Short term business loans

What is a short term business loan?

It is a term loan compressed into months instead of years. You receive the money up front and repay a fixed total, usually through automatic withdrawals every business day or every week. Online lenders dominate this product, and most quote the cost as a flat fee or factor rate rather than an interest rate.

The daily or weekly schedule is what makes it different from a bank loan. It keeps the lender's risk low, which is why approval is fast and loose, and it also means the payments hit your account before most of your customers have paid you.

Who qualifies for a short term loan?

Most online lenders want six months to a year in business, roughly $8,000 to $10,000 a month in bank deposits, and an owner credit score of 550 to 600 or higher. They care more about deposit volume and account balance than profit, which is why a business with thin margins can still be approved.

• Declined most often: businesses with frequent negative balances, more than three to five overdrafts a month, or an existing daily payment loan already in place.
• Under six months in business: a few lenders will consider you with strong deposits, but see financing under one year for better fits.
• Credit under 550: look at a merchant cash advance or bad credit options, and expect a higher factor rate.

What does a short term loan really cost?

A factor rate hides the real cost because it ignores time. A typical example: you borrow $50,000 for 12 months at a factor rate of 1.25. You repay $62,500 in 52 weekly payments of about $1,202. The fee is $12,500, which sounds like 25%, but because the balance is falling every week the APR is roughly 45%.

The same $12,500 fee on a six month term is closer to 90% APR. Add an origination fee of 2% to 5% and the number rises again. Always convert the offer to APR before you compare it with anything else; our guide on APR versus factor rate shows how.

How do you qualify, and what documents do you need?

The file is light. Most lenders ask for three to six months of business bank statements, a voided check, your business formation documents and a government ID for each owner. Loans above about $150,000 usually add a recent tax return and a year to date profit and loss statement.

What gets you approved at a better factor rate is a bank account that looks calm: steady deposits, few overdrafts, and an average balance above the proposed payment. The full list is in our document checklist. If your statements show another daily payment loan, say so up front; lenders find it anyway, and hiding it is the fastest route to a decline.

How long does a short term loan take?

Typically one to three business days from application to money in your account. Decisions often come within hours because underwriting is largely automated from your bank statements. Connecting your bank account directly, rather than uploading PDFs, is usually the fastest route.

Funding slips when the lender needs to verify a landlord, confirm a tax balance or see a signed return. If you need the money for a fixed date, apply a week ahead and read fast funding for what else shortens the clock.

When should you choose something else?

Choose a line of credit if you qualify for one, because you pay interest only on what you draw and the APR is usually half or less. Choose a term loan if the purpose is a purchase that pays back over years rather than months; a 12 month payment on a five year asset will strain cash flow. If you are waiting on slow paying customers, invoice financing is usually cheaper than borrowing against the whole business.

Do not take a second short term loan to cover the first. Stacking is the most common path to a business that cannot make payroll.

How do you apply for a short term loan?

Apply once here and your file goes to short term lenders and to every other lender type that fits, so you see the cheaper options side by side with the fast ones. It is free for your business, and we are paid the same whichever lender you choose. You can also ask your AI assistant to apply for you through our MCP server, using your bank statements to complete and submit the application.