Written by A short-term business loan refers to a business loan used as a short-term solution to a problem rather than a long-term investment for your business. They’re designed to be paid off within one to three years and deal with smaller amounts that can be paid off more quickly, from micro loans as small as $5,000 up to $300,000.
While a long-term loan might be suited to large scale projects like buying a property or opening up a new outlet for your business, short-term loans are more suited for things like upgrading equipment, consolidating debt, paying wages or even providing the upfront finance to run an event or conference.
There are many different types of business loans that could be regarded as short-term loans, so your business has a wide variety of temporary finance options on the table.
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The benefits of a short-term business loan
Repay over as little as three months
No security required
Borrow from $5,000 to $500,000
Competitive interest rates
Available to new businesses
Rapid application turnaround
Free early repayment options
Lower interest outlay
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What other options do I have for short-term business finance?
Business credit card
A business credit card is similar to a personal credit card, except that it’s tied to your business’ finances rather than yours. It gives you the same flexibility with borrowing money at need – normally at pretty steep interest. Just like a personal credit card, it’s best suited to expenses that can be paid off quickly – preferably within a couple of months.
Business line of credit
A line of credit has some similarities with a credit card. It involves your lender setting aside an amount of funds that your business can call on at need. Just like a credit card, you only pay interest on the money you’ve borrowed. Unlike a credit card, though, it’s often only available for a specific period of time (often between one month and three years, although some lenders will go longer). The penalty fees for late payments and going over the credit limit can also be very high.
Invoice financing
This is a unique form of financing which involves selling on some of your outstanding invoices (i.e., the money other people owe you) on to a lender. The lender pays you a proportion of the invoice amount and takes on the responsibility of collecting the debt. Once the debt is repaid, they’ll pay you the remaining amount – minus fees and interest.
Merchant cash advance
A merchant cash advance is a kind of finance where, rather than making repayments at a set rate, a lender agrees to take a percentage of your business profits to progressively pay off the loan. It gives you some protection against being overwhelmed by loan repayments in a slow business period, but it’s only really suitable for businesses with a steady cash turnover. There’s also less government regulation on these loans – it’s technically a “sale of future revenue” rather than a loan, so it’s not subject to the normal rules of small cash loans.
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Short-term business loan FAQs
Yes – many lenders are willing approve commercial financing for businesses that have seasonal cash flow, such as agricultural businesses. You’ve still got many options on the table.
No – you don’t have to be a business looking for finance in Sydney or Melbourne. Businesses all over Australia, whether in capital cities or out in the regions, are able to access the finance they need with an online business loan. Lenders are more concerned with your business’ ability to cover its loan repayments and meet the required criteria than where it’s based.
No – if you’re looking for finance as a tradie, or anyone else for that matter, you’ll also have the option of seeking out equipment financing. This is a type of secured finance which utilises the purchase of your chosen piece of equipment as collateral for your loan. The major benefit of this is that you can gain access to lower interest rates and potentially longer terms, which you can achieve by applying through Savvy and having your application handled by one of our experienced consultants.
Yes – bad credit business loans are a special type of loan specifically for businesses with a poor credit rating. Many common types of short-term finance, including unsecured loans, can be taken as a bad credit loan. They cost more, but they’re a good option if your business’ credit score is making it hard to get a loan approved. Many online lenders can offer a bad credit loan, so it pays to shop around.
No – a sole trader won’t rule you out of getting business finance in Australia, as long as the money is specifically going into the business. Short-term business loans are well suited to small businesses, as they deal with smaller amounts and are often far easier to get approved.
In most cases, you’re likely to be better off with a short-term unsecured business loan. These are more widely accessible and won’t require any asset collateral (which bridging finance often does). On top of this, in many cases, you can more easily pay these off ahead of schedule should you acquire the funds you need and may attract a lower interest rate in some cases.
From submitting your application to receiving your business loan funds can take just 24 hours, down to as few as only two with some lenders. Unsecured finance is fast to process thanks to the lack of asset collateral required, so provided your business meets the various criteria relating to revenue generated, time trading and more, you can have your funds as soon as the same day you apply.
