Short Term Funding for Small Businesses

  • November 5, 2020
  • Written by : Elizabeth Beall

No matter the phase of business you are currently in, starting, maintaining, or growing, working capital is essential for day-to-day operations.

If you are just starting out, you may need a lump sum to create a solid foundation. If you’re maintaining, you may need capital to pay your employees or order new equipment. Lastly if you’re trying to grow, you may need a cushion of funding to allow for expansion, marketing, and more.

But if you don’t have the working capital, where do you get it from? And how can you ensure you aren’t going to break the bank with debt repayments, nor enter into a debt train for years to come?

How can you receive working capital now, pay later, and still not feel like you have fallen into a long term commitment with a bank or lender?

The simplest answer: short term loans.

There are three common types of short term funding: term loans, business lines of credit, and business credit cards. The three have differing payment options, terms, interest rates, qualifications, and more.

Here’s how we tell the difference:

Term Loans

When speaking to our clients, we explain that “a term loan, which provides a one-time lump sum of cash up front is repaid in a series of fixed payments over a fixed period of time.” If you, as a business owner, want to avoid immediate repayment, this may be the best-fit option for you. 

This way, you can preplan the amount you will borrow. Along with, the time frame in which the borrowed amount will be repaid. Term loans tend to help bring some peace of mind to business owners. Especially those who feel that lines of credit or business credit cards are too big of a commitment. 

Businesses may also seek term loans for the following benefits: to help bridge cash flow gaps during slow or uncertain times, to cover operational costs for those in seasonal businesses with a need for new hires, to handle emergencies, and more.

To qualify for this loan, you’ll need to have been in business for 1+ years, have $100,000 in annual revenue, and show a minimum 600 credit score.

Business Line of Credit

If you are seeking the path of least resistance, this may be your first choice for a short term loan. This loan grants business owners the flexibility and ease to receive and repay as little or as often as necessary. 

“With a business line of credit, small businesses can borrow up to a certain limit, and pay interest only on the portion of capital that was borrowed,” as we’ve mentioned before. Keep in mind however that businesses; who are worried of not meeting monthly revenue expectations. Also, those who fear that will not be able to repay the borrowed amount monthly. They should know that this option may not be the best. 

To qualify for this loan, we, as a lender, request that you have been in business for at least 6+ months, have $100,000 in revenue, and can show a 600+ FICO.

Credit Card for Business

If you are looking for the most accessible option, this is it. The type of industry or business does not determine whether or not you qualify for the loan; this is the opposite of some other loans that turn away businesses because of a specific industry.

Business credit cards are extremely useful for those who need access to working capital on a continuous cycle and basis for things like inventory purchases, project costs, employee payroll, or even balancing out your daily cash flow. This option permits you to draw capital as needed. Therefore allowing your credit to be drawn from multiple times.

In order to qualify for this loan, a business must be able to show zero debt, outstanding balances, and bankruptcy within the last year, as well as a 650+ FICO and at least one credit card with a $3,000 limit.


Now that you understand the differences between each loan. It’s important to understand how they may affect your business both short and long term.

A business owner should keep in mind that short-term loans are not all fun and games. It is because they do come with a few repercussions every now and then…

According to Nerd Wallet, a few disadvantages include: higher costs and interest rates than that of a long term loan, more frequent repayment options as the frequency tends to be sped up for quicker reimbursement, and lastly, the risk of a debt trap due to common addictions of receiving and repaying loans faster and more efficiently every time. 


Hopefully, this information can help you put together a pro/con list to get you closer to your final decision. 

As you come closer to deciding, consider us as your lender to lean on. We’re a family here, and want the best for our clients… that includes giving them payment options and flexible terms to allow for growth, not limitations and boundaries.

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