Compare short-term business loans

Sometimes a little bit of financing can make all the difference to a small business. A computer crashes and you don’t make enough revenue to quite cover the cost. Bills are due and your business only has outstanding invoices, not cold hard cash. The short-term loan that your business can get for a quick fix will depend on factors such as your annual revenue and credit score.

Compare short-term business loans

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Product CAFBL	APR Range	Loan Amount	Loan Term	Minimum Revenue	Minimum Time in Business	Loans Offered	Broker Compliance
Journey Capital Business Loan	8% – 29%	$5,000 – $300,000	4 – 24 months	$100,000/year	6+ months	Term Loan, Line of Credit, Merchant Cash Advance		To be eligible, you must have been in business for at least 6 months with a minimum annual gross revenue of $100,000. Journey Capital offers fast and simple financing. Apply in less than 10 minutes with your basic business information and see your loan offers without hurting your credit score. Get approved within 1 business day, and choose your term, amount and payback schedule once approved.	Go to siteMore Info Compare	loading Fetching your data…
Merchant Growth Business Loan	12.99% – 39.99%	$5,000 – $800,000	6 – 24 months	$10,000 /month	6 months	Unsecured Term, Line of Credit, Merchant Cash Advance		To be eligible, you must have been in business for at least 6 months and have a minimum of $10,000 in monthly sales. Merchant Growth offers financing tailored to business needs. It specializes in providing capital based on future cash flows, but it also offers fixed solutions. Fill out an application within 5 minutes and get your funds within 24 hours.	Go to siteMore Info Compare	loading Fetching your data…
Loans Canada Business Loan	6.99% – 46.96%	$500 – $500,000	3 – 60 months	over $10,000/month	9 months	Unsecured Term	Loans Canada is a loan search platform with access to multiple lenders. Applicants will be matched with a suitable lender based on credit history and borrowing requirements.	To be eligible, you must have been in business for at least 100 days, have a Canadian business bank account and show a minimum of $10,000 in monthly deposits ($120,000/year). Loans Canada connects Canadian small business owners to lenders offering financing up to $500,000. Complete one simple online application and get matched with your loan options.	Go to siteMore Info Compare	loading Fetching your data…

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How do short-term business loans work?

There’s no one way that short-term business loans work. That’s because a short-term loan can be any type of business financing: Fixed-term loans, invoice factoring or financing and merchant cash advances all involve different ways of borrowing and paying back funds.

What short-term loans have in common is that they typically come in smaller amounts, have shorter loan terms and more require frequent payments than your standard business loan. With most short-term business loans, you can expect to make daily or weekly repayments and pay it off in a matter of months or up to two years. Interest rates and fees are also typically higher than long-term business loans but they have lower personal credit requirements.

Often referred to as business payday loans, these are generally meant for emergencies to fix quick cashflow problems. That’s because high interest rates and fees make them unaffordable to cover large expenses — and you likely won’t be able to qualify for a large amount of funds anyway.

5 types of short-term business loans

There’s no one-size-fits-all short-term business loan. The loan type that works best for you depends on your business’s immediate needs and how it operates. Have a lot of outstanding invoices? Invoice factoring might be what you’re looking for. Just need to cover a small one-time expense? A business term loan might be best.

Here are five common types of short-term business loans to consider and how they compare:

*Information in this table is meant to be used for estimates only. Contact your lender or provider for details for before applying.

Business term loan

Business term loans come in one lump sum that you pay back over a set period of time with interest and fees. Loans with a term less than 18 months or two years are considered short-term and often come with daily or weekly repayments, instead of monthly repayments.

Invoice factoring

Invoice factoring involves selling your business’s unpaid invoices to a third party for a percentage of their value. Your lender gives your business a smaller percentage of the invoices upfront after deducting a fee. Once your customers pay off the invoices, the lender gives your business the remaining amount.

You can either sign up for invoice factoring monthly to make sure all of your business expenses are covered or use invoice factoring to cover a one-time payment. You can also either factor all of your business’s invoices or select which invoices to factor.

Invoice financing

Similar to invoice factoring, invoice financing gives you an advance on your invoices. It’s essentially a loan backed by your company’s invoices. You’ll get a percentage of your invoice’s value upfront, which you pay back with interest and fees. Once the client pays you, you repay your lender.

Line of credit

Business lines of credit give your business access to a certain amount of funds at the last minute, similar to a credit card. You only have to repay what you borrow and your loan term typically starts when you make your first withdrawal. Short-term lines of credit typically come with terms that range from 6 to 12 months with weekly or even monthly repayments.

Merchant cash advance

Merchant cash advances are quick lump-sum advances on your business’s future sales. Your business can typically qualify for a certain percentage of its annual sales and pay it back with a percentage of your business’s daily sales or with fixed daily withdrawals from your business’s bank account.

Instead of getting an interest rate, you’ll get a factor rate, which determines how much you’re on the hook to pay back up front. Multiply your merchant cash advance by the factor rate and that’s how much you’ll pay.

How can a short-term loan benefit my business?

• Covers gaps in cash flow. You need money to keep things running, but revenue has stopped coming in — for now. A short-term business loan can help pick up the slack to maintain overhead costs while you wait for things to go back to normal.
• Gets you cash fast. Many short-term business loan providers can get you funds in as little as one business day after you submit your application.
• Designed for emergencies. Your business’s van broke down days before a huge delivery or one of your restaurants’ ovens is on the fritz. A short-term business loan can give you just enough to cover those immediate repair costs so your business doesn’t lose even more money. Learn more about emergency business loans.
• Doesn’t require good credit. Short-term lenders often accept less than perfect credit scores, meaning you don’t need to have a spotless personal financial past to qualify for this business loan.
• Minimal paperwork. Not only is the turnaround time quick, the amount of time and effort needed for the application is generally less than your typical business loan, letting you get back to work quickly.

What to watch out for

• Can be expensive. Short-term loans come with higher interest rates and fees than other types of loans, especially if they come with lax credit requirements.
• May have weekly or daily repayments. If your business is just starting out and doesn’t make money every day or relies on large lump-sum payments each month, it could have trouble paying back a short-term business loan.
• Can be a debt trap. With any short-term loan, there’s a risk of borrowers taking out more short-term loans to pay off the last loan. With high interest rates, it’s not difficult to spiral into a cycle of debt that could ruin your credit and put you out of business.
• Not good for large expenses. The larger the loan, the higher your repayments will be — and the more interest you’ll pay. With such frequent repayments, a large short-term loan could be the recipe for default and a ruined business.

How do short-term business loans compare to other loan types?

Bottom line

Short-term business loans could help your business in a pinch. Their fast turnaround time and relatively effortless applications mean you can get a small amount of funds fast when you need it. But your business will pay for that quick and easy application — they cost more than your typical business loan. You might want to treat them as a last resort.

Curious about how other types of business financing work? Check out our business loans guide, where we break things down and compare lenders.

Frequently asked questions

To make sure you get accurate and helpful information, this guide has been edited by Leanne Escobal as part of our fact-checking process.

Written by

Anna Serio

Editor

Anna Serio was a lead editor at Finder, specializing in consumer and business financing. A trusted lending expert and former certified commercial loan officer, Anna's written and edited more than 1,000 articles on Finder to help Americans strengthen their financial literacy. Her expertise and analysis on personal, student, business and car loans has been featured in publications like Business Insider, CNBC and Nasdaq, and has appeared on NBC and KADN. Anna holds an MA in Middle Eastern studies from the American University of Beirut and a BA in Creative Writing from Macaulay Honors College at Hunter College, CUNY. See full bio

Anna's expertise

Anna has written 61 Finder guides across topics including:

• Personal, business, student and car loans
• Building credit
• Paying off debt