A short term business loan can help smooth out your company's cash flow or cover the cost of upcoming purchases. Use the table below to compare competitive business loans from a range of lenders, based on loan types, amounts and terms, and eligibility criteria.
A short term business loan is one of the most common ways to help manage cashflow, finance a new startup and help scale a successful businesses.
However, the difference between securing the best and worst terms on a short term loan could make a substantial difference to a business’s bottom line.
In this guide, you’ll learn whether a short term loan is right for your business, how to find the best deal and how the approval process typically works.
Business owners may take out a short term loan when they require additional funds to cover an upcoming purchase or large expense, or when their business is facing a temporary cash flow issue. Generally speaking, business loans with a term less than 18 months or 2 years are considered short term and can even come with daily or weekly repayments instead of monthly repayments.
Short term business loans will normally fit within the following criteria:
In all cases, the lender will consider your business credit score, annual turnover and how long you’ve been in business during the approval process. In many cases, it will display minimum eligibility criteria for all three of these factors.
In many cases, you can apply for a short term business loan very quickly online using the lender’s website.
You’ll need to fill in a few essential personal details as well as the essential details to identify your business, such as your company type, business address and limited company number.
In most cases, you’ll also need to provide financial details and proof of income, such as VAT returns and bank statements. You may also need to explain why you’re applying for a loan.
Some lenders will make an instant decision on your application. Others take two to three business days. Once your loan has been approved, you can sometimes expect to be credited with your loan on the same business day.
Lenders use a business credit score to assess the creditworthiness of your business.
Credit reference agencies calculate your business credit score based on information in your business credit file. The factors they use to measure your score include borrowing history, previous credit applications, current debt, debt payment history and the number of years the company has been in business.
Different lenders will use different credit reference agencies to measure your business credit score. Your score will determine the terms of the loan offered to you, if you’re considered eligible at all.
To ensure your business maintains a healthy credit score, don’t open too many lines of credit or push your existing lines too close to their limit. This makes your business appear as a risky prospect. However, it’s generally worth opening some lines of credit and making timely repayments in order to build your company’s credit score.
Representative example: When you spend £1,200 at a purchase rate of 36.19% (variable) p.a., your representative rate is 58.77% APR (variable). Optional upgrade to Business Rewards (£99 per year).
Short term business loans are a handy option if you’re looking to borrow large sums of money with short notice, but they’re not always the best option.
A business credit card could prove more useful if you’re looking to cover immediate expenses. Although the maximum borrowing amount doesn’t tend to be as high, the application process typically isn’t as strict or as complicated as applying for a short term loan. It’s possible to attach multiple cards to the same account, which can prove to be a useful way to manage employee spending.
It may also be possible to add an overdraft onto your current business account, which will give you access to additional funds as and when you need them. Often, the lender will agree to leave an overdraft in place for a fixed amount of time before removing it.
If it’s unlikely your business will be able to repay the loan over two years or less, consider a medium or long term business loan instead. The repayments on these longer deals will be lower, although you’ll pay more interest in total.
There’s no one-size-fits-all 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. Have an unpredictable and irregular cash flow? Consider a line of credit. Here are some of your options:
These business loans come in one lump sum that you pay back over a set period of time with interest (usually fixed) and fees.
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 monthly invoice factoring 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.
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 value upfront, which you pay back with interest and fees. Once the client pays you, you repay your lender.
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 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 upfront. Multiply your merchant cash advance by the factor rate and that’s how much you’ll pay.
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. Your business will pay for that quick and easy application because they cost more than your typical business loan, so 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.
The Co-operative Bank offers variable-rate business loans to existing business current account holders.
Get low rates, quick decisions, good customer service and plenty of flexibility through non-bank lenders.
Not every business or business owner has a perfect credit history. Compare lenders that may approve you even with bad credit and learn their lending criteria.
If you are looking for funding to get your business off the ground or to take it to the next level, challenger bank TSB could help with a loan of £1,000 to £100,000 for up to 25 years.
Information about the many business loans available from Nucleus.
Borrow up to £500,000 from Fleximize as an SME or up to £1 million+ as a more established business. Find out how other lenders compare.
Find out about the many business loans available from NatWest Bank.
Information about the business loans available from Barclays Bank.
Information about the business loans available from HSBC.
An overview of the range of business loans available from Santander Bank
We are a start-up company and require a short term loan of £25,000 for three months (or say six months to allow for contingencies). We have three sources of funding coming in to repay this facility, each of which will provide more than twice the amount we wish to borrow.
Today we are opening a business account with Barclays.
The purpose of the loan is to finalize our business plan, after which we have access to long term investment.
Can you suggest a possible loan facility?
Hi Peter,
Thanks for getting in touch with Finder. I hope all is well with you. 😃
On this page, you will see one of your options, iwoca. However, if you want to explore more options, please click on the “Get quick quotes” green button found above this page.
Please make sure that you’ve read the relevant T&Cs or PDS of the loan products before making a decision. Moreover, check the eligibility requirements as well and consider whether the product is right for you.
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua