Businesses need capital to get started and a steady stream of income to keep running, but a growing company might require additional investment from time to time. To get additional funding, businesses either look for investors or apply for loans.

For small business owners who might not be eligible for long-term loans yet, short-term loans are a big help. These loans allow businesses quick access to cash that they can use to handle emergencies, pay their employees on time, or take advantage of a profitable opportunity. Short-term loans can be in the form of lines of credit, a credit card, a loan term, or invoice factoring.

In this article, we'll define and discuss the different types of short-term business loans. We'll also give you a list of the best short-term lenders to get you started if you're looking.

What Is a Short-Term Loan?

Short-term loans are a type of credit with short repayment periods, ranging from three months to three years. It also involves lower borrowed amounts, which may range from $100 to $100,000.

Short-term loans are generally repaid through fixed, regular monthly payments. The payments, which include interest and fees, may be higher because of the shorter repayment periods.

Businesses take on short-term loans to support temporary capital needs or cash flow issues. It is a valuable option for small businesses or start-ups that may not be eligible for traditional business loans from a bank.

Pros and Cons of Short-Term Loans

If you're looking for short-term loans to cover emergency cash flow needs, consider the following advantages and disadvantages of this type of credit before applying.

  • Quick processing time: Businesses can access short-term loans quickly because they're considered less risky than long-term loans. Since the loan has a shorter maturity date and repayments are set when funds are issued, creditors are not worried about the borrower's ability to pay. Hence, loans can be processed, approved, and funded in as little as one day.
  • Easier to qualify: For newly built businesses with no credit history, the requirement of a short-term loan can be easier to meet and offers excellent options to get funding.
  • Lower total interests: The shorter repayment periods mean the total interest amount payable can be lower compared to long-term loans.
  • Low loan amounts: Small businesses looking for significant capital funding may not benefit from short-term loans because of the smaller loan amounts available.
  • High monthly payments: With short repayment periods, businesses applying for short-term loans must make sure they have the cash flow to afford higher monthly payments.

Types of Small Business Short-Term Loans

Here are some of the small business short-term loans available in the market.

SBA Loan

SBA loans are small-business loans partially guaranteed by the U.S. Small Business Administration. This means that if you default, the government pays the lender the guaranteed amount. The loans are issued by lenders like banks and credit unions. SBA loans can be a little difficult to qualify for, but it's worth a try because they offer flexible terms and low-interest rates.

The SBA has several loan programs. For example, you can borrow $50,000 or less with microloans to finance inventory, equipment, or machinery. You can also borrow up to $5 million from the 7(a) loan program to fund your business operations.

The requirements for an SBA loan include an unconditional personal guarantee from everyone with at least 20% ownership in a company. In addition, your business must be at least two years old and making profits. You'll also need a good credit score of 690 or higher.

Business Term Loan

Business term loans come with a fixed amount that business owners receive in a lump sum. The loans are typically repaid over a specified term in a prearranged schedule of payments. The repayment period typically ranges from three to 18 months for a short-term loan, while a long-term loan can extend up to 10 years or longer.

Business Line of Credit (LOC)

A line of credit provides businesses access to flexible cash. It works the same as a credit card. You get a set credit limit, but you don't only make payments or get charged interest for the amount you borrowed. Business owners use this fund to cover day-to-day working capital, such as buying inventory, repairing equipment, or funding a marketing effort.

Two types of business LOCs:

  • Secured business line of credit: This type of LOC requires the business to pledge collateral to secure the line. Lenders may ask for short-term assets, such as accounts receivable and inventory.
  • Unsecured business line of credit: This type of LOC does not require assets as collateral, except for a general lien and personal guarantee. This is why they generally come with higher interest rates. To qualify for an unsecured line of credit, you would need a strong credit history and your business must be profitable.

Invoice Factoring

Invoice financing is a way for businesses to borrow money using accounts receivables. Invoice factoring is an example of invoice financing. It involves selling your unpaid invoices to a factoring company, where they get paid when they collect from your customers. The factoring fee ranges from 1% to 5% depending on the invoice amount, your sales volume, and your customer's creditworthiness.

In addition, there are two types of invoice factoring: "recourse" or "nonrecourse." With a recourse factor, you are ultimately responsible for the unpaid invoice. For instance, if the customer doesn't pay, you'll have to buy back the invoice or replace it with a more current receivable. If it's a nonrecourse factor, you're not obligated to repay or replace the unpaid receivables.

Best Short-Term Lenders

Check out some of the best short-term lenders to get you started.


Kabbage is an online bank that offers lines of credit with loan amounts starting from $2,000 to $250,000. They're a great option because they don't charge an application fee, origination fee, or other hidden fees. Your loan costs will vary depending on the type of loan you choose, the amount you borrow, and the repayment terms.

The requirements include at least $50,000 in annual revenue or $4,200 per month in income and your business should be at least one year old.


Accion is an international nonprofit organization providing loans for startups up to $100. They offer flexible repayment terms, although terms vary depending on where you live. Accion is an excellent option for new small businesses because its service includes referrals to banks, local organizations, and peer networks.

Your business must be at least one year old to qualify and you'll need business records showing at least $50,000 in annual revenue.


OnDeck offers lines of credit and short-term loans starting from $5,000 to $250,000. They're known for their fast loan application process that can get you approved within a day. If you need cash quickly, OnDeck is an excellent option (note that they charge a first-time origination fee of 2.5%).

You also need a FICO score of 600 or better to qualify for a loan and your business must be at least one year old with at least $100,000 in annual revenue.


BlueVine is an online lender that offers lines of credit and invoice factoring. With BlueVine, you can access lines of credit up to $250,000 and invoice factoring up to $5 million. Fees for loans are based on your personal FICO score, business revenues, and industry. Note that they only accept invoice factoring for business-to-business companies.

If you're a business-to-consumer company, you can still qualify for a line of credit. The eligibility requirements include at least three months in business, a credit score of 530 or above, and $10,000 or more in monthly revenue.

Let Skynova Help You Manage Your Small Business

Running a business is about managing your cash flows and looking for opportunities to make profits. Sometimes, taking a loan is necessary to do both, which is why understanding your loan options is important. Short-term loans can be an effective tool to help you deal with emergencies or take advantage of an income-producing business opportunity.

Are you looking for an easier way to manage your company's cash flow? Use Skynova's accounting software. Your receipts are organized, backed up, and kept in one place. It's an easy way to maintain accurate records of your income and expenses and it lets you generate financial reports any time you need them.

Explore our platform for business templates and other software products to help you manage and grow your business.

Notice to the Reader

The content within this article is meant to be used as general guidelines and may not apply to your specific situation. Always do more research and consult with a professional to ensure that you're making the best decisions for your business.