What is a Short-Term Loan?
Short-term business loans are a type of term loans, meaning they have a set repayment term and offer a one-time, lump sum payout to the borrower up front. The borrower must repay the sum of the funds borrowed plus interest and any fees over this term.
The repayment term — or repayment period as it is also known — is what designates a term loan as short. Short-term loans typically have a repayment period ranging from a few months to a few years. A small business owner usually takes out a short-term loan when they have an immediate need that does not require a large capital investment.
When You Should Consider Short-Term Business Loans
Don't automatically discount short-term loans just because they may offer less money than a long-term loan. They are the ideal business loan for a number of particular small business needs — ones that aren't necessarily best served by longer-term, higher dollar amount loans. If you're looking to get financing for any of the following small business concerns, short-term funding may be a good option.
Short-Term Loans vs. Long-Term Loans
Short-term and long-term loans are both term loans. The difference between the two lies with the loan amount and the length of the repayment period. Short-term loans offer amounts smaller than long-term loans do because of their intended use: they're meant to handle immediate needs. Long-term business loans are designed for major investments that will take a longer amount of time to implement.
Long-term loans have a lengthier repayment period when compared to short-term loans, due in part to the larger sums they typically offer. Actual payment terms vary from lender to lender, but a general long-term business loan repayment period can run anywhere from 1 – 25 years.
The length of the payment term also impacts interest rates. Long-term loans tend to come with lower interest rates — as opposed to short-term loans — because the borrower is paying back over an extended amount of time. With the comparatively shortened repayment term of a short-term loan, the borrower has less time to pay back. The higher interest rates of short-term loans reflect this compressed payment term.
Short-Term Business Funding From Headway Capital
We can help you fulfill your short-term financing needs with our business line of credit. Unlike a short-term loan, our revolving line of credit gives you 24/7 access to working capital — you can draw up to your credit limit whenever and for whatever you need. There is no need to reapply for additional funds since money becomes available again as you repay your balance.
Business line of credit
12, 18 or 24 months
No Hidden Fees
See our Rates & Terms for details
Weekly or monthly
Clear payment terms, interest does not compound, no penalty for early payoff
FAQ About Short-Term Business Loans
How do short-term business loans work?
Short-term loans provide a fixed lump sum of money up front that is repaid in installments over a set period of time. They are commonly repaid in monthly installments, but options to repay more frequently exist, too.
How long is a short-term business loan?
What credit score do I need to get a business loan?
How long does a business loan take?
1We always do a soft inquiry unless your credit file is restricted, in which case we would ask you to contact the credit bureau to lift the restriction. Doing so may result in a hard pull.