Using the short-term loan calculator above would help you figure out how much you may be able to borrow based on factors short-term lenders commonly consider when approving borrowers: Time in business, revenue and personal credit score. When deciding how much you should actually request from a lender, think about how much you can afford to repay. Take the total amount you may borrow and divide it by your desired term. That would help you figure out your approximate weekly or monthly payment.
Of course, the payment amount you’ll receive from your lender would reflect your exact interest rate, fees and term. Here’s a closer look at how the components of a short-term loan would impact the cost of funding.
Short-term loan amounts and terms
A short-term loan for small businesses is a form of financing that must be repaid within three to 24 months. Business owners may use short-term loans to cover cash flow gaps or emergency expenses. Short-term loan amounts could range from $5,000 to $500,000, or more.
Because you’d only have a few months to repay the loan, you wouldn’t be able to spread out the balance over several years as you would with a long-term loan. The more you borrow, the higher your daily or weekly repayments would be to pay off the loan in that short amount of time.
Short-term loan interest rates
Interest rates for short-term loans vary by lender. Annual fixed rates could start at 7% or 8% and go up to 50% or more, depending on the specific circumstances. If a lender offers you a rate that makes the loan unaffordable, you may want to continue shopping to find a better rate. There are times when you’ll need to know how to calculate short-term loan interest rates for yourself.
Short-term loan payment
Short-term loans typically require repayment on a daily or weekly schedule, which is faster than the monthly repayment schedule that usually accompanies a long-term loan. Shorter terms often result in higher interest rates and fees, especially if you borrow from an online business lender. These lenders offer fast turnaround times on funding, but you may pay for that convenience with a high rate.
After receiving your funds, your first payment would likely be due the following day or week. Most of the time, the payment amount would be fixed. But in some instances, a lender may have a fluctuating structure, such as one that requires interest-only payments for the length of the term, which are then followed by a final balloon payment.
Online lenders often automatically deduct payments from borrowers’ business bank accounts. Although automatic payments would ensure you don’t miss a payment, the withdrawals could also disrupt your cash flow. Make sure your revenue stream can support regular withdrawals from your account.
