Explore more insights

business loans

How do short term business loans work?

Capitalise Mar 27, 2024

Having access to quick and flexible finance can empower business to seize a new opportunity, overcome financial challenges, or simply manage your day-to-day expenses. Short term business loans can provide this quick injection of capital with short and manageable repayment terms. 

But before diving into an application, it’s important to understand how exactly these loans work and what you should consider before choosing one. Here’s what we’ll cover: 

  1. Understanding short term business loans
  2. How does a short term loan work?
  3. Things to consider with a short term business loan
  4. Applying for a short term loan

Understanding short term business loans

Short term business loans are a type of lending product designed to provide businesses with smaller amounts of funding over a brief period, typically ranging from a few months to two years. These loans are often used to cover immediate expenses, such as purchasing more stock, covering an upcoming bill, or bridging gaps in cash flow. Unlike traditional bank loans, which may require extensive documentation, short term loans typically require less documentation and funds are dispersed much faster. 

How does a short term loan work?

Short term business loans provide quick access to finance to help your business handle immediate needs such as covering unexpected expenses, or bridging a cash flow gap. 

When you apply for a short term business loan, you’ll need to share details about your business’ financial health, like your revenue, profit and business credit score. If approved, you'll get a lump sum of money, which could be from £1000 up to £100,000+ depending on your individual circumstances. You'll then pay back this loan, along with interest, in regular instalments over a short period. This repayment period is usually three months up to a maximum of two years. 

Keep in mind, because these loans are quick and convenient, they often come with higher interest rates. So, it's crucial to make sure you can comfortably repay what you borrow within the agreed time frame to avoid any financial strain on your business.

 

Here’s how the process for getting a short term business loan works with Capitalise:

  1. Use our business loan calculator to see how much you could borrow with a short term business loan 
  2. Start your business loan application, providing supporting documentation such as 6 months business bank statements and your last set of filed accounts 
  3. Speak with one of our funding specialists who will help you find the best lender for your business 
  4. Apply to up to four lenders in one application
  5. If successful, you’ll receive the funds into your business bank account
  6. You’ll repay the lender each month until the term length is over

Things to consider with a short term business loan

 

Assess your needs 

Before applying for a short term loan, make sure to carefully assess your financial needs and determine whether a short term option aligns with your objectives. This type of funding is best suited for addressing immediate expenses or seizing short term opportunities, rather than long term investments.

 

Cost evaluation

While short term loans do offer quick access to capital, it's important that you weigh the cost of borrowing against the potential benefits. Higher interest rates and fees associated with short term loans can significantly impact the overall cost of borrowing. 

You can use our business loan calculator to assess the total cost of the loan, as well as the monthly repayments to understand what you can afford to borrow. When you apply for a short term business loan with Capitalise, our funding specialists will also be on hand to help you understand all the associated costs so that you can make a well-informed decision.

 

Explore alternative finance options 

Before committing to a short term loan, you could consider some other short term finance options in case they better suit your needs. Some examples include a line of credit, a business credit card, or a revolving credit facility

Each option has its advantages and disadvantages, so it’s essential to compare them based on factors such as interest rates, repayment terms, and eligibility requirements. If you’re unsure which option is right for you, just make sure to explain your funding needs and how your business operates when you apply for a business loan with Capitalise. Our funding specialists will use their expertise to match you with the lender and type of finance that works best for your business. 

Apply for a short term loan

At Capitalise, we work with 100+ UK lenders to help you find better fit funding for your business. Whether you need to cover a short term cash flow gap, or you’re looking for a longer term investment, we can match you with the right lender. Just start a funding search today to get started. 

finance
profitability
help
alternative finance
invoice finance
fintech
news
accountant
case study
trade finance
contract finance
working capital
startup loans
refinancing
fashion finance
merchant cash advance
future accountant
product of the month
women in funding
partner of the month
business tips
accountants
accounting
product
forecasting
live session
accountex
2019
capitalise
funding
monitor
ai
international women's day
covid19 coronavirus
corporate finance
accounting firm
m&a
asset finance
hire purchase
businesses
credit score
rls
business funding
business credit score
south africa
business
adviser
small business
business loan
property finance
commercial mortgage
credit imporvement
spring budget 2023
small businesses
spring budget
ccj
inflation
commercial mortgages
trade debtors
cash flow
truck finance
late payments
lorry finance
manufacturing
building a financial safety net
healthcare
trade debtor days
overdraft
bridging loan
credit checks
interest rates
overtrading
templates
balance sheet
construction
bad debt
company credit checks
debt collection
credit control
check company credit
business loans
instant offer
credit scores
credit review service
economy
company credit check
commercial property
revolving credit facility
line of credit
Follow Us
Sign Up to Receive Updates

Related content

Signup to our newsletter

Have insights about the accounting community sent straight to your inbox. Sign up to our newsletter.