Many small businesses need to borrow money at some stage in their development to help with cash flow, expansion or other costs. Short term loans can be a good solution to help small businesses overcome temporary cash flow or expenditure issues.
If you are thinking about taking out a short term loan to help keep your small business on track but are unsure what these types of loans involve, take a look at what short term loans are and the best places to find this immediate and temporary type of business loan.
What are Short Term Loans?
Short term loans provide businesses with varying amounts of finance, which could be as little as $5,000 or as much as $500,000. The money is available immediately and is designed to be repaid quickly, often within between 1 and 2 years. The debt can be paid off even more quickly, in a matter of months rather than years.
Interest rates can be high on short term loans, as much as 65% annual percentage rate in some instances, so it is vital small business do their math and ensure they can afford the repayments prior to taking out a small business loan.
The stipulations of short term loans vary significantly from lender to lender, so it is important to do your homework and find a lender catering to your small business’s specific financial needs to help support its growth. For example, some lenders charge penalties for early repayment, while others don’t. If you are in a position where you can repay the loan early, a no penalty for early repayments deal would be advantageous, as you would only have to pay the interest for the time you have the loan.
A short term loan is a good option for businesses requiring a line of funding but seeking to avoid being saddled with a heavy debt to repay over a number of years. These types of loans can provide a business with the start up costs required to get up and running, or for bridging seasonal cash flow gaps. They may also be a suitable option for purchasing quick-turnaround inventory at a discounted price, or to cover the costs of emergency repairs of critical equipment.
Best Places for Short Term Business Loans
If you are determined to give your business a fast cash infusion, here are five short term financing options for small businesses.
Kabbage
You can lend between $2,000 and $250,000 on a short term business loan from Kabbage. The annual percentage rates on a Kabbage short term loan are from 24 to 99%. In order to qualify, businesses need an annual revenue of at least $50,000 and have to have been in business for at least one year. As your personal credit score is not assessed by Kabbage, this loan can be a good option for borrowers with bad credit.
Fundbox
Small businesses can borrow from $1,000 to $100,000 with Fundbox. Annual percentage rate is between 10.1% and 79.8%. As with Kabbage, you will need a minimal annual revenue of $50,000 to qualify for a short term loan from Fundbox but will only need to have been in business for three months, making it a good option for startups requiring funding to get up and running. You can sign up with Fundbox in seconds and have a decision on requested funds in minutes.
BlueVine
You can get fast funding for your business needs with BlueVine. Credit lines from $5,000 up to $250,000 are available and you only pay for what you use. The funds of this flexible short term business loan replenish as you pay the loan back. There are also no prepayment penalties with a BlueVine loan. Annual percentage rate is from 15% to 78%. Personal credit scores are factored in when applying for a BlueVine loan, however, so it may not be an option for someone with too many personal debts.
OnDeck
OnDeck provides access to simple, fast and transparent funding for small businesses. You can quickly access anything from $5,000 and $50,000 with an OnDeck loan. Short term loans are available for 3 to 12-month terms, perfect for purchasing inventory with a quick turnaround or to fund an important marketing campaign. Annual percentage rate is between 16.7% and 99.4%. Businesses need an annual revenue of at least $100,000 and must have been in business for at least one full year to successfully secure a short term loan with OnDeck.
Credibility Capital
Credibility Capital provides transparent and affordable short term loans for small businesses. Loans range from $10,000 to $400,000 and are available with 1, 2 and 3-year loan contracts which are paid back monthly. Annual interest rates start at 8%. Businesses however must have been in business for 24 months and the business owner will need to have strong personal credit. There is a one-time originating fee which starts at 3% you should be aware of when applying for a loan with Credibility Capital.
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Aira Bongco
Small businesses need a surge of cash from time to time and these short term loans can really help.