If your business is seeking additional finance to grow, or cover a short-term hole in cash flow, then a short term business loan can provide that quick injection of cash when it’s needed most. Short term business financing loans aren’t your only option either – we’ll cover these in detail – but we’ll also explore some of the other ways that short term financing for small business can happen. This is a complete guide to the best short term business funding options available now.

What is a Short Term Business Loan?

A short-term business loan is a type of secured or unsecured business finance that can be used by businesses to cover any immediate business requirement. This could be an unexpected expense or an opportunity to capitalise on time-sensitive opportunities. Perhaps your business has seasonal cash-flow or a small window has opened for you to access discounted stock.

Short term business loans are generally offered on terms between 1 month – 24 months. Though you will find the odd online lender providing ‘short term business loans’ all the way through to 36 months. 

The major lenders will generally grant somewhere between $5,000 – $300,000, with security being required for short term loans over $100,000. You will find some lenders offering short term business loans all the way through to $1,000,000.

Short term business loans tend to be processed quickly, are often unsecured and usually have higher interest rates.

A Short Term Business Loan Alternative with no Interest Rate – Cape Business Card

The Best Short Term Business Loans Lenders

These are just a small sample of the Aussie lenders providing short term business loans online. The market has grown rapidly, we have over 30 online lender reviews on SmallBusinessLoansAustralia so far and we’re regularly adding more. Some specialise more in secured loans, whilst others have expertise in invoice finance, and the lenders listed on this page specialise in short term financing for business. You can also consider applying for short term business loans with a bank or business loan broker.

Banks, Online Lenders or Brokers?

You can also consider applying for short term business loans with an Australian business bank or business loan broker.

Short term business loan rates can vary quite substantially from bank-to-bank but if your business is in good financial health and you have a long relationship with a bank then you might be able to achieve the best financing rates with your bank. The only issue is that applications can take weeks or even months to process and you have no indication if your application will be successful – by the time your loan is approved your financial position and business requirements may have even changed.

You can also consider applying through a business loan broker. You will incur additional fees but gaining their expertise should help your business find cheaper short term business loan interest rates and they will know which lenders are a good fit for your business profile and requirements. We can definitely see the value a business loan broker adds but it’s why we also recommend a business loan marketplace in the first instance, such as Lend.com.au. They’re free to use, your credit score will not be impacted when you apply and you can receive multiple loan offers in one place. These should be from lenders who fit your borrowing requirements and business profile as well. 

In summary, banks tend to offer more competitive rates but have low approval rates, whilst online lenders often have faster application and approval processes. There is an ever growing variety of short term financing solutions that are opening to SMEs and a business loan marketplace like Lend is one of the best places to start.

Short Term Business Loans New Zealand?

A quick note on short term business loans in New Zealand – a number of the leading online business lenders in Australia can certainly assist businesses in New Zealand too. A short term business loan in NZ is definitely possible through online business lenders as well as banks. Prospa launched its short term business loans in New Zealand in 2019 and even has offices in Auckland.

Short Term Funding for Small Business – How Much Can I Access?

Some lenders like Business Fuel are quite explicit in their FAQs that you’ll be granted a sum which is roughly equivalent to one month’s revenue when you apply for an unsecured short term business loan. It’s common knowledge in the industry that this is about par for the course when you apply for an unsecured loan but there’s no hard and fast rule and each situation is unique. You might be eligible for up to 2x monthly revenue or even more if you can provide security. 

Secured short term business loans can usually be up to around 90% of the value of the asset you’re using to secure the loan. For more information on this, see our guide to secured business loans.

Short Term Business Loan Interest Rates

Short term business loan interest rates can be anywhere from 5% though most businesses should expect to pay at least double digits, i.e. 10% plus. Bear in mind that as of June 2023, the RBA’s cash rate – the interest rate that banks pay to borrow funds from other banks in the money market overnight – is set at 4.1% and this will directly influence the rate you’re required to pay on a short term business loan. 

Not all lenders present their repayment terms with an interest rate. Some business lenders present their rates on short term business loans as factor rates, which are usually anywhere between 1.1 – 1.4. The key differential of a factor rate vs an interest rate is that the repayment rate never goes down whilst the principal loan amount is repaid.

A factor rate is calculated entirely on the original borrowing sum. When a short term loan has an interest rate, the repayments are calculated over time as a percentage of the remaining loan sum outstanding, until the loan is paid off.

As a general rule of thumb, the longer the duration of the loan, the more disadvantageous factor rates become.

Short term business loan interest rates can vary significantly from one borrower to the next. The financial profile of your business, how long you’ve been operating and the industry you’re in are just some of the factors which will influence short term business loan interest rates.

Additional Loan Fees

In addition to the interest or factor rate, be aware of the other fees associated with a short term business loan. These can include:

Establishment Fees

An establishment fee, also known as an origination fee, is a variable fee (usually between 2-4%) that is calculated at the onset of the loan. You don’t necessarily have to pay this fee upfront and many lenders will automatically calculate and add this into your monthly repayments.

Service Fees

Service fees, also known as ongoing fees, could be charged on a weekly, monthly or annual basis. They aren’t always applied to business loans and are more common for facilities like a business line of credit.

Late Payment Fees

Be sure to read the T&C’s as almost all short term loan agreements will have a late payment fee which is applied when you fail to make one of your repayments. They often prove very costly so be sure to find a repayment schedule that fits your cash flow and, if you think you might miss a payment, speak to the lender prior to the due date to see what can be done.

SBLA Recommends: With the various fees that can apply on a business loan and the difference between interest rates vs factor rates, it’s best to ask for the APR (annual percentage rate) to make a more like-for-like comparison across different short term business loan companies.

Short Term Loan Calculator

If you’re looking for a short term business loan calculator to better budget future loan repayments then make use of our very own business loan repayment calculator. It works as a short term business loan calculator from durations of 1 month onwards (often the minimum period that lenders will offer finance). Simply input the proposed loan amount, the interest rate offered and your planned repayment schedule (daily/weekly/monthly) to calculate the total cost of the loan and your repayment sums.

Alternative Options for Short Term Financing for Business

Credit Cards

A business credit card works just like a personal credit card – it’s a short-term, unsecured facility that can be used to make business purchases either online or through a card terminal. The industry average for interest rates on a business credit card is roughly 18-21% which won’t be all that much higher than a short term business loan but your credit card limit is likely to be significantly less than the size of the business loan you are looking for. If you need to access cash (i.e. transfer funds from your credit card balance to your transaction account) you can also expect to pay a higher interest rate of 21% upwards.

Line of Credit

A business line of credit provides quick and flexible access to funds from a pre-agreed credit facility. The borrowing limit on your business line of credit is agreed when you open the facility so you don’t have to worry about seeking credit approval each time you require finance. Instead, you can just draw and redraw on your existing facility, providing that your total borrowing stays below your limit. Applications for a line of credit can be just as fast as a short term business loan when you apply with a specialised online business lender.

Invoice Finance

Invoice Finance is an increasingly popular form of short term funding for small business. It’s a way for businesses to borrow money based on the invoices due to them. Invoice Finance typically works best for B2B companies with payment terms of 30, 60 or 90 day durations. When issuing your invoice you simply notify the lender, they advance you 80-90% of the value of the invoice and the rest is settled when your customer pays (less invoice financing fees, which usually start at around 2%).

Business Overdraft

An business overdraft can always come in handy when your business encounters unexpected expenses – perhaps it’s an urgent repair or a small amount of stock you need to replace. Whatever it is, a business overdraft is usually sufficient to provide that quick injection of working capital that your business needs. Usually, a business overdraft is provided by the bank that handles your business transactions but it doesn’t always have to be this way. It’s worth highlighting GetCapital’s business overdraft – building on open banking technology you can plug a GetCapital business overdraft into your existing transaction account.

Merchant Cash Advance

Capify is the most well known business lender in Australia to offer a merchant cash advance. A merchant cash advance takes into account your business revenue derived from card sales (i.e. a point-of-sale terminal or online payment gateway) and provides financing relevant to this. Given its weighting on card revenue as opposed to credit history, it’s a popular solution for those seeking bad credit business loans. That’s not to say there are short term business loans with no credit check – some are just easier to access.

Short Term Business Loans Advantages and Disadvantages

The best short term business funding option for your business will depend on the industry in which you operate, the financial health of your business, and how long you need the funds for. Still, there are various pros and cons to short term business finance which are likely to apply no matter the business you operate.

Short Term Business Loans Australia – Concluding Remarks 

A short-term business loan is typically used when businesses need to cover sudden expenses or to capitalise on an immediate opportunity. Short term financing for business can be for virtually any business purpose, although it may not always be your best option. If you’re looking to finance equipment or finance a fit out then you may prefer a lending product specifically designed for this. Short Term Business Financing Loans are best used for short term working capital requirements.