When to Consider a Short-term Business Loan

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Key takeways

  • Quick-term loans are finest used for emergency bills, seasonal money circulation gaps, time-sensitive alternatives or to buy stock
  • Quick-term enterprise loans can have excessive rates of interest or charges, so that you’ll have to assessment the mortgage settlement rigorously earlier than signing
  • Quick-term loans can be found via conventional lenders, like banks, and on-line or different lenders

While you run your individual enterprise, there might come occasions when you could want money shortly to cowl a right away want. Quick-term enterprise loans will help, however you’ll have to know which sort of short-term mortgage is best for you and its benefits and drawbacks.

We’ll break down frequent conditions the place short-term loans will help your corporation and the sorts of financing to contemplate.

Emergency bills

In some conditions, your organization may face a monetary emergency and have to give you fast funds. For instance, if a key piece of kit breaks, it’s essential to get it repaired to maintain your organization operating. Borrowing cash to cowl that expense is smart.

A enterprise line of credit score or time period mortgage is an efficient supply of funds to assist cowl emergencies. You’ll probably have to work with an alternate lender for quick approval and funding. They have a tendency to concentrate on offering loans in as little as 24 hours, which is way quicker than loans usually provided by banks and credit score unions.

Fill gaps in money circulation

One of the vital vital issues for enterprise homeowners is to maintain monitor of their money circulation. Companies questioning if they need to get a short-term enterprise mortgage might wish to begin by evaluating their income and bills. Your organization could be worthwhile, but when revenue doesn’t align with bills, you would end up with payments coming due and no cash to pay them.

Seasonal companies typically face this concern, with numerous cash coming in throughout busy seasons and restricted revenue throughout the low season.

The very best enterprise strains of credit score supply a fast and versatile supply of funds to cowl short-term money circulation points. The profit is you could draw funds every time wanted and solely pay curiosity in your excellent stability. Simply be careful for upkeep charges and different fees. The general price of the mortgage may rise considerably based mostly on these further fees.

For those who can’t qualify for a line of credit score, some companies depend on different sorts of financing to assist cowl money circulation points. There are various sorts of loans which might be accessible to enterprise homeowners with weak credit however will carry increased charges and charges. These embrace:

Bankrate perception

The 2023 Report on Employer Companies: Findings from the 2022 Small Enterprise Credit score Survey discovered that 65 p.c of small companies searching for financing had been making use of to fulfill working bills, and 53 p.c had been making use of to develop enterprise, pursue new alternatives or purchase enterprise property.

Buy stock

Stock is crucial for any enterprise that sells merchandise relatively than companies. Even service-based companies want the provides concerned in offering that service.

You may need assistance getting funds to purchase stock for those who run a retail retailer. Stock financing loans are specifically designed to assist in these conditions. The stock itself serves as enterprise collateral for the mortgage, making approval simpler.

These loans are sometimes restricted in measurement. Lenders might solely supply anyplace from 20 p.c to 80 p.c of the stock’s complete worth. It can be troublesome to discover a lender that gives stock financing. Time period loans and features of credit score are good alternate options to contemplate.

Time-sensitive enterprise alternative

Generally, your organization may discover a time-sensitive alternative that would assist the enterprise develop. For instance, if a bit of actual property in a chief location hits the market, it may pose an enormous likelihood to develop your footprint, however you want money to safe a lease.

On this situation, pace is an important issue, and the kind of mortgage is determined by how a lot funding you want and the way lengthy you wish to take to pay it off. For big loans, long-term loans offer you as much as seven years or longer to repay debt, however you’ll probably pay extra in curiosity in comparison with short-term loans you must repay in two years or much less. Some companies might wish to contemplate a working capital mortgage, which helps cowl your corporation’s day-to-day operations, permitting you to make the most of the time-sensitive alternative.

Bankrate perception

For those who’re contemplating a short-term mortgage, buying round and discovering a lender with the perfect charges on your group’s desired phrases is sensible. Among the finest short-term enterprise mortgage lenders embrace:


Professionals and cons of short-term enterprise loans

Though short-term loans will help with emergency bills or time-sensitive enterprise alternatives, they aren’t the perfect match for each enterprise. Earlier than agreeing to a short-term enterprise mortgage, it’s vital to assessment the professionals and cons.


  • Quick funding
  • Extra relaxed eligibility necessities
  • Number of funding choices based mostly on wants
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  • Quick reimbursement timelines
  • Potential for top charges and rates of interest
  • Might encourage a cycle of debt

The place to get short-term enterprise loans

If your organization is out there for a short-term enterprise mortgage, there are a number of locations to look.

  • Banks and credit score unions. These are conventional sources of enterprise financing. They usually have bodily places the place you possibly can apply or get in-person assist. Additionally they have a tendency to supply cheap charges and charges. However they’ll take longer to approve loans and have a tendency to favor lending to established companies with good or wonderful credit score, so their eligibility necessities are typically extra strict.
  • On-line lenders. On-line lenders often give attention to fast mortgage approvals and should have extra versatile eligibility necessities. However debtors with less-than-ideal credit score may face very excessive prices, together with excessive mortgage charges and rates of interest. They might even have decrease mortgage limits in comparison with banks and credit score unions.
  • Nonprofits and authorities organizations. Relying on the scale of your corporation, the place you use, and different elements, native authorities or nonprofit entities might supply loans. These sources typically have nice offers however can contain lengthy lead occasions, a whole lot of paperwork and low mortgage limits.

Bankrate perception

The 2023 Report on Employer Companies discovered that the majority small enterprise candidates appeared to banks for financing: 43 p.c utilized at a big financial institution and 30 p.c at a small financial institution, whereas 22 p.c of candidates appeared to on-line lenders, and solely 4 p.c utilized at CDFIs.

Backside line

Quick-term enterprise loans are an effective way on your firm to cowl rapid monetary wants, nevertheless it’s vital to recollect their price. For those who can, take the time to buy round to seek out the perfect short-term mortgage for you.

Incessantly requested questions

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