How much money will it take to start your new business? Many entrepreneurs underestimate the cost of starting their business, but with the right nu...
The Top Lenders at a Glance
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Minimum Credit Score | Visit Site |
|---|---|---|
| Lendio |
580
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View Rates |
| Rapid Finance |
550
|
View Rates |
| OnDeck |
600
|
View Rates |
A merchant line of credit loan permits businesses to draw on a flexible credit line up to the maximum agreed upon amount but needs to be repaid within weeks rather than months. Accounts receivable loans give advances against outstanding unpaid invoices. A short term business loan is usually approved quickly, with funding coming in within a few days, and isn't secured against any particular assets.
On average, short term business loans carry between 7% to 30% APR each month. Repayment terms are usually between 3 and 36 months, although some can be as short as just a few weeks. Some short term business loans do come with early repayment charges. Short term business loans are good for businesses that need extra capital for a short period of time like to cover stock expansion ahead of a busy shopping season. They are also great for covering an unexpected shortfall, meeting emergencies, or taking advantage of a business opportunity when the business needs the funding in a hurry. However, since rates tend to be higher than long-term business loans they can be risky, so only take on a short term loan if you are sure that you can pay it off within the term.
What to Look for When Choosing a Short Term Business Loan?
- Repayment fees: If you’ve decided that a short term business loan is the best solution for your company right now, then there are certain things to look for. Because short term loans usually carry higher interest rates, you’ll want to pay it off as fast as possible so look for a loan without any early repayment charges.
- Repayment schedule: Some short term lenders want repayments to be made daily or weekly rather than monthly, which could pose a challenge to your cash flow. Another issue is that many lenders allow you to renew your loan as soon as you’ve paid it or even when you’ve paid off just the majority of the amount. This can seem like a plus if you need more financing, but it can also turn into a temptation to keep on borrowing more without ever fully throwing off your debts.
The 3 Best Lenders for Small Businesses
1. Lendio
- 10 different loan types
- No minimum credit score
Lendio is an online small business loan aggregator that brings business owners and lenders together on one platform. The site is free to use, and offers over ten distinct loan programs, for every business need, from business acquisition to funding for commercial real estate, increasing your chances to find both a lender and a specific loan program that suits your needs.
2. OnDeck
- 24-hour approval
- Excellent customer service
OnDeck offers conventional business loans and lines of credit, allowing flexibility to get the loan you need. Best of all, you can have your money within 24 hours with fast approval and excellent customer service.
3. Rapid Finance
- Quick application & approval
- Multiple financing options
Founded in 2005, Rapid Finance advertises its dedication to “entrepreneurialism” and has extended over $2 billion in funding to companies. Operating as an alternative to banks and other traditional lending institutions provides Rapid Finance with the flexibility to work with businesses of all sizes across a broad range of industries.
Read the full Rapid Finance review
Conclusion
Short term business loans are an easy way to get access to working capital in a hurry when you need to cover temporary cash flow issues or take advantage of a great business opportunity. Each of the five loan providers we’ve profiled here can fix you up with a competitive short term business loan.