Best Short-Term Business Loans Of 2024

Consider these tips when comparing short-term business loans:

• Find repayment terms that work for you. If your primary goal is to repay your debt quickly, compare lenders based on available repayment terms. Shorter repayment terms may come with larger monthly payments, but they also save you money on interest over the life of the loan.
• Determine how you want to receive your funds. Two of the most common ways you can receive and access your business funds are through a lump-sum payment or on an as-needed basis. If you want to receive your funds up front, choose a traditional working capital or term loan. However, if you want to use funds only as you need them, consider a business line of credit.
• Look out for additional fees. Some lenders offer fee-free business loans that don’t require borrowers to pay origination fees, late payment fees, prepayment penalties or any other common loan costs. However, this is not always the case. Be sure to confirm a lender’s fee structure when shopping for the best terms. Factor additional fees into your decision-making process.
• Evaluate the lender’s customer support options. If you’ve found a lender that’s prepared to offer the money you need at acceptable terms, consider the lender’s support options before signing the loan agreement. Customer support can make a huge difference down the line if you encounter issues with repayment. Research the lender’s customer service resources and read reviews to make sure it’s a good fit.

We reviewed 26 popular lenders based on 16 data points in the categories of loan details, loan costs, eligibility and accessibility, customer experience and the application process. We chose the lenders with terms as short as three months based on the weighting assigned to each category:

• Loan cost. 35%
• Loan details. 25%
• Customer experience. 20%
• Eligibility and accessibility. 10%
• Application process. 10%

Within each major category, we also considered several characteristics, including available loan amounts, repayment terms and applicable fees. We also looked at minimum credit score and time in business requirements and the geographic availability of the lender. Finally, we evaluated each provider’s customer support tools, borrower perks and features that simplify the borrowing process—like online applications, prequalification options and mobile apps.

Where appropriate, we awarded partial points depending on how well a lender met each criterion.

To learn more about how Forbes Advisor rates lenders, and our editorial process, check out our Loans Rating & Review Methodology.

A short-term business loan is a loan or other form of financing that lets business owners access cash for expenses like short-term payroll needs, emergency expenses or other unexpected cash flow shortages. These loans generally come with annual percentage rates (APRs) as low as 3% and up to 50% or higher. However, these rates vary based on the type of financing, lender and borrower’s creditworthiness.

How Do Short-term Business Loans Work?

Short-term business loans function much like traditional business loans, but with shorter repayment periods. In general, short-term repayment periods range anywhere from three months to three years, but they’re often shorter than 12 months. Not only do shorter repayment terms translate into higher monthly payments, but short-term business loans may also come with more frequent payments.

Traditional installment loans are most commonly repaid on a monthly basis, but short-term loans may require weekly or daily payments to stay current. Due to these characteristics, short-term loans pose a greater risk of falling into a refinancing or debt trap, wherein the borrower is constantly refinancing a loan to decrease and delay payment—accruing interest throughout.

Short-term business loan interest rates are typically higher than their long-term counterparts, sometimes reaching as high as 50%. Lenders compensate for the increased risk of potential default with higher interest rates. That said, these rates can vary greatly depending on the lender, the creditworthiness of the business and the specific loan terms.

The interest rate on a short-term business loan determines the cost of borrowing and how much the borrower needs to repay. Consider calculating the total repayment amount, including interest, before taking out a short-term loan.

Popular types of short-term business financing include:

Short-term business loans can be easier to qualify for than other loans, but they still have their risks. Consider the pros and cons of short-term business loans before you go forward with this financing.

Pros

• Easier to qualify for
• Quick funding turnaround
• Receive client payments faster with invoice factoring

Cons

• Can be expensive
• Generally used for working capital
• Complicated or unfavorable repayment structures
• No early payoff savings with factor rates

There are several circumstances under which a short-term business loan may be helpful or even necessary. Consider short-term business loans if you’re faced with:

• Interruptions to cash flow. Some businesses—like seasonal operations—are more susceptible to short-term cash flow issues than others. If your business experiences seasonal slowdowns or other regular cash flow issues, a short-term loan may provide the cash necessary to maintain production and make payroll during low-revenue periods. Just make sure you’ll have the funds to repay the loans when you need them.
• Short-term business opportunities. If your business is faced with a lucrative opportunity but needs funds quickly to make it happen, short-term financing may be the answer. Approval times and funding speeds may be faster than with traditional loans—sometimes as fast as 24 hours—and qualifications are often less rigorous. Still, this type of financing should only be used if the financed opportunity has the potential to increase revenue or otherwise improve your business’ bottom line.
• Emergency expenses. Sometimes expenses are unavoidable and can’t be postponed until you have cash on hand. If your business is faced with emergency expenses like building, equipment or fleet repairs, short-term business loans can provide the money you need to cover them.

A short-term loan can be an accessible solution if your business is faced with emergency expenses or is otherwise in need of cash. However, this type of financing isn’t a good fit for businesses that can’t repay the loan quickly. Avoid a short-term business loan if you’re facing any of these situations:

• Inability to make payments. If cash is tight and you need a short-term loan to fund operating expenses, take a deeper dive into the business’ finances and budget before borrowing. Likewise, evaluate whether the loan funds will increase the business’ revenue or otherwise improve its finances and ability to make payments.
• High annual percentage rates. APRs on short-term loans may be higher than for their traditional counterparts. A high APR can substantially increase individual payments and the overall cost of borrowing.
• Frequent repayments. Because some short-term loans have abbreviated repayment terms compared to traditional loans, borrowers may have less time to repay the funds. Don’t commit to a short-term loan if your business is unable to make consistent, on-time payments.
• Partially amortized repayments. Many traditional business loans are fully amortized, meaning the monthly payment is calculated so that the loan is fully repaid at the end of the loan term. However, some short-term business loans are only partially amortized with a balloon payment due at the end of the repayment term. This structure reduces the monthly payment amount but can be dangerous for businesses that aren’t prepared to cover the balloon when it’s due.
• Risk of repeated refinancing. Short repayment terms and large individual payments make it easy for business owners to fall behind on loan repayment. This often results in refinancing a short-term loan multiple times to both reduce and delay payments.

The process for getting a short-term business loan depends on the type of financing and the lender. However, there are a few general steps to follow if you choose a short-term funding option.

• Evaluate your borrowing needs. Before searching for a lender, evaluate why your business needs a short-term loan. Will the expenditure improve efficiency or otherwise increase the business’ revenue? Do you need a lump sum of cash, or is a line of credit more appropriate? Based on these considerations, determine how much the business actually needs to borrow and what works with your budget.
• Check your credit score. If you have an established company, check its business credit score through Dun & Bradstreet (D&B), Experian or Equifax. Because most business loans are personally guaranteed by the applicant, lenders also look at the business owner’s personal credit score when evaluating their application. Ideally, you should have a FICO score of at least 600 to qualify for a short-term business loan.
• Compare lenders. Once you know what kind of short-term financing you want and how much you need to borrow, compare lenders. If you have an established banking relationship, ask an agent about lending offers. Where possible, evaluate each lender’s borrower qualifications to gauge your approval odds. Finally, read online reviews to identify red flags, and speak with other members of your industry to get lender recommendations.
• Submit a formal application. Visit your preferred lender’s website or contact a customer service representative to determine the formal application process. Many lenders offer online applications, though you may need to speak to an agent via telephone. Some traditional lenders still require prospective borrowers to complete their application documents in person.

¹The required FICO score may be higher based on your relationship with American Express, credit history, and other factors.