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    Business Term Loans: A Quick Guide

    Sometimes, all it takes to get your business moving in the right direction is a quick financial injection. Regardless of how large or small the payment might be, you simply need some money for a short period of time to get things on track.

    For these times, business term loans are ideal. In simple terms, these are small business loans that have to be paid back in a relatively short space of time (typically within two years). Naturally, business term loans online aren’t for every business. However, if you need some money and don’t need a ton of time to pay it back, they might just be for you. To help you decide if a short term loan could help your venture, let’s break down the basics.

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    What is a Short Term Business Loan?

    What is considered a short term loan? If we’re being blunt, there’s not much difference between short term business loans and standard business loans. Other than the time in which you have to pay off the debt, everything else is almost identical. The main differences you’ll notice are the repayment schedule and, in some cases, the interest rate. Because business term loans are repaid over a shorter period, lenders may charge higher interest rates in order to make it worth their while. Additionally, fees for late or non-payment may also be higher due to the contracted nature of the agreements.

    Types of Short-Term Business Loans

    As with all types of financial support, there is more than one type of short-term business loan. To help you decide which offers may be right for you, here are the main types of business loans you can use in the short term:

    Short Term Business Loan

    Most small businesses apply for short term loans online. These deals are simply a type of business capital loan that allow you to borrow a fixed amount of money at a set interest rate for a certain period of time. In fact, with the National Small Business Association stating that 82% of new companies fail because of cashflow issues, short term business loans are often a vital lifeline for startups. Although short term loans online or offline will vary depending on the lender, it’s typically the case you’ll be able to borrow between $2,500 and $250,000. The APR can start anywhere from 14% and you’ll have between three and 18 months to repay the debt.

    Merchant Cash Advance

    For a different type of support, you may want to try short term cash loans. Otherwise known as merchant cash advances, these deals give you between $2,500 and $250,000 at a factor rate of around 1.14. The main difference between a short term cash advance and other similar loans is that the repayments are deducted from your merchant bank account on a daily basis.

    Invoice Financing

    If you have invoices pending, some lenders will give you credit for them. In other words, you can borrow money based on the value of your outstanding invoices. The amount of money you can borrow will vary between 50% and 90% of the total invoices outstanding and repayments will be deducted when customers pay (plus a fee).

    How a Short Term Loan Works

    In general, short term loans are the same as long term ones. In other words, you borrow a set amount of money from a lender and have to repay it over an agreed period. However, one of the main differences between the two is that payments usually have to be made on a more frequent basis. In most scenarios, lenders will ask for weekly and sometimes daily payments. Moreover, this means the interest rate is usually based on a “factor” rather than an APR.

    For example, some short term business loans may use business days in a year to determine the repayment plan. So, for a 12-month loan, you’d have to make repayments based on 264 business days. Understanding these subtle differences is crucial when you’re searching for short term loans online.

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    When are Short-Term Options the Right Solution?

    New small business loans are ideal when you need a quick injection of cash to cover daily operations, buy stock, pay off longer-term loans or avert a crisis.

    Inventory Loans Small Business

    If you need new stock or equipment, maybe because you’ve received a large order, business inventory loans are great as they can help you bridge the financial gap.

    Emergency Business Loan

    Anything can happen in business. If you can’t cover the cost of an accident, theft or any other unexpected event, a short term emergency loan can provide a quick solution that doesn’t leave in debt for years.

    You Have a Short-Term Need

    Sometimes, there may be a deal that’s too good to miss. If you’ve been offered a great deal on something that will help your business but you don’t have the capital, short term money loans can be a great way to seize the moment.

    Advantages and Disadvantages of Short Term Loans for Small Businesses

    Even the best small business loans have their advantages and disadvantages. To ensure you get a deal that’s right for you, make sure you consider the following positives and negatives:

    Advantages of Short Term Loans

    Build Your Business Credit

    As a new business, it can be tough to prove you’re a reliable borrower if you don’t have any credit history. Short term loans are a form small business line of credit that can help you build up a better reputation.

    Seize Growth Opportunities

    Getting a business loan can be for something as simple as seizing an opportunity. If you don’t have the capital, short term business loans can help you take advantage of a great deal.

    Quick Approval and Funding

    In most cases, you’ll receive the money for your short term loan within a few days (sometimes a few hours). Indeed, look online and many lenders will entice you with headlines such as “business loan instant approval.”

    Disadvantages of Short Term Loans

    Higher Interest Rates 

    Short term business loan interest rates can be high. Because you’re repaying the debt over a shorter period, lenders can charge upwards of 14% APR to cover their costs.

    Know the Risks

    Naturally, with less time to pay, short terms loans can put you under more pressure. If you find a short term loan online, make sure you’re prepared for higher interest rates and frequent payments.

    How to Qualify for Short Term Small Business Loans

    To apply for a short term loan online and have any chance of being accepted, you’ll need to provide the following:

    Get Your Paperwork ready

    To speed up the application process, make sure your accounts are in order and you’re ready to provide all the details about your business.

    Show an Ability to Pay

    You’ll need at least some financial and assets/capital to prove you’re able to meet the repayments.

    Reasonable Credit Score

    Because short term loans can be higher risk than other financial products, you’ll typically need a strong credit score of 500+.

    Low Credit Utilization

    Ideally, you don’t want to ask for more than 30% of the total credit available to you. The total credit is based on your credit score and assets.

    How Much Can You Get from a Short-Term Loan?

    Getting a small business loan is all about necessity. In other words, you shouldn’t borrow unnecessarily or more than you can afford. What’s more, getting a business loan should be factored into your company’s plan and not something you do on a whim. With that in mind, short term loans usually range from $2,500 to $250,000.

    Short Term Business Loans For Bad Credit

    Perhaps one of the most overlooked benefits of short term loans is that you don’t always need good credit. Yes, a strong financial history will help you receive a better deal. However, you can find lenders that advertise themselves with these types of slogans “short term loans online bad credit.” Basically, when it comes to short term loans bad credit offers, you’ll probably have to pay a higher interest rate. But there are deals out there and, what’s more, they can help you improve your credit score in the long term if you make repayments on time.

    Boost Your Business With Short Term Loans

    The best small business loans are a great way to bridge financial gaps and take your company to the next level. Although short term loans aren’t for everyone, they can cover unexpected costs, seal a once-in-a-lifetime deal or help you through a temporary downswing. By finding the right short term loans online, you can cover your financial problems and, potentially, make a success of your business.