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Short Term Loans

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A small loan, often from a credit union or other smaller financial institution, which usually must be repaid in two years or less, principal and interest. Has the advantage of less stringent loan requirements.

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  • Covering small business costs while awaiting payment of accounts receivable
  • A Christmas oriented business buying stock in advance of the holidays, with the loan to be paid off after the Christmas season
  • Purchase of equipment that will pay for itself in less than two years
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  • Minimum Credit Score: 500
  • Minimum Time in Operation: 6 months
  • Minimum Revenue: $100,000 annually
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facts short term loans


  • Lukewarm credit OK
  • Limited paperwork
  • Quick access to cash
  • Can be used for a wide variety of purposes
  • Relatively high Annual Percentage Rate (APR)
  • Capped loan amount
  • Daily payments

Disclaimer: The above information is provided as a guideline. Some loan conditions may fall outside of these parameters. We recommend that you speak with one of our advisors before taking any course of action based on this information.

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Short term financing is an essential option for small businesses. Buying inventory, covering working capital expenses while awaiting payment of invoices, and expanding operations are just some of the uses small businesses have for short term loans.

While the overall structure of short term loans is similar to their more common relative, long term loans, there are some important differences.

As with long term loans, your business will need to qualify with the lender. In addition to your credit score, the lender may also want to see records of previous loan repayments, payment histories to your suppliers and your company’s cash flow history, preferably for the past 3 to 5 years. An income statement may also be required. Depending upon these factors, and the lender you’re dealing with, your loan may be secured against collateral or unsecured, also known as a ‘signature loan’.

Payment schedules also differ. Where traditional long term loans usually require monthly payments, short term loans may have payment schedules as frequent as every business day.


Short term loan interest rates are economy-dependant. In a normal or boom economy, interest rates on short term loans will be higher than long term loans, however, in a recession, short term loan rates may be lower than those for their long term cousins.

The interest and repayment requirements of short term loan rates can be calculated in different ways and obviously you’ll want the calculation that is most in your favor. Our experts at Big Think can assist you with finding a lender who will provide your business with the most favorable terms.


It is possible to get a short term loan for a startup or small business, however be prepared for more stringent qualification requirements. In addition to the documentation already noted above, you may also need to provide projected cash flow statements and projected financial statements for the next 3 to 5 years. In addition, you’ll need to clearly lay out in your financial projections how you plan to repay the loan. Even with all that, if your business is a startup it’s most likely that you’ll only qualify for a secured loan, so you’ll need some personal assets such as real estate.