Your Guide to Short-Term Small Business Loans for 2021
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Editor’s note: At Lantern, we strive to help you make financial decisions with confidence. To do this, we occasionally feature content that includes information about our partners and their products or services. We do not provide, endorse, or guarantee any third-party product, service, information or recommendations—and our opinions are our own.
What short-term lending is. The pros and cons of short-term small business loans. Short-term business loans vs long-term loans. Types of short-term loans for small businesses. How to apply for a short-term business loan. Alternatives to short-term financing.
What Are Short-Term Loans?
Fast to fund. Easier to qualify for compared to long-term loans. Generally lower in total cost due to shorter terms for loans.
What Are Short-Term Business Loans Used for?
Working capital: Cover short-term debts and day-to-day expenses Inventory purchases: Re-stock or prepare for seasonal inventory needs Maintaining cash flow: Keep cash available to cover daily, weekly, and monthly expenses when financial inflow is low or delayed Marketing: Fund short-term marketing campaigns Expanding or improving: Fund updates to equipment, employee bonuses, competitor acquisitions Unexpected costs: Cover emergency expenses without jeopardizing the business’ regular finances
Who Is Eligible for a Short-Term Loan?
Startups Business or individuals with poor credit or no credit Businesses that haven’t been around for very long
Typical Rates and Fees for Short-Term Financing
Application fees: Charges for processing your application and setting up an account Early repayment fees: Some lenders may charge fees for paying back the loan early Service fees: Charged in intervals to cover ongoing costs related to your account ACH or bank wire fees: For certain types of short-term business loans, there may be fees for transferring funds between bank lenders and borrowers Early termination: Some companies may charge a fee if you choose to cancel the contract early
Who Offers Short-Term Business Financing?
Pros and Cons of Short-Term Loans
Pros of Short-Term Lending Options
Resolve Cash Flow Issues
Cons of Short-Term Lending Options
Payments Occur More Frequently
Risk of Getting in a Debt Cycle
Types of Short-Term Business Loans
Business Line of Credit
Invoice Financing and Factoring
Merchant Cash Advance
Lenders take a percentage of the merchant’s daily credit card deposits Lenders withdraw funds directly from merchant’s bank account each business day, also known as automated clearing house (ACH)
Applying for a Short-Term Business Loan
How much financing do I need? What is the money being used for? How soon do I need funding? What can I qualify for? What are the interest rates and fees? Can I afford to pay back the loan on time?
Additional Business Loan Options
Working capital Inventory or supplies Furniture or fixtures Machinery or equipment
Peer-to-Peer (P2P) Lending
Compare the Short-Term Lenders with Lantern Credit
Frequently Asked Questions
About the Author
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