HomeBusinessAlternatives to Short-term Business Loans

Alternatives to Short-term Business Loans

An elderly florist/shop owner sits in a wheelchair, tending to flowers in her greenhouse.

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Key takeaways

  • Options to short-term loans embrace long-term loans, strains of credit score and SBA loans
  • Grants, enterprise bank cards, peer-to-peer lending and crowdfunding are additionally viable options to short-term loans
  • To decide on the best lending possibility for what you are promoting, contemplate time period lengths, rates of interest, necessities, phrases and circumstances

If your organization wants quick money to cowl emergencies or seasonal bills, a short-term enterprise mortgage like a line of credit score, bill financing or service provider money advance generally is a good supply of funds. However these loans might carry greater charges and unfavorable phrases than various choices.

Right here’s a have a look at some frequent options to short-term enterprise loans.

Lengthy-term loans

Lengthy-term enterprise loans can provide reimbursement timelines wherever from three to 10 years, which may help make month-to-month funds extra manageable. Against this, short-term enterprise loans normally have reimbursement intervals of three to 24 months.

One main good thing about a long-term mortgage is that you could normally borrow bigger mortgage quantities. That is true as a result of you’ll be able to stretch these funds throughout an extended time interval than with short-term loans. Additionally they have decrease month-to-month funds and have a tendency to have decrease rates of interest, which might make it simpler to suit the mortgage into your organization’s price range.

Bankrate tip

Among the greatest enterprise loans embrace massive banks like Financial institution of America and Wells Fargo. These provide long-term loans for established companies, and they are able to quote you decrease charges than many short-term lenders.

Traces of credit score

A enterprise line of credit score offers your organization versatile entry to a pool of money. You may draw cash from the accessible credit score every time it’s essential, and you’ll borrow a number of occasions over the lifetime of the road of credit score.

Banks, credit score unions and a few various lenders normally provide long-term strains of credit score. For instance, Wells Fargo has strains of credit score with lengthy draw and reimbursement intervals. These loans are sometimes reserved for established companies with good credit score and robust enterprise financials.

Some strains of credit score are accessible to debtors with very bad credit, however these might have greater charges and brief reimbursement intervals. These loans can also require weekly funds. Traces of credit score may also have excessive borrowing prices once they use issue charges or charges as an alternative of rates of interest.

Bankrate perception

Take a look at our information to see the common enterprise line of credit score charges prime lenders cost.

SBA loans

SBA loans are particular loans insured by the U.S. Small Enterprise Administration. You apply for them via banks, credit score unions and different lenders. The SBA then ensures a sure proportion of the mortgage, which helps make it extra reasonably priced than different enterprise loans.

The SBA affords a number of mortgage packages. The 2 hottest kinds of long-term SBA loans are the 7(a) and 504.

For 7(a) loans, phrases depend upon how you utilize the mortgage and different components. The utmost time period for gear, stock and dealing capital loans is 10 years, whereas actual property loans go as much as 25 years. The SBA additionally affords strains of credit score as a part of the 7(a) program. These work the identical as strains of credit score provided by banks and different lenders, however they’re backed by the SBA, identical to its time period loans. This implies probably decrease charges — however a way more aggressive utility course of.

The phrases are the identical for the Neighborhood Benefit mortgage, which is a pilot program set to run out on September 30, 2024. This mortgage program for underserved communities can embrace veteran or startup enterprise homeowners and companies positioned in low-to-moderate-income communities.

The 504 mortgage program has reimbursement phrases of 10, 20 or 25 years. These loans can be utilized to purchase buildings or land, construct new services or buy long-term equipment and gear.

Bankrate perception

In response to the SBA’s weekly lending report, as of January 14, 2024:


  • The SBA has permitted 16,659 7(a) loans vs. 1,586 504 loans.
  • The typical mortgage dimension is $429,035 for the SBA 7(a) mortgage vs. $1,101,772 for the 504 mortgage.
  • Most 7(a) loans (30.4%) are for $50,000 or much less.
  • Most 504 loans (50.2%) are between $500,000 and $2 million.
  • 83.6% of SBA 7(a) loans and 83.8% of 504 loans are permitted for city areas.
  • Most SBA 7(a) loans (56.4%) and 504 loans (77.6%) go to companies greater than two years outdated.

Various enterprise loans

There are numerous various kinds of enterprise loans accessible from various lenders.
If a extra conventional enterprise mortgage is outdoors your attain however you don’t need to face the excessive value of a short-term mortgage, contemplate one in every of these choices.

  • Crowdfunding: An possibility for elevating cash from neighborhood members and supporters, generally in alternate for a reward or fairness.
  • Peer-to-peer lending: An organization or group of traders decides whether or not to mortgage you cash. Sometimes, it’s extra casual and lending necessities are much less stringent than a financial institution mortgage.
  • Microloans: Smaller loans, sometimes provided to underserved communities.
  • Enterprise grants: Normally awarded via an utility course of. Since grants don’t must be repaid, they’re aggressive and infrequently have strict necessities.
  • Enterprise bank cards: Whereas enterprise bank card limits are sometimes decrease than conventional loans, they’ll include advantages like money again or journey miles. In some circumstances, you could have an introductory APR, and no curiosity is charged in case your stability is paid in full each month. They’re additionally a a lot better possibility for serving to you construct enterprise credit score.

Backside line

Quick-term enterprise loans are one of many many ways in which firms can borrow cash. In case you’re searching for extra flexibility or want extra time to pay again what you borrow, different choices like long-term loans or SBA loans would possibly match the invoice.

No matter kind of mortgage you decide on, ensure that to take the time to buy round and evaluate your choices. Getting affords from a number of lenders will enable you discover the very best deal.

Ceaselessly requested questions on enterprise mortgage options


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