Short-term business loans, also called short-term commercial loans, can provide much-needed funding for business owners in a pinch. Whether you need to cover a gap in your cash flow, take advantage of a promising opportunity, or handle some emergency expenses, a short-term loan can give you quick and easy access to the financing you need.
Short-term financing can come in the form of an installment loan, a line of credit, or invoice factoring, and repayment terms are generally 12 months or less but may extend as long as three years. We reviewed 20 different short-term business lenders to give you the best based on various categories that benefit certain types of businesses and financing needs.
Due to COVID-19, many small business lenders have halted lending temporarily. Please make sure you check with each lender to verify what options are currently available.
The 7 Best Short-Term Business Loans of 2021
Best Overall: Kabbage
We chose Kabbage as our top option for business owners because of its quick turnaround time for both approval and funding, as well as its flexible loan options.
Multiple short-term business loan solutions
No origination fee
Clear eligibility requirements
Other valuable business tools
Business owners must be in business for at least one year
Minimum revenue requirements
Kabbage is an online bank that offers finance tools that small business owners need, such as checking accounts, invoicing, and loans. Kabbage loans don't charge an application fee, origination fee, or any other hidden fees—a major reason why it gets the nod for best overall. Loan costs can vary depending on the type of loan you choose, loan amounts, and repayment terms. For example, you can get a short-term business line of credit worth up to $250,000, which you’ll repay over six, 12, or 18 months.
This lender charges a monthly fee structured as a percentage of your balance, which means the faster you pay down your debt, the less you’ll pay. No prepayment penalties exist with Kabbage.
There are some minimum requirements to qualify for short-term financing. For starters, your business must be at least one year old. You’ll also need at least $50,000 in annual revenue or at least $4,200 per month over the last three months. As a result, it may not be a good fit for brand-new businesses that aren't yet generating revenues.
Kabbage will run a personal credit check on the primary person applying for the loan but doesn’t specify a minimum credit score requirement. Funding can be quick; if you’re approved and request the loan amount to be deposited into your PayPal account, you’ll receive the funds in just minutes. Funding into a bank account can take up to three days.
Best for Bad Credit: SnapCap
Getting approved for any type of business loan can be difficult if your credit isn’t in good shape. SnapCap stands out by offering short-term business loans with a minimum credit score requirement of just 500.
Accessible for business owners with low credit scores
Loans of up to $1 million
Short- and mid-term repayment options
Multiple loan options
Somewhat restrictive annual revenue requirement
Payments must be made daily or weekly
May charge an origination fee
SnapCap is a LendingTree company offering loans such as for equipment financing, inventory loans, and expansion capital. The primary reason we chose SnapCap as the best for bad credit is because of its rock-bottom 500 credit score requirement. That said, you’ll need at least $100,000 in annual revenue and must be in business for at least a year to get approved.
The interest rate on a SnapCap loan can vary based on a number of factors, including your recent business performance, industry, loan term, and loan amount. Once you’re approved for a loan, which can happen on the same day you apply, you can expect to receive your funds within 24 hours. Repayment terms are anywhere from three months to three years and are done via ACH withdrawals from your business bank account either daily or weekly.
The application process takes just a few minutes and utilizes a simple questionnaire. Loans are available for any type of business entity including sole proprietors, corporations, and partnerships. Use loan proceeds for various business needs including equipment financing, payroll, location remodeling, invoice factoring, and more.
Best for Startups: Accion
Accion is an international nonprofit organization that specializes in providing funding for startups. You don’t need to have been in business for a minimum amount of time or meet certain revenue goals to qualify.
Loans of up to $250,000
Flexible repayment terms
Accessible for business owners with low credit scores
Terms vary based on where you live
May charge a processing fee and closing costs
Funding amount may not be enough for some startups
We chose Accion, founded in 1961, for the best short-term business loan for startups because, unlike other business lenders, the nonprofit organization doesn’t have strict requirements on how long your business has been open and how much revenue you have.
Of course, that doesn’t mean there are no eligibility requirements. Criteria can vary depending on where you live, but we found minimum credit scores generally need to be in the mid-500s. Also, you must be current on all your debts—if you’re not, it can’t be more than $3,000—and have the cash flow to repay the loan. Startups may qualify for up to $250,000 in loans up to three years in duration.
Other than credit requirements, startups must:
- Have a business plan with a 12-month cash flow projection
- Have not declared bankruptcy in the last 12 months
- Have not gone through foreclosure in the last 24 months
- Provide two recent paystubs
As a nonprofit, Accion serves as more than just a lender. Its staff is knowledgeable about new business needs and will help founders throughout the life of the loan. Help includes referrals to banks, local organizations, and peer networks. This is an added edge Accion customers get that helps set them up for success with a new venture.
Best Short-Term Line of Credit: Fundbox
Fundbox is far from the only lender that offers lines of credit, but its short-term options come with fast funding, no collateral, transparent pricing, and low credit score requirements.
Lenient eligibility requirements
Can be reused after you pay it off
Minimum revenue requirement
Requires weekly payments
Fundbox offers a wide variety of business loans that includes both short-term and traditional loan types including SBA loans, business credit cards, and conventional bank loans. Its short-term lines of credit are valued up to $150,000 with repayment terms being either 12 or 24 weeks with flexible eligibility requirements, making it the best for lines of credit.
Instead of charging traditional monthly interest, the lender assesses a weekly fee, which is included in your payment every Wednesday through a direct link to your accounting software and bank accounts. Fees are only payable when you have drawn on the line of credit.
Business owners can get up to $100,000 in a line of credit to access as needed. The Fundbox website says it has no hard requirements for approval but will instead assess your business and repayment ability based on revenues, industry, and years in business. Applicants will also need a business bank account and must be based in the United States or a U.S. territory.
Fundbox periodically reviews bank information for those with a line of credit with them. It uses this information to update your credit limit or fee rate when revenues increase or a good credit history emerges.
Best for Low Rates: Credibility Capital
Getting an affordable short-term business loan can be challenging, but Credibility Capital offers rates starting at just 8% where other lenders are charging 10% or more.
Low interest rates
Short- and mid-term repayment options
No application fee or prepayment penalty
High credit score requirement
Business owner must be in business for at least two years
Not available in all states
Upfront origination fee
Loan is secured by a lien on your business
Credibility Capital was founded in 2013 and offers loans ranging from $25,000 to $250,000, which you can pay back over one, two, or three years. One of the drawbacks to consider is that the lender charges a one-time origination fee, which ranges from 3% to 5% of the loan amount.
Because Credibility Capital’s strength is in its low-interest rates, it has higher eligibility requirements than other short-term business lenders. For starters, you must have been in business for at least 24 months, be generating revenue, and have a strong personal credit history, though the lender doesn’t disclose a minimum score. Additionally, business owners must be a U.S. citizen with no commercial or personal bankruptcies within the past five years.
Loans are not available in Nevada, North Dakota, South Dakota, or Vermont. If you want an unsecured loan option, this lender isn’t for you. However, by completing an application, Credibility Capital will work with partner lenders for products it doesn't offer that may be what your business needs.
Best for Quick Funding: OnDeck
Funding for small business loans is getting faster, and many of the lenders on our list will get you your money within a day or two. With OnDeck, though, you could get the funds on the same day your application is approved.
Term loans and lines of credit available
Relatively low credit score requirement
Loyal borrowers get discounts on future loans
Requires daily or weekly payments
Requires a business lien
Upfront origination fee
Same-day funding is limited
Possible prepayment penalty
OnDeck has been providing small business loans since 2006 and has extended more than $13 billion in credit over the years. It offers term loans and lines of credit.
One of OnDeck’s strongest features is its same-day funding, which is why it wins the category for quick funding. If you’re borrowing up to $100,000 and live in an eligible state, you can receive your funds by 5 p.m. on the day you get approved. Unfortunately, you won’t be able to get that benefit if you borrow more than that; the lender offers loans ranging from $5,000 to $250,000.
OnDeck charges an upfront origination fee of up to 5% of the loan amount, though the lender may reduce that fee on subsequent loans if you’re eligible. Repayment terms range from three to 18 months. To be eligible for a loan or line of credit, you must have been in business for at least one year, have a FICO score of 600 or better, and have at least $100,000 in annual revenue.
If you don’t qualify for OnDeck’s Prepayment Benefit and you pay off your loan early, you’ll still need to pay 75% of the remaining interest you would’ve paid based on the original loan agreement. Payments are automatically withdrawn from your bank account either daily or weekly.
What Is a Short-Term Business Loan?
For the most part, short-term business loans function similarly to traditional business loans. The difference is that you typically have less than a year to pay off what you owe instead of several years, although some short-term options may give you up to three years to repay the debt.
The most common types of short-term business loans are term loans, lines of credit, and invoice factoring. Term loans are for a specified amount over a specified period of time such as a year. A line of credit allows borrowers to draw against a total amount when needed and can be reused after it is paid off. Invoice factoring pays a percentage of the value of revenues that are expected to come in.
Who Should Get a Short-Term Business Loan?
Short-term business loans are best suited for short-term financing needs. For example, you may consider one if you’re experiencing some cash flow irregularities, have a promising business opportunity you can’t afford right now, or need to cover some unexpected emergency expenses.
It’s important to check the eligibility requirements before you apply, though. Many short-term business lenders require you to have been in business for a year or longer, and you may need $50,000 or more in annual revenue.
Short-term business loans may not be a good idea if you’re borrowing a lot of money that you can’t repay over a short period of time—this includes business owners who want to invest in expansion or a specific project that likely won’t bear fruit immediately.
How Much Does a Short-Term Business Loan Cost?
Short-term business loans tend to cost more than traditional business loans. Some loans are unsecured, which poses more of a risk to the lender, who charges a higher interest rate to compensate.
Unfortunately, it can be challenging to nail down exact figures because most short-term business lenders aren’t very transparent about pricing upfront. You’ll typically need to apply and get an offer to understand exactly how much it’s going to cost you. We found short-term loans with rates as low as 8%.
How We Chose the Best Short-Term Business Loans
We considered a lot of different variables to make up our list of the best short-term business loans, such as quick funding, low credit score requirements, competitive interest rates, and financing options.
When it came to financing options, we wanted to review a variety including term loans, lines of credit, and invoice factoring since not every business will want or qualify for the same type of financing.
Finally, we wanted to give borrowers an idea of what repayment looks like, which ranges from daily to weekly to monthly payments. And depending on your needs, we included lenders with a range of repayment terms, from just a few months to a few years.
Govloans.gov. "7(a) Small Business Loans." Accessed December 30, 2020.