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Many entrepreneurs consider short-term business loans as a tool to cover emergency expenses or take advantage of quick market opportunities.
Therefore, if you need immediate working capital and do not want to commit your company’s finances for years on end. UnderstandAing how these loans work is the first step towards a solid financial decision.
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In this article, we will analyze how short-term business loans work and review the best available options. Unlike traditional financing, these lines of credit usually have payment terms ranging from three to 24 months.
By the end of this reading, you will have all the information about short-term business loans to choose the option that best suits your business reality. Keep reading.
What Are Short-term Business Loans?
A short-term business loan is defined by its speed and its reduced term.
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While traditional loans can tie a company to debt for several years, the structure of short-term business loans is designed to be resolved quickly. Generally between three and 24 months.
These credits take various forms to meet specific needs.
Know that commercial lines of credit work on a revolving basis, where the entrepreneur uses the resource and only pays for the amount drawn, being able to reuse the limit as they pay it back.
Term loans, on the other hand, deliver a fixed amount all at once, which must be amortized in regular installments.
There are also more specific modalities, such as invoice factoring. Where the company sells its accounts receivable in exchange for an advance. Or the Merchant Cash Advance (MCA), where the creditor advances an amount in exchange for a percentage of the business’s future sales.
Main Alternatives for Short-term Business Loans
1. American Express Business Line of Credit
American Express offers a robust commercial line of credit. Positioning itself as a competitive option in the short-term business loans scenario.
As a rule, this credit allows access to amounts ranging from US$ 2 thousand to US$ 250 thousand, with payment terms established between 6, 12, 18, or 24 months.
As a rule, rates start from 3% for shorter terms. Scaling according to the duration of the loan:
- 3% to 9% for six months;
- 6% to 18% for 12 months
- 9% to 27% for 18 months
- 12% to 18% for 24 months.
In addition to competitive rates, American Express stands out for the absence of origination fees or prepayment penalties. It offers a significant economic advantage for those who can pay off the debt before the deadline.
Furthermore, the payment model is monthly. Facilitating cash flow management compared to daily collection models.
2. OnDeck (Short-term Business Loans)
OnDeck is an institution recognized for its agility. This is certainly a frequent choice for those looking for quick-release short-term business loans. Incidentally, this bank also offers one of the best loans for Startups.
As a rule, the company offers both term loans and lines of credit, with amounts ranging from US$ 5 thousand to US$ 400 thousand and terms that reach up to 24 months.
Furthermore, OnDeck’s value proposition is speed: financing of up to US$ 100 thousand can be processed and released on the same day, thanks to an optimized online process.
However, this convenience comes at a cost. The minimum reported Annual Percentage Rate (APR) is 35.26%, which is considerably high.
In addition, borrowers must be aware that there may be an origination fee of up to 4% on the total financed amount.
3. Fundbox
For companies that do not yet have an extensive history or millionaire revenue, Fundbox presents itself as a viable alternative in the business loans market.
Its line of credit offers up to US$ 250 thousand, with short payment terms, structured in 12 or 52 weeks.
Initially, rates start at 4.66% for the 12-week term and 8.99% for the 52-week term. In this option, the release of funds is extremely fast, generally occurring within one business day.
4. Fora Financial
Fora Financial focuses on serving companies that need higher amounts of capital through short-term business loans.
Its term loans range from US$ 5 thousand to an expressive US$ 1.5 million, with repayment terms ranging from 4 to 18 months.
Furthermore, the collection model uses a rate factor, starting at 1.13, in addition to a 3% origination fee. This means that the total cost of the loan is calculated by multiplying the principal amount by the determined factor.
Despite the potentially higher cost implied in the collection factor, Fora Financial compensates with flexible approval criteria.
As a rule, the institution accepts borrowers with a credit score starting from 570 and requires only six months of business operation.
5. Credibly (Short-term Business Loans)
Credibly operates in the working capital and Merchant Cash Advance (MCA) segment, offering short-term business loans ranging from US$ 25 thousand to US$ 600 thousand.
You need to know that payment terms are between 6 and 24 months.
Like Fora Financial, Credibly uses a collection factor, which starts at 1.11, and applies an origination fee of 2.5%.
One of Credibly’s main attractions is its accessibility for riskier credit profiles.
In addition, the company approves applications with a credit score starting from 500 and requires only six months of operating time.
However, there is a minimum annual revenue requirement of US$ 180 thousand. Indicating that, although the personal credit may be low, the company’s cash flow needs to be strong to sustain payments.
6. Bluevine
Bluevine stands out for its speed of decision and competitive rates on its line of credit, one of the most sought-after short-term business loan modalities.
First, the limit offered reaches US$ 250 thousand, with a maximum term of 12 months for settlement.
Furthermore, the initial rate is 7.8%, which is attractive in the online lender scenario.
At Bluevine, the main technological advantage is the ability to issue a credit decision in just 5 minutes.
Therefore, for entrepreneurs who need the money instantly, Bluevine offers the possibility of same-day transfer. Although it may charge an additional fee for this speed.
7. Reliant Funding (Short-term Business Loans)
The Reliant Funding specializes in Merchant Cash Advances (MCAs), a specific category of business loans where payment is linked to the company’s sales performance.
You need to know that the available amounts range from US$ 2 thousand to US$ 2 million, with estimated terms from 2 to 24 months.
Furthermore, collection is not done through a traditional fixed interest rate, but as a percentage of future revenues and a variable origination fee.
This structure is ideal for seasonal businesses. After all, payments decrease if sales fall.
8. Lendio
Lendio operates differently from the other listed options, functioning as a loan marketplace and not as a direct lender.
Know that the platform connects entrepreneurs to more than 75 partners. Allowing them to compare various offers of short-term business loans, lines of credit, factoring, and MCAs with a single application.
In addition, the values can vary enormously, from US$ 1 thousand to US$ 5 million, and terms range from 3 months to 25 years.
Comparative Table of Short-term Business Loans
| Lender / Product | Value Range | Estimated Term | Rates / Charges (Summary) |
| American Express | US$ 2 thousand – 250 thousand | 6 to 24 months | Initial rate from 3%; 3-9% (6 m), 6-18% (12 m) |
| OnDeck | US$ 5 thousand – 400 thousand | Up to 24 months | Min. APR 35.26%; origination up to 4% |
| Fundbox | Up to US$ 250 thousand | 12 or 52 weeks | 4.66% (12 w) or 8.99% (52 w) |
| Fora Financial | US$ 5 thousand – 1.5 million | 4 to 18 months | Factor from 1.13; origination of 3% |
| Credibly | US$ 25 thousand – 600 thousand | 6 to 24 months | Factor from 1.11; origination of 2.5% |
| Bluevine | US$ 1 thousand – 250 thousand | Up to 12 months | Initial rate of 7.8% |
| Reliant Funding | US$ 2 thousand – 2 million | 2 to 24 months | % on future revenues; variable origination |
| Lendio | US$ 1 thousand – 5 million | 3 months to 25 years | Variable according to partner |
Conclusion (Short-term Business Loans)
Short-term business loans represent a powerful tool for modern financial management. Offering the necessary agility to navigate dynamic markets.
We recap that options like American Express and Bluevine offer competitive rates for more solid credit profiles, while OnDeck, Fora Financial, and Credibly ensure quick access to capital for companies with more flexible requirements.
The final reflection rests on the balance between cost and opportunity.
Choosing the right product depends on a cold analysis of the numbers: does the speed of access to credit compensate for the higher cost of rates? For many businesses, the answer is yes, as long as the capital is applied to initiatives that generate quick and tangible returns.
Here’s the tip! Success in using these financial instruments lies in the ability to plan cash flow to accommodate payments without suffocating the operation.