if you don’t repay the loan on time or miss payments.
Short term loan requirements
As you can imagine, there are some requirements when entering into an agreement.
Like the following.
- Some lenders will want you to have some collateral.
- Proof of income is essential, which can include bank statements.
- Some lenders may want to see proof of employment.
- You need an active bank account, valid address and ID. A checking account works and you must have ID.
Gather this information before applying for these short term loans. A low credit score can be a problem.
The best short-term loan options
As a small business, you may have a cash flow gap or other problem. Here are some of the best short-term financing options. Check how many business days it takes to receive the money when you sort through the options. Here’s a quick list of your top picks when you’re in North Dakota. And a list if you live in South Dakota.
You can get same day financing here. Interest rates depend on your monthly or annual income. Be careful, you can’t get bad credit.
This company has a low minimum credit score requirement. You can try and choose the loan amount with their flexible financing options. They have provided more than $1 billion in total business loan financing.
3. Reliable capital
Get a low fixed monthly payment. There’s even a loan calculator so you can check out multiple repayment options.
Repayment terms vary here and you can get Fundbox Flex Pay. This allows three additional days to redeem. Add this add-on to the original loan agreement and there are no fees.
This company has been offering installment loan options since 2012. They offer a variety of products including home improvement and or emergency loans to name a few.
If your credit report needs a little work, this is the company to work with. Businesses and individuals with poor payment history can apply for loan amounts ranging from $200 to $36,500. APR ranges from 7.99% to 35.99%. This is a preferred choice for bad credit borrowers.
7. PenFed Credit Union
You don’t need to pay any origination fee. Plus, there are no prepayment penalties.
This is a good choice for people with fair credit. Borrowers can get the money the next day after their approval. Upstart uses AI to approve their borrowers.
There is a minimum credit score of 560. However, there is no early repayment penalty. The upgrade offers a lower loan limit of $1,000.
What is the shortest loan term?
Short-term loans are called that for a reason. They should be repaid somewhere between six months and a year. The longest possible term is 18 months.
What are the best short term business loans?
The best option for one of these short-term business loans comes with a fixed interest rate. They can be risky, and you want to watch out for pitfalls like prepayment penalties.
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