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 amount
Short-term loan amounts usually fall below $500,000, though some lenders may offer financing into the millions. 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.
Let’s say the lender quotes a simple interest rate, but you’ll also need to pay an origination fee. To calculate the APR on your own, plug the loan amount, rate and fees into a basic APR calculator.
Short-term loan payment
As mentioned earlier, short-term loans usually require daily or weekly repayments. 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.