What Is a Short-Term Business Loan?

A short-term business loan, also commonly referred to as a short-term working capital loan, is a loan that is paid back over a short period of time. This period can range from one week to several months, but short-term loans are usually paid off in less than one year. Businesses often rely on short-term loans to fund immediate needs, like purchasing inventory or new equipment, or covering emergency expenses. Many startups also rely on short-term loans to cover their operating costs while waiting to turn a profit.

Short-Term vs. Long-Term Business Loans

There are several things to consider when comparing short- and long-term business loans. Here are several:

• Speed of Funding – Short-term business loans can typically be funded much faster than long-term business loans, partially because they usually have simpler application processes.
• Length of Need – Another factor to consider is how long you will need the funds. If you need money fast, but only need it for a short period of time, then a short-term loan may be the best bet. (Example: To purchase new equipment required to do the work that will land you a big contract.) If you need the money over a longer period of time, then a long-term loan may be the right option. (Example, you’re renovating your office over a period of nine months.)
• Interest Rates – Short-term loans may have higher interest rates; however, since they are paid back quickly, interest does not accrue over a long period of time so you could actually end up paying less in interest than on a long-term loan. It depends on the loan terms and the length of time required to pay the loan back.
• Credit Rating – Since short-term loans are paid back quickly, your credit rating can improve when the loan is repaid. With long-term loans, on the other hand, you carry the debt over a longer period of time, which may affect your ability to borrow additional funds during the repayment period.
• Eligibility – It’s often easier to qualify for a short-term loan, than a long-term loan. At Atlantic CLS, for example, we take a close look at business performance when underwriting short-term business loans, not just at the borrower’s credit rating.

Need a Short-Term Business Loan?

Atlantic CLS has helped hundreds of small business clients just like you to get the cash they need to help their businesses succeed and grow with short-term loans and mid-term loans. We’ll get to know you and your business and be there for you when you need us. Contact us today.