Business loans

Short term business loans for cash gaps and urgent costs

Covering a cash gap, stock order or urgent bill? See how short term business loans work, the main types, what they cost, what lenders check and alternatives.

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Amount: From £10,000 to £20 millionLarger amounts through secured, property and asset-based finance
Security: Secured or unsecuredOptions compared for your case
Suitable businesses: Sole traders to limited companiesPartnerships and LLPs too
Lender panel: 300+ lendersWhole-of-market search

In short

What you need to know.

Short term business loans suit a need that will pay for itself soon: waiting on customer payments, a stock order, contract start-up costs or an urgent bill.

Because the money is repaid quickly, monthly repayments are high even when total interest is modest. Most are unsecured with a director's personal guarantee, and lenders look mainly at recent bank statements, steady turnover and a clear source of repayment.

What short term loans are used for

Bridging a gap while waiting for customers to pay
Buying stock ahead of a busy season or a large order
Funding the upfront costs of a new contract
Covering an urgent repair or unexpected bill
Paying a VAT bill on time (see VAT loans)

Short term finance works best when you can see where the repayment will come from. It is rarely the right tool for long-life assets such as property or major machinery.

For corporation tax, Self Assessment and PAYE as well as VAT, see our guide to tax loans, which matches each type of tax funding to its HMRC deadline.

Our case study on a £70,000 short-term loan for a food and beverage business shows working capital for stock and staff during growth.

A transaction we arranged

£60,000

£60K over six years, not another short-term fix.

A 72-month business loan gave an established communications firm £60,000 it could keep working in the business.

Read the transaction

Sector: Communications
Structure: 72-month business loan
Outcome: Completed

About short term business loans

Specialist knowledge. Better outcomes.

A short term business loan is borrowing repaid over months rather than years, with the exact term set by the lender and the case.

It is for businesses facing a temporary cash gap, a stock purchase, a new contract or an unexpected cost, where the money to repay is already in sight. Short term loans can be unsecured or secured, and are generally quicker to arrange than long term borrowing, although monthly repayments are higher.

Smart Funding Solutions is a broker, not a lender. We find short term finance that fits your purpose, turnover and credit profile from our panel of 300+ lenders, and tell you when another option would serve you better. For the wider range of funding, see our business finance overview.

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Independent brokerSmart Funding Solutions is an independent broker, not a lender.
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Support from start to finishOur experts handle the process from start to finish.

Types of short term business finance

Short term unsecured loan

A fixed sum repaid over a short term, typically backed by a personal guarantee rather than an asset. Decisions can be fast because there is no valuation or legal charge.
Revolving credit facility

A credit line you draw from, repay and reuse, paying interest only on what you use. It suits recurring or unpredictable needs.
Learn more
Invoice finance

A lender advances a percentage of the value of your unpaid invoices, so you do not have to wait for customers to pay. The facility grows with your sales. Read more in our invoice finance guide.
Learn more
Merchant cash advance

An advance repaid as an agreed share of your future card takings, so repayments rise and fall with sales. It suits card-taking businesses such as retailers, restaurants and online shops.
Learn more
Trade and stock finance

Funding to pay suppliers for goods, often overseas, with repayment once the goods are sold. It suits importers, wholesalers and retailers.

How short term business loans work

You borrow a lump sum and repay it, with interest and any fees, in regular instalments (weekly or monthly) over a short agreed term. Some lenders charge interest in the usual way; others apply a fixed fee or "factor rate" to the amount borrowed, so always ask for the total amount repayable.

Most short term loans for limited companies are unsecured but require a personal guarantee from the directors. Larger or higher-risk loans may be secured on property or other assets.

Costs and what affects them

Pricing depends on your trading history, turnover, credit record, the loan amount and term, and whether security is offered. Alongside interest, check for arrangement fees and any early repayment or late payment charges. Compare offers on the total amount repayable, not only the headline rate.

Our lender reviews show what this looks like in practice: iwoca loans charge interest only on what you still owe, while Little Business Loans focuses on sums up to £20,000 over a year or less.

Who qualifies for a short term business loan?

Most UK businesses that have been trading for at least six to twelve months, bank their takings through a business account and can show from recent statements that the repayments fit comfortably within their cash flow can qualify for a short term business loan.

Lenders set their own criteria, but most want to see:

A UK-based limited company, LLP, partnership or sole trader
A period of trading and a steady level of monthly turnover
Recent business bank statements showing the repayments are affordable
An acceptable credit history for the business and its owners
A clear purpose and a realistic source of repayment

Some lenders only work with limited companies, so if you are a sole trader or partnership it helps to use a broker who knows which lenders will consider you.

Short term loans with bad credit

Some lenders will consider applications from businesses with missed payments or a County Court Judgment, depending on how recent the issues are and how the business is trading now. Expect higher pricing and closer scrutiny of your bank statements. See bad credit business loans.

Security and personal guarantees on short term loans

For most short term loans the lender's security is a personal guarantee from each director or owner, sometimes alongside a debenture over the company on larger amounts.

Read the guarantee carefully: it may be for the full debt or capped at an agreed sum, and where several directors sign it is usually joint and several, so each can be pursued for the whole amount. If you would rather not give one, a smaller number of lenders offer loans without a personal guarantee, usually for stronger, established businesses. Where a larger sum is needed quickly, a short term loan secured by a charge over commercial or investment property, or a bridging loan, can raise more. Our guide to personal guarantees explains the risks.

Alternatives to a short term loan

Medium or long term loans for larger investments with a longer payback. Our comparison of short term vs long term business loans sets out the differences.
Business overdraft from your bank, usually reviewed annually
Business credit card for small, regular purchases
Asset finance for equipment and vehicles

Checklist

Documents lenders usually ask for

The last three to six months of business bank statements
Latest filed accounts, if available
Recent VAT returns or management accounts for larger requests
ID and address for directors or owners
The amount you need and what it is for

Pros and cons

Advantages

Faster to arrange than most long term borrowing
You are committed for a shorter period, so total interest can be lower even when the rate is higher
Often available without property security
Flexible use of funds for most business purposes

Disadvantages

Higher monthly repayments, because the loan is cleared quickly
The annual cost of borrowing is usually higher than for longer secured loans
Smaller amounts than secured or long term finance
Directors' personal guarantees are common

Side by side

Compare your options

How the main business finance structures work. Lenders set their own terms, so treat this as a guide to the questions to ask.

Option	How you repay	Security	Often used for
Unsecured business loan	Fixed instalments, usually monthly	No charge over assets; a personal guarantee is usually required	Growth, stock, tax bills and cash flow
Secured business loan	Fixed instalments, often over a longer term	A charge over property or other assets	Larger sums, property and refinancing
Revolving credit facility	Interest on what you draw; repay and redraw	Varies by lender and case	Recurring or uneven cash flow gaps
Merchant cash advance	A share of future card takings	No charge over assets	Card-taking businesses with uneven months
Asset finance	Regular payments over the life of the asset	The asset being financed	Equipment, vehicles and machinery
Invoice finance	Settled as customers pay their invoices	Your unpaid invoices	Businesses waiting on customer payment

General information only. Every lender has its own criteria, and all finance is subject to status.

Fast, same-day and emergency short term business loans

Same-day business loans are possible with some online lenders when the application is simple and complete, but no lender can promise funds the same day. Speed depends far more on how ready you are than on which lender you choose. Where the need is urgent, unsecured short term loans and merchant cash advances tend to be the quickest options, because neither needs a property valuation or a legal charge.

Instant decision is not instant funding

Many lenders advertise an instant or same-day decision. That is often an initial, conditional answer based on automated checks of your bank statements and credit files. Before money is paid, the lender usually still needs to verify identity, confirm the details, and have the agreement and any personal guarantee signed. A missing document or an unexplained transaction can turn a quick decision into a slower one.

What makes a short term loan fast

Recent business bank statements ready to share, ideally through open banking
Up-to-date filed or management accounts
ID ready for every director who will sign a guarantee
A clear amount, purpose and source of repayment
No need for a property valuation or legal charge

If the pressure is a sudden crisis rather than a planned cost, our page on emergency business loans covers how to check your position before you borrow.

How to compare short term business loan offers

Short term offers are priced in different ways, so the headline figure is rarely comparable on its own.

What to check	Why it matters
Interest rate or factor rate	A factor rate is a fixed charge on the amount borrowed, so it does not fall if you repay early
Arrangement or broker fee	May be deducted from the advance, reducing what you receive
Repayment frequency	Daily or weekly collections affect cash flow differently from monthly ones
Early settlement terms	Shows whether repaying sooner actually saves money
Total amount repayable	The only figure that compares like with like

For recurring gaps rather than a one-off need, a revolving credit facility can cost less, because you only pay for what you draw. We compare offers across our panel on the total amount repayable and the guarantee terms, not the headline rate.

Some short-term funders make offers within hours: our review of Elect Capital sets out its same-day offers, its £25,000 monthly revenue minimum and what its advances cost.

How we arrange short term finance and how long it takes

An unsecured short term business loan is typically decided within a few working days of a complete application, with funds often following soon after the agreement is signed; a secured short term loan usually takes longer, often several weeks, because a valuation and legal charge are needed first.

We confirm the amount, the purpose and where repayment will come from.
We check your bank statements and credit position before any application, so searches go only to realistic lenders.
We approach suitable lenders and chase for a quick decision.
We compare offers with you on the total amount repayable, fees and guarantee terms.
The lender completes its checks and issues an offer; decisions can come within a few working days once it has everything it needs, and funds can follow shortly after signing.

The lending decision is always the lender's, and it is free to enquire; any broker fee is disclosed separately before you proceed. If timing matters, explore funding options with your bank statements ready.

FAQs

Questions clients ask

Can sole traders get short term business loans?

Yes, although fewer lenders serve sole traders than limited companies. Lenders look at your trading history, bank statements and personal credit record. Borrowing of £25,000 or less by a sole trader or small partnership can be regulated consumer credit, which brings extra protections and affordability checks.

Can I repay a short term business loan early?

Most short term business loans can be repaid early, but you will not always save money. Loans priced with a fixed fee or factor rate may require the full amount to be paid whatever the timing, while loans charging interest in the usual way may reduce the cost. Check the settlement terms before you sign. Our guide to paying off a business loan early explains what to look for.

Can I get a short term business loan with bad credit?

Some lenders will consider a short term business loan with bad credit, particularly where recent bank statements show steady income and the problems are settled. The cost is usually higher and the amount may be lower. Card takings or unpaid invoices can make funding easier, through a merchant cash advance or invoice finance. Our page on bad credit business loans covers how lenders view adverse history.

Can a start-up get a short term business loan?

It is difficult, because short term lenders rely heavily on recent trading and bank statements to judge affordability. Most want to see several months of trading at least. A new business may have more success with a government-backed start-up loan, asset finance for equipment or funding linked to a confirmed contract. Our page on start-up business loans explains the options.

Are short term business loans more expensive than long term loans?

Short term business loans usually have higher monthly repayments and can carry a higher annual cost, but the total interest paid may be lower because the money is borrowed for less time. The right choice depends on how quickly the borrowing will pay for itself. Compare the total amount repayable for each option. Our guide to short term versus long term business loans sets out the trade-offs.

How much can I borrow with a short term business loan?

The amount depends mainly on your monthly turnover, how much repayment your bank statements show you can afford, your credit record and any existing borrowing. Because the term is short, each repayment is large, so affordability usually caps the loan before anything else. Offering property as security can raise more. Once we have seen your recent statements, we can tell you what is realistic.

How long is a short term business loan?

A short term business loan is repaid over months rather than years, with the exact term set by the lender and your case. Shorter terms mean higher repayments but less time paying interest. If repayments over a short term would strain cash flow, a medium or long term loan may suit better; our guide to short term versus long term business loans compares the two.

What is a factor rate on a short term business loan?

A factor rate is a fixed multiplier applied to the amount you borrow to set the total you repay, instead of interest that builds up over time. It is common with merchant cash advances and some short term loans. Because the charge is fixed at the start, repaying early often saves little or nothing. Always convert offers to a total amount repayable so you can compare them fairly.

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