Short-Term Loan Calculator

Using a short-term loan calculator could help you determine how much capital you may be able to borrow to cover an unexpected or emergency expense. Short-term business loans typically must be repaid in about a year and often come in smaller amounts than longer-term loans, making them ideal for businesses that need a quick, minimal cash infusion.

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What is a short-term loan?

A short-term loan for small businesses is a form of financing that must be repaid within three to 18 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.

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.

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Estimating the cost of a short-term loan

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.

When to consider a short-term loan

When considering a short-term loan, make sure you can count on your business generating enough income in the near future to pay off the debt. For example, you may want to use a short-term loan to cover upfront expenses when starting a new project for a client. The client may not pay you until you complete the work. You could borrow a short-term loan to cover the cost of the work, knowing you’ll have the money to repay the loan once the client pays their bill.

Short-term loans: Consider the limitations

While short-term loans can be beneficial, they do come with some disadvantages. One of the biggest is that these types of small business loans often come with a higher APR than a long-term business loan because of the length of the repayment term, as well as more lenient borrower requirements.

In addition, lenders often attach fees to short-term loans, taking the fees along with the interest rate and converting that number into the APR. If the lender doesn’t provide an APR, you can do the calculations yourself, as we mentioned earlier. Ask the lender for the total cost of borrowing, so you understand exactly what’s required.

The APR may include:

  • Origination fees
  • Underwriting fees
  • Service or processing fees
  • Packaging fees

The lender may also impose a late payment fee.

Ultimately, the APR is determined by lenders’ fees, the risk involved in lending the money and the length of the loan’s term. This creates a limitation to the short-term loan calculator — you may be approved for a certain amount, but you may not be able to borrow that full amount after factoring in the APR you receive.

Alternatives to short-term loans

There are several other types of business financing that could give you access to fast funding to help you handle a cash crunch, temporary expense, seasonal payroll or inventory costs.

  • Business line of credit: A business line of credit lets you borrow money as needed. You only have to repay what you borrow from your credit line, and interest only applies to what you actually withdraw. Once you repay your debt, your full credit amount would become available again.
  • Merchant cash advance: A merchant cash advance is an advance on your business’s future receivables. An MCA provider would give you a lump sum of funding in exchange for a portion of your future sales. MCAs are one of the fastest options to get business funding, but they can also come with high rates and fees.
  • Invoice factoring: Invoice factoring allows you to sell your unpaid invoices to a financing company in exchange for funding. You would receive an upfront advance on a portion of those invoices. When the invoices are paid, the financing company would collect a fee before sending you the remaining amount.

Although you may be in a hurry to secure short-term financing, be sure to shop around to find the right funding option for your business. Look for a lender that offers the amount you need with rates and terms you can afford.