Business Short Term Working Capital Loans

These days business owners have a wide range of funding options available to them. Short term working capital, line of credit, business term loan, merchant cash advance, invoice financing, purchase order financing, equipment financing, equipment leasing, equipment refinancing, and the list goes on.

 

  • What is business short term working capital?
  • What are the pros and cons of a short term working capital loan?
  • How to apply for short term working capital
  • How to get the best working capital loan options
  • Best time for your business to apply for a short term working capital loan
  • Alternative options to business short term working capital

What Is a Business Short Term working capital Loan?

As the name indicates, a short term working capital loan is a business loan that is typically shorter in length than a traditional business loan. Not only is the term shorter, but so is the application and approval process for short term business loans. Term lengths of short term business loans typically range from as little as a few months up to 24 months.

Short Term Business Loan typically ranging from 3 to 24 months

Payment frequency is typically daily, weekly or monthly

Approvals weighted more heavily on revenue as opposed to time in business and credit

What are the pros and cons of short term working capital Loans

Easy Application Process

As indicated above, short term working capital loans are much easier to apply for than a traditional business loan. Most traditional bank loans require in-depth paperwork and documentation, taking weeks or months to get an approval or decline. Because of this, conventional business loans are typically not a viable option when a business is experiencing urgent, unexpected business expenses.

Higher Approval Rates than Traditional Loans

Another advantage of short term business loans is that the underwriting requirements are typically much more relaxed. It easier for businesses to get approved for short term working capital loans as opposed to traditional business loans.

Borrow Smaller Amounts

Another benefit of short term working capital loans is that businesses can borrow smaller amounts of money. Many traditional business loans have minimum loan request requirements meaning that they may have to borrow more money than they need. Or the end up being declined for applying for a loan under the minimum requirement.

Ideal for Short Term Opportunities

Short Term, Working Capital loans can be a great option to get over short term and temporary financial hurdles. Some businesses don't like the idea of being stuck paying off a loan for several years after the first use of funds has passed.

Some Short Term Working Capital Loans can Increase Business Credit

For newer businesses, short term working capital can help improve your business credit score. As a company develops its credit score, it will have an easier time getting approved for more substantial loans in the future. When applying for a short term working capital loan inquire if it will help build business credit. Some funding sources report to the business credit agencies and some do not.

Higher Interest Rates than Traditional Business Loans

The most significant disadvantage to short term working capital loans is that the interest rate is typically higher than the interest rates on a traditional business loan. Also, because of the shorter terms, these loans sometimes have more frequent payments that are daily and weekly. Not all short term working capital loans are daily and weekly payments though, sometimes they have monthly payment options.

Advantages of Business Short Term Working Capital

Quick Funding Timeline

Easy Application Process

Can borrow smaller amounts

Options for most credit types

Disadvantages of Business Short Term Working Capital

Typically Higher rates than traditional bank loans

Sometimes quicker payback frequency

Shorter Terms

How to Apply for Short Term working capital loans

The application process is much easier for short term working capital loans. Sometimes its as simple as an online application, three months bank statements, and four months merchant statements (if your business accepts credit cards).

Online Application & 3 Months Business Bank Statements

How can your business get the best short term working capital loan?

Lenders underwrite Short term working capital loans based on past revenue. Most lenders will analyze the business's last three months of bank statements. The stronger their previous months' bank statements are,  the better the terms and structures you will qualify for.  One mistake many businesses make is waiting too long to apply for the capital they need. They have an event that strains their money but waits until they run out to apply. Then when they apply, the bank statements have low balances or revenue, and they receive terms based on this.

Last Three months average deposits & average balances determine what you qualify for

Apply when previous three months of business are strongest

Don't wait until you run out of money in your account

Don't stack working capital loans

When is the best time for your business apply for a short term working capital loan?

The quick and easy approval process makes short term working capital loans an excellent option for businesses with unexpected or emergencies. Sometimes companies don't have time to apply for a traditional business loan when they need immediate funds.

Don't have time to apply for traditional bank loan

Need funding for short term opportunity

Declined by bank

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