Short-Term Business Financing: Get the Cash You Need Fast

Short-term business financing is taking out a loan in order to pay for a purchase, usually for a time frame shorter than a year.


The most well-known types of short-term financing include Payday Loans, Unsecured Personal Loans, and Buy Now, Pay Later

Types of Short Term Business Financing

When you need cash fast for your business, you have a few good options to explore.

1. Lines of Credit

A line of credit allows you to borrow up to a pre-approved amount whenever you need it. You only pay interest on what you use, so it’s flexible and affordable. The downside is you may need collateral like accounts receivable or equipment to qualify.


2. Credit Cards

High-limit business credit cards are quick and convenient sources of short term financing. Look for cards with 0% APR introductory offers and rewards that match your business spending.

However, credit card interest rates are often higher if you carry a balance from month to month.

3. Factoring

If you have unpaid customer invoices, factoring allows you to sell them to a third party at a discount in exchange for most of the cash upfront.


Factoring companies buy the rights to collect on the invoices, then you get paid the balance minus their fees once they collect. It’s easy to qualify for but factoring fees can be steep.

4. Online Lenders

Online lenders like Kabbage and OnDeck offer lines of credit and short-term loans that you can apply for and get funded quickly.

They use alternative data to qualify businesses so you have a good chance of approval even with poor credit. However, their interest rates tend to be higher than traditional financing options.

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Benefits of Short Term Business Loans

Short term business loans provide several key benefits for companies. Some of the benefits includes:

1. Quick Access to Funds

The main advantage of short-term business loans is their speed. It is possible to be accepted and receive money on a daily basis in less than a week.

With this fast accessibility of funds, you can buy necessary goods or equipment, grab opportunities, or cover short-term financing shortfalls.

compared to conventional bank loans, which can take several months to approve and fund, short-term lenders provide an immediate choice.

2. Flexible Repayment Terms

Short term business loans typically have flexible repayment terms of 3 months to 3 years. You choose a term that fits your needs and cash flow.

Payments are often made daily, weekly or monthly through automatic withdrawals from your business bank account.

There are usually no early repayment penalties if you want to pay the loan off sooner. This flexibility allows you to match loan payments to the expected inflow of revenues.

3. Convenient Application Process

The application process for short term business financing is simple and stress less. You can apply online in minutes and get a decision quickly.

The requirements are straightforward you’ll need identification, bank statements, and a few other business documents. There are no lengthy proposals, tax returns, financial audits or collateral required.

4. Build Business Credit

Making timely payments on a short term business loan can help build your business credit profile. This establishes a track record of responsible borrowing and repayment which can help qualify you for additional financing and better terms in the future. Building business credit is critical for any company looking to grow and expand.

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How to Qualify for Short Term Business Funding

To qualify for short term business funding, you’ll need to meet a few basic criteria. Which includes;

1. Your Business Financials

Lenders will review your business financial statements, tax returns, and bank statements to determine your cash flow and ability to repay the loan.

They want to see stable or growing revenue over the past two years and a healthy profit margin. If revenue or profits have declined recently, be prepared to explain the circumstances.

They’ll also consider your business credit score and credit history. Paying bills and loans on time leads to a good score and builds your creditworthiness.

If your score needs improvement, you may need to provide additional documentation to qualify for funding.

2. Your Personal Credit Score

For small businesses, your personal credit score also matters. Most short term lenders will check your personal credit since your business is relatively new.

A good score signifies you handle credit responsibly. If your score has taken a hit recently, take steps to improve it before applying for a loan.

3. Loan Collateral

Some short term loans are unsecured, but secured loans typically offer better terms. If you can provide business assets as collateral, like equipment, inventory, or accounts receivable, you may qualify for a larger loan with a lower interest rate.

4. Realistic Repayment Plan

Finally, you’ll need to present a realistic plan for repaying the loan. Short term loans are meant to be repaid quickly, often in 6-18 months.

Show how you will generate enough cash flow to make regular payments, and build a pro forma financial statement to demonstrate your ability to repay.


Meeting these qualifications will put you in a good position to obtain short term funding for your business. Be ready to provide documentation, explain any credit issues, and present a solid repayment plan.

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