A closer look at our top short-term business loans
Credibly merchant cash advance: Best for merchant cash advances
Overview: Founded in 2010, Credibly offers several types of small business loans, including merchant cash advances. With this type of loan, your payments are based on a percentage of your company’s future income until the advance is paid off, helping you avoid large, difficult payments.
Why Credibly is the best for merchant cash advances: Credibly has easy credit requirements, only asking for a FICO score of 550 or higher. It also has quick approvals and funding, which is essential for merchants in need of quick cash.
Who Credibly’s merchant cash advance is good for: You might consider a Credibly merchant cash advance if you have average credit, you’re in a rush to get funding and don’t mind paying high fees to cover a short-term cash flow interruption.
Fora Financial small business loan: Best for bad credit
Overview: Fora Financial, a working capital lender, has some of the lightest eligibility requirements among lenders on this list, but the trade-offs are high fees and factor rates. The company offers prepayment discounts on its small business term loans, so you may save if you pay the loan off quickly.
Why Fora Financial is the best for bad credit: Fora has generous qualification requirements, which is important if your credit isn’t great. You can get a flexible, high-limit loan after just three months of operating and with a poor FICO score in the 500s.
Who Fora Financial's small business loan is good for: If you’re a newer business owner without a strong credit profile, a Fora Financial small business loan might work for you — especially if you think you can repay your loan quickly.
Funding Circle business term loan: Best for secured loan
Overview: Funding Circle is an online lender that has originated almost $20 billion in loans to 135,000 businesses around the world. It offers term loans, business lines of credit and SBA 7(a) loans.
Why Funding Circle is best for a secured loan: Funding Circle’s term loans are secured and can be repaid in as little as six months. But if that is too short, you can choose longer terms, going all the way up to seven years. The streamlined application process can be completed in as little as six minutes, and if approved, funds can be received within five days.
Who Funding Circle's secured business term loan is good for: If you have been in business for at least two years and have a personal FICO credit score of 660, you may be eligible for a loan with reasonably low interest rates.
Backd line of credit: Best for fast funding
Overview: Based in Austin, Texas, Backd offers working capital loans and lines of credit for small business borrowers. As a business owner, you can apply for a Backd line of credit and get preapproval with a soft credit check. If approved, you can draw between $10,000 and $750,000 for your company’s short-term needs.
Why Backd is best for fast funding: With instant preapprovals and access to funding in as little as 24 hours, Backd’s lines of credit might appeal if you need cash quickly.
Who Backd's line of credit is good for: Consider a Backd line of credit if you’re running a relatively new business that could benefit from prompt access to funding. As a trade-off for this speed and convenience, though, you’ll need to be okay with at least an 18.00 percent simple interest rate and be able to make weekly repayments.
National Funding working capital loan: Best for early payoff discount
Overview: California-based online lender National Funding may be a good choice for young businesses — so long as they’re making enough revenue. You may qualify for a loan as large as $500,000 after just six months of operating. It also offers equipment financing that companies can use to buy the tools they need to operate.
Why National Funding is best for early payoff discount: National Funding only requires six months in business and offers loans as low as $5,000 or up to $500,000. This flexibility allows businesses to borrow only the needed amount. Plus there are no prepayment penalties, and borrowers can receive an early payment discount if they're able to pay off their loan in full ahead of schedule.
Who National Funding's working capital loan is good for: If your business generates high cash flow and needs money to keep growing, this loan could be worth exploring.
Bluevine line of credit: Best for established businesses
Overview: Bluevine is a financial technology company that offers lines of credit with relatively low interest rates. You can get lines of credit as large as $250,000, but will only be eligible if you have an established business with nearly $500,000 in revenue each year.
Why Bluevine is best for established businesses: Bluevine only lends to companies that have been around for a couple of years. That gives it the flexibility to offer relatively low interest rates.
Who Bluevine’s line of credit is good for: If you have a seasonal business (like a landscaping or pool-cleaning company) or aren’t sure how much money to borrow, this product could be a good option. Because it’s a line of credit, it allows you to draw money as needed, paying interest only on what you’ve borrowed.
eCapital invoice factoring: Best for invoice factoring
Overview: Alternative financing company eCapital has been offering invoice factoring, asset-based lending and equipment refinancing since 2006.
Why eCapital is best for invoice factoring: The onboarding process takes at least a week for commercial businesses, though only two to four days for transportation businesses. But once you're onboarded, eCapital can respond to funding requests within 24 hours. They offer up to 100 percent advances on invoices.
Who eCapital's invoice factoring is good for: If you expect your business will want to use invoice factoring to fill future cash flow gaps, you may want to go through eCapital's onboarding process for fast access to working capital next time you need it.
OnDeck line of credit: Best for building business credit
Overview: OnDeck is an online lender that has been providing small business loans since 2006. Its line of credit lets companies access up to $100,000, which can be paid back in weekly installments over the course of a year.
Why OnDeck is best for building business credit: OnDeck reports your payment history to credit bureaus. If you can repay your line of credit in full and on time, this type of loan is great for building business credit.
Who OnDeck's line of credit is good for: OnDeck’s line of credit is best suited for businesses that need funding as soon as possible and haven’t been able to get approved by other lenders. But since the APRs are so steep, you’ll need to be confident that you can afford to pay back what you’ve borrowed — or your business credit could take a hit.
American Express Business Blueprint™: Best for lines of credit
Overview: Business Blueprint, formerly Kabbage, is a service from American Express offering flexible lines of credit. What makes the service unusual is that it doesn’t charge interest, instead assessing a monthly fee when you have an outstanding balance.
Why Business Blueprint is the best for lines of credit: Business Blueprint offers lines of credit with flexible amounts and fair eligibility requirements.
Who Business Blueprint is good for: These lines of credit could be suitable for you if you’re a small business owner with fair credit and want to draw money as you need it. However, you should be comfortable with putting up collateral and a personal guarantee and understand how the unique fee structure works.
* All businesses are unique and are subject to approval and review.
Who should get a short-term loan?
Consider a short-term business loan if:
- You’re facing a budget shortfall. A short-term loan can give you an infusion of cash if you need funds to buy inventory or cover emergencies.
- You want to take advantage of an opportunity. Sometimes, a great deal falls into your lap and it could be a boon for your company, if only you could afford it. Imagine you own a restaurant and the chance to open a new location in a popular area appears, but you need cash tomorrow. A short-term loan could help.
- You don’t have collateral. Many short-term loans don’t require collateral, making them an option for newer companies or those without significant assets.
But short-term business loans can be expensive and, in some cases, dangerous for your company’s future. You might want to avoid them in these situations:
- You have long-term cash flow issues. If you’re facing a more long-term or repeated problem with your company’s cash flow, a loan will only make it worse by saddling you with payments.
- You can’t find a reasonable rate. Since most short-term loans are accessible to startups and borrowers with fair or bad credit, they come with high interest rates.
How much do short-term business loans cost?
The cost of a short-term business loan can be higher than other types of loans. Some short-term loans use a factor rate rather than interest. To determine how much you’ll owe using factor rates, multiply your loan amount by the factor rate. For example, if you borrow $10,000 at a factor rate of 1.15, you’ll have to repay $11,500.
Factor rates are common for high-risk loans like merchant cash advances and business lines of credit open to borrowers with fair or bad credit.
Typical business interest rates range from 5.00 percent to over 84.00 percent APR, depending on the type of lender and your company’s creditworthiness. Factor rates can range from 1.09 to 1.50 or more. To ensure you’re getting the most affordable loan possible, make sure you convert loans with factor rates to interest rates so you can better compare your options and see how much more expensive factor rates can be.
Other costs include business loan fees like origination fees and early repayment fees, so be sure to read the fine print to determine the full cost of a short-term business loan.