If your company needs fast cash to cover emergencies or seasonal expenses, a short-term business loan like a line of credit, invoice financing, or merchant cash advance can be a good source of funds. But these loans may carry higher rates and unfavorable terms than alternative options.

Here’s a look at some common alternatives to short-term business loans.

Long-term loans

While short-term business loans usually have repayment periods of 18 to 24 months, long-term business loans can be anywhere from three to 10 years, which can help make monthly payments more manageable.

One of the major benefits of a long-term loan is that you can usually borrow larger loan amounts than short-term loans. They also have lower monthly payments and tend to have lower interest rates, which can make it easier to fit the loan into your company’s budget.

Lines of credit

A business line of credit gives your company flexible access to a pool of cash. You can draw money from that pool of funds whenever you need to and multiple times over the life of the line of credit.

Banks, credit unions, and some alternative lenders usually offer long-term lines of credit. This includes Wells Fargo, which has lines of credit with long draw and repayment periods. But these loans are typically reserved for established businesses with good credit and strong business financials.

Some lines of credit are accessible to borrowers with bad credit, but they tend to have higher rates and short draw and repayment periods. This is especially true of online loans that use factor rates or fees instead of interest rates to calculate the cost of a loan. These loans may also require weekly payments.

Bankrate insight

Check out our guide to see the average business line of credit rates top lenders charge.

SBA loans

SBA loans are special loans insured by the U.S. Small Business Administration. You apply for them through banks, credit unions and other lenders, but the SBA guarantees a certain percentage of the loan, which helps make them more affordable than other loans.

The SBA offers several different loan programs. The two most popular types of long-term SBA loans are the 7(a) and 504 loans.

For 7(a) loans, terms depend on how you use the loan and other factors. The maximum term for equipment, inventory, and working capital loans is 10 years. Real estate loans have maximum terms of 25 years.

Those terms are the same for the SBA Community Advantage loan, which is a pilot program set to expire on September 30, 2024. This loan program for underserved communities can include veteran business owners, startup businesses, and businesses located in low-to-moderate-income communities.

The 504 loan program has repayment terms of 10, 20, or 25 years. These loans can be used to buy buildings or land, build new facilities, or purchase long-term machinery and equipment.

Alternative business loans

There are many different types of business loans available from alternative lenders. If you’re having trouble getting a loan or want to consider alternatives, look into options such as:

Bottom line

Short-term business loans are just one of the many ways that companies can borrow money. If you’re looking for more flexibility or need more time to pay back what you borrow, other options like long-term loans or SBA loans might fit the bill.

Whatever type of loan you settle on, make sure to take the time to shop around and compare your options. Getting offers from multiple lenders will help you find the best deal.

Frequently asked questions

  • A short-term business loan is a loan that you must pay back within a short period of time, typically less than 24 months.
  • Short-term business loans are good for companies that need to borrow relatively small amounts of money quickly, such as for an emergency or to help with seasonal changes that can disrupt cash flow. They’re not intended for larger, long-term investments.
  • A drawback of short-term business loans is that they have smaller maximum loan amounts. They can also have high interest rates and fees.