Best Short-Term Small Business Loans for 2020

Best Short-Term Small Business Loans for 2020

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Generally speaking, short-term business loans typically have maturities ranging from three months to three years, with most short-term loans between three and 18 months. If you're looking for a loan with a quick payback time, we've researched a variety of lenders to find the best among short-term business loans, lines of credit and other financing options.

Best Short-Term Business Loans

When it comes to short-term loans, consider an alternative or online lender. Many of these companies will make loans with durations of 18 months or less. In comparison, most bank and SBA loans have terms of at least a few years (if not five to 20 years).

PayPal Working Capital

(Read Review)

OnDeck

(Read Review)

Credibly

(Read Review)

QuarterSpot

(Read Review)

SnapCap

(Read Review)

StreetShares

(Read Review)

Funding Circle

(Read Review)

LendingClub

(Read Review)

Fundation

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Best For...PayPal merchantsLower credit scores; fast fundingUnsecured loans; lower credit scoresUnsecured loans; lower credit scoresLarge term loans; newer businessesSmaller & growing businessesEstablished businessesLower revenue businessesEstablished businesses
APRs15.00% - 30.00%9.30% - 99.70%1.15x - 1.49x20.00% - 48.00%19.99% - 49.99%8.00% - 39.99%4.99%-22.99%5.99 - 29.99%7.99% - 29.99%
Amounts$1,000 - $200,000$5,000 - $500,000$5,000 - $400,000$5,000 - $250,000$5,000 - $1,000,000$2,000 - $250,000$25,000 - $500,000$5,000 - $150,000$20,000 - $500,000
Repayment TermsUp to 18 months3 - 36 months6 - 18 months9, 12 or 18 months3 - 36 months3 - 36 months6 - 60 monthsOne, two, three, or five years1 - 4 years
Funding TimeSame dayAs fast as one business dayas soon as the same dayAs fast as one business dayAs fast as one business dayAs fast as same dayas few as 5 daysAs fast as five daysAs fast as one business day
Personal Credit ScoreNone600500550500620620620620
Annual Revenue$15k - $20k (PayPal)$100,000$120,000$200,000$100,000$50,000$100,000
Time in Business3 months12 months6 months12 months9 months12 months24 months12 months12 months
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For Credit Scores Under 600: OnDeck, Credibly, QuarterSpot, SnapCap, PayPal Working Capital

All five of these lenders don’t require business owners to have personal credit scores above 600 to be eligible for a loan. PayPal Working Capital, in fact, has no credit criteria -- though you will need to be an active PayPal Business or Premier Merchant to qualify. Of the remaining four lenders, each has different time in business and annual revenue requirements, so you'll need to see where you meet the minimum criteria. In general, you should aim to be comfortably above the minimum threshold to qualify; that's to say if the minimum annual revenue required is $100,000, you should have at least $120,000 to $150,000 to improve your odds of getting approved.

For Businesses Under One Year Old: Credibly, SnapCap PayPal Working Capital

Credibly, SnapCap and PayPal Working Capital have time in business requirements ranging from three to nine months. As mentioned previously, you’ll need to be a PayPal merchant to access their working capital program, but you can qualify after using the platform for only three months. On the other hand, Credibly and SnapCap are open to all types of businesses and will consider companies that are less than one year old. If your business is over one year old, but not at two years yet, we recommend looking at OnDeck, QuarterSpot, StreetShares and Fundation.

For Businesses With Annual Revenue Under $100k: StreetShares, LendingClub, PayPal Working Capital

These three lenders have more relaxed revenue requirements for businesses, requiring between $15,000 and $75,000 in annual revenue. StreetShares, in particular, can be great for growing businesses as the company only requires borrowers to show $25,000 for yearly revenue. For PayPal Working Capital, business owners must show at least $15,000 to $20,000 in yearly PayPal sales, depending on which type of merchant account they have. Finally, LendingClub has a minimum revenue requirement of $75,000, though business must be at least two years old to qualify.

For Unsecured Short-Term Business Loans: Credibly, QuarterSpot, LendingClub

Both Credibly and QuarterSpot don’t have specific collateral requirements for their loans, and in general, neither company will even file a general lien (UCC-1) against your business unless the loan is sufficiently large. LendingClub will do the same for loans of $100,000 or less. Avoiding collateral requirements can be great if you need to get a quick turnaround on your loan application or if you only need to borrow a small amount.

For Large Loans: OnDeck, Funding Circle, Fundation, SnapCap

If you need to borrow more than $300,000, the above four lenders all have loan amounts ranging up to $500,000 or more. Out of the six, Bond Street offers the highest amount at $1 million with particularly competitive interest rates, and in second place is SnapCap with $600,000. The rest of the lenders offer up to $500,000. Funding Circle and Fundation have the most competitive interest rates and terms out of the four lenders, but they also have the strictest eligibility criteria. If you can’t meet the credit score, revenue or time in business requirements, consider OnDeck and SnapCap.

Best Short-Term Lines of Credit

Many times a line of credit can make more sense than a term loan if you are looking for a short-term financing solution. We take a look at some lenders that offer short-term lines of credit to all types of business owners.

Kabbage

(Read Review)

Fundbox

(Read Review)

OnDeck

(Read Review)

BlueVine

(Read Review)

StreetShares

(Read Review)

Best For...Lower credit scores; larger line amountsLower credit scores; smaller, growing businessesLower credit scores; quick fundingNewer, high revenue businessesSmaller, growing businesses; longer terms
APRs20.00% - 80.00%15.00% - 59.00%13.99% - 39.90%15.00% - 78.00%8.00% - 39.99%
Amounts$2,000 - $250,000$100 - $100,000$6,000 - $100,000$5,000 - $250,000$5,000 - $250,000
Repayment Terms6, 12 or 18 months12 weeks6 months6 months3 - 36 months
Funding TimeAs fast as same dayAs fast as next business dayAs fast as one business dayAs fast as one business dayAs fast as same day
Personal Credit ScoreNoneNone600600620
Annual Revenue$50,000-$500,000$50,000$100,000$100,000$50,000
Time in Business1 - 3 years3 months12 months6 months months12 months
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For Credit Scores Under 600: Kabbage, Fundbox, OnDeck

Neither Kabbage nor Fundbox requires business owners to have a certain FICO score to qualify for a line of credit. Kabbage will look at your credit score as part of their evaluation process, but it’s not the sole factor in their decision. The company cares more about your business’s finances -- whether you have good revenue and growth. Fundbox doesn’t even look at your personal credit score, instead requiring business owners sync their accounting software as part of the underwriting process. And while OnDeck has a credit score requirement, it’s fairly low at 500 (for comparison, a fair to average credit score falls between 630 and 680). However, the average OnDeck borrower has a credit score around 660, so keep this in mind if you apply.

For Businesses Under One Year Old: Fundbox, BlueVine

Both Fundbox and BlueVine only require businesses be at least six months old to qualify for a line of credit, and this requirement is even lower if you are looking for invoice financing at either company. The interest rates at both companies are fairly competitive given the less stringent requirements and quick application and funding process. Fundbox, in particular, may be better for newer businesses as the revenue requirement is much lower than the requirement at BlueVine.

For Businesses With Annual Revenue Under $100k: StreetShares, LendingClub, Fundbox, Kabbage.

If your business has quite reached $100,000 in revenue (or if you’re just barely above that), these three lenders may be your best choice for a short-term line of credit. Both StreetShares and Fundbox require businesses show at least $25,000 in yearly revenue. LendingClub and Kabbage have higher requirements, but both are still under the $100,000 mark. One note about Kabbage: if you want a line of credit over $100,000, you’ll need to have $500,000 in revenue annually. Otherwise, you will only need $50,000 per year.

For Lines Over $100,000: Kabbage, LendingClub

LendingClub extends credit lines up to $300,000 for qualifying businesses. To be eligible, you’ll need a fair or better personal credit score and your business must be at least two years old with yearly revenue of $75,000. Kabbage also provides lines of credit over $100,00 with maximums going up to $150,000. Though if you want to qualify for more than $100,000 at Kabbage, you’ll need to meet stricter requirements: three years in business with at least half a million dollars in yearly revenue.

Other Short-Term Business Financing Options

If you’re looking for a non-traditional product, we’ve compiled a list of companies that offer invoice factoring and business advances. These products work differently than a loan or line of credit, and will have different repayment schedules and fees.

Fundbox

(Read Review)

BlueVine

(Read Review)

ProductInvoice financingInvoice factoring
Estimated APRs13.00% - 60.00%15.00% - 68.00%
Amounts$100 - $100,000$20,000 - $5 million
Repayment Terms12 or 24 weeksUp to 90 days
Funding TimeAs fast as next business dayAs fast as one business day
Personal Credit ScoreNone530
Annual Revenue$0$100,000
Time in Business3 months3 months months
Apply for FinancingApply NowApply Now

When to Avoid Short-Term Loans

Short-term loans can be a godsend for businesses that have unexpected or emergency expenses. However, we caution business owners from getting too reliant on short-term loans, because despite their easier application processes, they are some drawbacks:

  • Higher interest rates and fees: Most alternative and online lenders charge much higher interest rates than what you would find on a bank or SBA loan. This is because it’s often easier to qualify for these loans and the turnaround time is very fast. If you have a large, planned expense -- say purchasing commercial real estate -- we recommend business owners do their due diligence and apply with a bank or lender that can get you a lower rate. This will save you a lot of money over the long haul.
  • More frequent repayment: Many online loans require borrowers repay daily, weekly or twice a month. In contrast, SBA and bank loans typically follow standard monthly payment schedules. Some borrowers may prefer smaller, more frequent payments, but for many, it can put an unnecessary strain on your company’s cash flow.
  • Loans may not be amortized: On amortized loans, each payment will be the same. This makes the loans easy to budget for as you know how much is due each month. While many short-term loans have standardized payments, not all of these loans operate this way. Sometimes you’ll make interest-only payments until the end of the term when you will make a final balloon payment. Balloon payments are much harder to budget for as they are generally close or equal to the value of the loan.
  • Confusing terms: Not all short-term loans will be quoted using an annual percentage rate. Some lenders may quote prices as factor rates, annual interest rates, effective interest rates or advance rates. This can make it very difficult for borrowers to understand how much their loan will cost and to compare loans across different lenders. We recommend borrowers look for the total cost of capital (which is the total amount you repay) and the amount and frequency of payment.

Short-term loans can be great choices for emergency or unforeseen expenses or to cover gaps in daily, weekly or monthly cash flow. However, they are not a good substitute for a standard term loan, especially if you’re looking to expand your business, purchase property or make other long-term investments.

Justin is a Sr. Research Analyst at ValuePenguin, focusing on small business lending. He was a corporate strategy associate at IBM.

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.