Funding Products
Short-Term Business Loans: When They Fit and When They Hurt
Short-term business loans typically run three to eighteen months with daily or weekly payments. They fund fast, require less documentation than a bank, and are widely available to businesses that banks decline.
They are also the easiest product to misuse. The decision is not whether short-term money is good or bad — it is whether your specific need repays itself inside the term.
Typical structure
- Amounts from $10,000 to $500,000, sometimes higher
- Terms from three to eighteen months
- Daily, weekly or bi-weekly automated payments
- Priced as a factor rate or fixed fee rather than an APR
- Personal guarantee and a UCC filing are standard
The repayment test
Before signing, answer one question: will the money I make from this use arrive before the last payment is due? Inventory that sells in 60 days passes. A building renovation that pays back over four years does not.
If the answer is no, you are not financing an investment — you are borrowing from next year to pay for this month, and the cost compounds each time you renew.
Good uses
- Inventory for a confirmed order or seasonal peak
- Covering a payroll gap while a large invoice clears
- A repair that restores revenue immediately
- A marketing push with a measured, short payback period
- Taking a supplier discount larger than the cost of the capital
Poor uses
- Real estate, build-outs or long-lived equipment
- Covering ongoing operating losses
- Paying off another short-term position with a new one at similar cost
- Speculative expansion with no revenue attached yet
How to compare offers honestly
Convert every offer to total dollars repaid and cost per week. A 1.25 factor on $100,000 over six months costs $25,000 and demands roughly $4,800 a week. Written that way, offers become directly comparable regardless of how they are quoted.
Then ask about prepayment. Some agreements discount the balance if you repay early; others charge the full fixed cost regardless. That single clause can change the real price by thousands.
Frequently asked questions
- Are short-term loans the same as a merchant cash advance?
- They are close cousins. A loan has a fixed term and payment; an advance purchases future receivables and can flex with volume. The economics are often similar.
- Can I pay off early to save money?
- Only if the agreement offers an early-payoff discount. Always confirm this in writing before signing.
- Will a short-term loan hurt my ability to get a bank loan later?
- It can, mainly through UCC filings and the payment burden showing in your statements. Repaying cleanly and avoiding stacking limits the damage.