Short Term Business Loans

A short-term business loan is a type of facility that has a typical repayment period of less than one year. These loans are often used by business owners who need funds to cover gaps in cash flow or unexpected expenses.

Short term loans can be used for anything from working capital, to equipment purchases, inventory expansion or any other business expense you may have. You can also use such loans to cover the costs of corporation tax, VAT bills and indemnity insurance premiums.

You can apply for anything from £2,000 to £500,000, but the amount you are approved for will depend on your financial situation and usually available on an unsecured basis.  These types of unsecured facilities will generally require personal guarantees of the business owners or entities.

Lenders will look will look at accounts, management information, bank statements amongst other indicators to determine the loan amount and assess your ability to repay the loan.

Benefits of Short Term Business Loans

These loans have a number of benefits, such as:

  • Decisions typically within 48 hours of receiving your financial information for application. You can typically receive funding as quickly as a few days after completing the application.
  • They do not require a large amount of information to apply for.
  • They are flexible. Short term loans are easier to top up at the end of the agreement, as the lender will have experience of your business.
  • They can be more cost effective. Short term facilities will generally be less interest

Who Uses Short Term Business Loans?

Short term business loans can work well for companies that need funds relatively quickly.  You may be a good fit for a short-term business loan if you:

  • Are looking for a quick financing solution with a fast turnaround time.
  • Have a good business credit history
  • Own a business that has been trading for at least 12 months months (first year accounts are required)
  • Are based in the UK mainland
  • Have a genuine need for the funds – underwriters are generally happy to underwrite based on a story and to understand how the loan will benefit your business.

If you have bad credit, then secured lending (generally secured by way of a second charge against property) might be a better option for your business.  Before applying for a loan, it is important to assess how healthy your cash flow is and look for ways to improve it, if necessary. Effective cash flow management is important when thinking about applying for finance.

What Can Short Term Business Loans Be Used For?

These loans can be used for a variety of purposes that could help small businesses with limited resources.  These purposes can include:

  • Covering business expenses like rent, utilities and insurance
  • Payroll or PAYE - so you can keep your staff happy and paid on time
  • Unexpected expenses - such as repairs or equipment failure
  • Inventory - so you don't run out of stock during busy periods
  • Equipment - buying new equipment needed to keep your business running
  • VAT bills - having the funds needed to pay on time and this can be used as a rolling facility every quarter
  • Tax bills - having the funds needed to pay on time
  • Suppliers or contractors - making sure they're paid in full and on time

How to Apply for Short Term Business Loans

Applying for a loan may seem intimidating if you haven't applied before, but it's actually a relatively simple process.  You can apply online after which you will be asked to provide information about your company and its finances.  You will need to provide such things like accounts, management accounts, business bank statements as well as other information.

You can complete this process and get a decision in as little as 48 hours. Please note this depends on you providing all of the required information and consents.

To determine whether you're approved, lenders use their own criteria to assess your financial situation and to see if your business fits their lending policies.  An underwriter will look at various factors including your cash flow statements, credit status, revenue, and other indicators of your ability to repay the loan.

Most lenders will have an appetite to lend to companies that:

  • Are profitable
  • Are financially stable
  • Pass affordability checks
  • Have a Bonafede need for funding in order for their business to grow

If you feel your company passes the above, then you may be eligible to apply.  On average it takes two working days from approval to receive funds from short term business loans.

Updated: May 30, 2022