Top Lenders to Explore When Shopping for a Short-Term Loan
Disclaimer: This article is a guest post by Fundera. The views, thoughts, and opinions expressed in the text belong solely to the author, and not to Hiscox. Neither this article nor the vendors referred to therein are sponsored or endorsed by Hiscox.
As a small business owner, you’re probably innately familiar with the old adage “it takes money to make money”. You may often find that for your business to grow, you have to put up a lot of money. The good news is that there are options such as small business term loans and business credit cards that can offer easy, quick access to capital. But when a business credit card doesn’t offer enough to cover a large expense or a traditional business term loan is simply more than you need, it’s time to consider a short-term loan.
A short-term loan is often smaller than a traditional term loan and usually comes with higher interest rates. The trade-off is a fairly short process from application to funding and you’ll typically have the money in your bank account within two days. Think of a short term business loan as a way to gain access to capital in an amount that can be paid back quickly so that you’re not juggling debt for years to come.
What to Know Before You Apply
Unlike traditional business loans, short-term loans are relatively easy to qualify for. There’s no business plan or extensive financial documents required, which can save you time during the application process. In general, most lender applications take just around 30 minutes.
At Fundera, we’ve found that the most likely businesses to get approved are those that have more than $150,000 in annual revenue, a credit score above 600, and have been in business for at least two years. With most short-term loans, you can expect to make payments on a weekly—even daily—basis.
The Best Short-Term Lenders
OnDeck Capital is one of the most well-known lenders offering short-term loans. OnDeck offers fast access to a loan of up to $250,000, with a payback window that spans from 3 to 24 months. Their interest rates ranges from 8.5% to 79%, and there is no repayment fee if you pay the debt off early. The application is only one page, and you’ll need three months’ worth of bank statements, a voided bank check, and a driver’s license to apply.
Though OnDeck is a great choice for many new business owners in need of quick cash, if you’ve been in business awhile and have a great credit score, a more traditional business term loan may offer you better rates. Additionally, they have a pretty specific list of industries that they won’t work with, so make sure your company is compatible. In some cases, you can even get the funds from OnDeck on the same day you apply.
CAN Capital is one of the oldest alternative lending services around, and they offer both long and short-term business loans. Like OnDeck, repayment plans span from 3 to 24 months.
To qualify at CAN Capital, you’ll need at least $45,000 a month in annual revenue and must have been in business for at least three months. If you’ve been in business for six or more years, you’ll need a minimum credit score of 550. Otherwise, you’ll need a minimum of 600. You should expect daily payments, which can get steep. Because of this, you’ll want to avoid CAN Capital if you have inconsistent income or tight cash flow.
ForwardLine offers a working capital loan. The loan amounts range from $5,000 to $150,000, with repayment terms from 6 to 15 months. They have a special algorithm called “ForSight,” which simplifies their application process. This means that you’ll spend less time applying for ForwardLine than you might with other lenders.
More good news? They are willing to work with businesses with bad credit. However, if you just opened your business, this is not the right option. Businesses must have been in business for at least three years to qualify. This extends to ten years if you’re in furniture retail, wholesale, or the construction industry.
QuarterSpot offers repayment terms from 9 to 18 months. Payments are made daily, and loan amounts range from $5,000 to $150,000. The median loan amount is $79,000 with a median repayment time of 12 months. The application process is simple, requiring only bank statements, your most recent tax return, a voided business check, and a copy of your driver’s license. In some cases, you may be required to submit a few more documents during underwriting.
QuarterSpot is a great choice if you’re looking to increase your credit score because they report to both the personal and business credit bureaus, which is rare.
A short-term business loan has definite perks, and with so many options there’s bound to be one that coincides with your business’s needs. At the end of the day, it boils down to which company fits your financial demands best and which repayment plan will have the least impact on your business.