Last updated on March 9th, 2019 at 08:07 am
There was a time, not too long ago, when small businesses had to resort to traditional banks or merchant cash advance companies to obtain short term business loans.
The biggest drawback that came attached to these loans was that they were costly.
Plus, they were often not available as quickly for short terms of 1 to 36 months, when small businesses needed them most.
Fortunately, nowadays small businesses have a plethora of options when it comes to obtaining short term loans for running their businesses.
This post will be discussing the top 5 short term loan providers for small businesses in detail.
Best Short Term Business Loan Provider
OnDeck is great for businesses earning annual revenues of at least $100,000.
The company caters to an extensive range of e-commerce and brick and mortar businesses.
Even businesses like nail salons and restaurants that often find it difficult to obtain a loan from the bank can approach OnDeck for short-term funds for their businesses.
What’s most alluring is the fact that a loan from OnDeck would cost you almost half of what a normal merchant cash advance would.
You can obtain any amount from $5,000 to $500,000, with the payment term ranging from 3 to 36 months.
The qualification requirements:
- You must be in business for at least 12 months before applying
- Should be generating annual revenues of more than $100,000
- Credit score should be at least 500+ personal credit score (In case of multiple owners, at least one should fulfill this requirement.)
Why is OnDeck on our list?
- Most businesses can have their loans approved at OnDeck if they qualify.
- They ask for only 12 months of business history, whereas others may ask for as much as 2 years.
- Their approval and funding process is quick and simple.
- You can obtain large amounts of loans. As much as 15% of your annual revenues.
If the minimum annual revenue requirements of OnDeck are too high for you, the other option to consider is the loans by Kabbage.
Just like OnDeck, these loans cost only half as much as the traditional merchant cash advances.
With Kabbage, you can obtain loan amounts ranging between $2,000 and $100,000 for any duration ranging from 1 to 12 months.
These loans function like a line of credit. This means you pay fees only for the funds you withdraw as a loan.
Kabbage does not charge an interest rate over the course of the loan, but rather a flat fee each month based on the loan amount drawn.
The qualification requirements:
- You must have at least 1 year of business history
- You should be earning more than $50,000 in annual revenues
- You should have a minimum credit score of 550
Why is Kabbage on our list?
- It allows large short-term loan amounts.
- Have a considerably lower minimum revenue requirements compared to others.
- Offer the flexibility of line of credit.
Small businesses often do not even have an operating history long enough to qualify for lending companies like Kabbage and OnDeck.
This is where companies like BlueVine come in handy.
BlueVine requires an extremely limited operating months period from businesses that wish to apply for a loan – barely 3 months.
This makes it an ideal financing option for small businesses that require initial working capital to fund and see through the running of their day-to-day operations.
However, they do have considerable minimum annual revenue and credit score requirements that may make it difficult for new businesses to qualify.
The qualification requirements:
- You must have at least 3 months of business history
- You should be earning more than $120,000 in annual revenues
- You should have a minimum credit score of 530
Why is BlueVine on our list?
- It caters to all industries, with the exception of health care and medical sectors.
- Existing clients with clean records get a discounted interest rate on applying for new loan
- Pays of 85% of the invoice amount
- Great for businesses who have credit customers that are financially strong and laid back in making payments.
We know how crucial it is for a business to keep its working capital cycle flowing smoothly.
However, when customers delay making payments to the business this cycle comes to a halt, creating working capital problems for the business.
This jolt is felt more by the small businesses that are already short in finances to fuel their processes. This is where Fundbox can help you.
It provides quick funding to cover the gap in your working capital cycle caused by the unpaid customer invoices.
Fundbox allows you to obtain up to $100,000 against your unpaid invoices. They offer flexible repayment terms, but can be slightly pricier than the traditional business loans.
The qualification requirements:
- You do not need any minimum credit score or minimum annual revenues.
- You should be able to show proof of business activity for more than 6 months through online accounting records.
Why is Fundbox on our list?
- There are minimal requirements to qualify for a Fundbox loan.
- The Fundbox loans cover 100% of the invoice amounts.
- You have the convenience of making repayments in 12 easy installments that begin 8 days after the funded invoice is cleared.
- Works great for businesses with low annual revenues and bad credit scores.
- This is a quick way of obtaining immediate working capital up to $100,000.
If you already have an active PayPal account, this is probably the most convenient funding option you have.
PayPal Working Capital allows you to borrow up to 15% of your annual PayPal revenue as a loan that is repaid in easy terms, over an unfixed period of time.
The regular payments are deducted from your daily PayPal income, the percentage of which is up to you.
This allows you to pay more on days you earn more and less on the days when business is low.
For days where you don’t earn anything, there are no repercussions or penalties, as the amount is automatically settled on the days the follow.
The qualification requirements:
- You should have a PayPal account.
- You should be earning more than $20,000 annually through PayPal sales.
- You should have a good PayPal history. No minimum credit scores are required.
Why is PayPal Working Capital on our list?
- It’s the cheapest option out of the five we’ve mentioned in this post.
- Since repayments are deducted from the daily PayPal revenue PPWC allows customers the flexibility to pick their own repayment rates. This helps small businesses adjust their repayments accordingly.
- They’ve got excellent reviews from clients.
- There is no fixed term for repayment – only that every 90 days, you’re required to pay more than 10% of the outstanding balance.
Our Top 5 Short Term Business Loans[table “18” not found /]
Let’s take a look at how each compares on the finer details of the short-term business loans they offer.
Generally, there are 3 major considerations that will be taken into account by the lender when deciding on who should be granted the short-term business loan they offer. These include:
- The annual revenues of the business
- The business operation history
- The credit score
Both these options do not have high minimum annual revenue requirements.
PPWC requires a minimum of $20,000 annual earnings through the PayPal account, whereas Fundbox has no requirements for minimum revenues whatsoever.
Above all, both these companies do not require credit score checks for applicants.
Comparing the other three, Kabbage is the easiest to qualify for. Where OnDeck and BlueVine require a minimum of $75,000 and $120,000 annual revenues respectively.
Kabbage gives out loans to businesses with as low as $50,000 in annual revenues. Another thing worth considering at this point is the credit score requirements.
In terms of that, it is OnDeck that is easier to apply for. At least one business owner must have a 500 or better FICO score to qualify with OnDeck.
However, BlueVine is the only company that offers loans to companies that have been operational for just 3 months!
Short Term Business Loans: Collaterals and Personal Guarantees
Often lenders secure their money with a personal guarantee or collateral. A personal guarantee holds you, the business owner, personally liable for the repayment of the loan.
This implies that due to any circumstances, if your business is unable to make the repayments, the lender has the right to make you surrender your personal assets to make the loan payments.
Out of all the options we’ve described, only OnDeck requires a personal guarantee.
If you obtain a loan from any of the other sources, you wouldn’t be pledging your personal property and finances in any way to pay off the loan.
With that said, OnDeck customers enjoy an advantage that none of the others do. When you payback an OnDeck loan, you contribute to improving the credit score of your business.
This means you can access to better capital at lower rates in the future.
On the other hand, when you pledge an asset or group of assets for the security of a loan, the asset is known as the collateral.
Collaterals are common when you go out to a bank or a financial institution to obtain a traditional business loan.
Any asset, such as machinery or equipment can be pledged to back your loan. Out of the 5 companies we’ve mentioned, none requires collateral for guaranteeing the loan.
However, Kabbage and OnDeck do place liens on your common business assets in return for the loans they provide. Only Kabbage loans exceeding $20,000 are backed by a lien.
A lien allows the lender the right to confiscate one or all of your assets in case your business is unable to pay the loan.
The Interest Rates
The Annual Percentage Rate (APR) or the interest rate plus fees as we normally call it, is the one-year cost of obtaining a loan.
The APR stated for each of these short term financing options are quite high when compared to the interest cost of a car loan or a home mortgage.
While OnDeck and Kabbage charge exorbitant APRs that fall between 40% and 80%, the BlueVine and Fundbox APRs fall in the average range of 13% to 70%.
PayPal happens to be the cheapest option for small businesses, with an APR that fluctuates between only 15% and 30%.
Hence, they end up charging you more for the funds they extend.
The most important thing to notice at this point is the fact that most of these loans are not secured with a personal guarantee of collateral, unlike a mortgage that is secured against your home and the car loan that treats the car as collateral.
For that purpose, lenders charge high APRs. In addition to that, these companies provide you the convenience of quick and easy funding – and convenience always comes with a price.
Although, companies like OnDeck and Kabbage place a general lien on your business assets to bring the risk factor down a bit, the absence of specific collateral still leads to higher interest rates.
The good thing isthat even with high APRs, it takes far less time than a conventional loan to pay them off.
Your total out of pocket expenses for a short term business loan will almost always be considerably less than what you end up paying for obtaining a traditional bank loan.
PayPal Working Capital Offers the Lowest Interest Rate Among All
Throughout the course of this post, we have discussed 5 different short-term loan options for you.
Out of these it is PayPal Working Capital that offers the lowest effective APR. Their APR for the loans vary between 15% and 30%.
The PayPal Working Capital loans work more like cash advances that you have to pay back little by little on a daily basis, according to a fixed percentage of your PayPal sales.
In most cases the APR will depend on the amount of loan you apply for, the daily repayment deduction percentage you set, and your PayPal sales volume.
The sooner you pay off your loan, the less interest you pay. For that, it is necessary to pick a higher percentage for repayment.
What Do Their Clients Have to Say About Them?
If there is anything that can give you an authentic review of these companies, it is the way their clients perceive them.
Below is a summary of customer reviews for each lender to assist you in the decision making process.
OnDeck has a score of 9.7 on 10 on TrustPilot. It also enjoys a 3.5 star rating on Yelp, along with an A+ Better Business Bureau rating.
Small businesses that have used their services outline the following things that won their appreciation:
- Quick funding even after rejection from multiple banks
There were certain customers, however, who thought the interest rates defined by OnDeck are confusing.
They were under the impression that they could end up saving money if they prepaid their interest amounts, which is obviously not the case.
Overall, Kabbage has received positive reviews by its clients. However, when you compare it with the other companies, these reviews lack luster.
The company boasts an A+ rating on the Better Business Bureau and a score of 9.2 on 10 at TrustPilot.
With Kabbage loans, customers appreciate the following:
- Quick funding
- Simple application process with minimum paperwork
- More control over The amount of interest
However, there were certain customers who complained about the amount of monthly payments being too high.
Kabbage allows a repayment period of no more than 12 months that may result in higher monthly payments when compared to other options.
With an average 5-star rating, PayPal outshines the other two companies under discussion in terms of customer reviews.
Here’s what clients appreciate most about PPWC:
- Increased flexibility in repayment methods
- Clients get to choose their own repayment percentage.
The only bad reviews for the company came from businesses that had trouble repaying their loans because they were unable to achieve a corresponding increase in sales to fulfill the terms of repayment.
What clients most value about the company includes:
- The affordability
- The quick application process
- The fast funding
- Great customer service.
Despite the excellent online reputation, clients do face problems owing to a separate account created for receiving payments from clients.
This is how BlueVine manages its repayment policy, but at times that becomes inconvenient for their clients.
Enjoying a score of 9.8 out of 10 on TrustPilot, Fundbox has impressive client reviews overall. What clients love about them most includes:
- Excellent customer service
- The loan amount equals 100% of the invoice amount
- Quick funding
- Simple application process.
With the general opinion of clients being on the positive side, the only negative aspect highlighted was the limited amount available on the credit line.
Fundbox caps the amount of loan at $100,000, which at times is not enough for some businesses.
So Which Short Term Lender Works For You?
In this post we’ve aimed at providing a detailed review on OnDeck, PayPal, and Kabbage. These are good providers for short term business loans.
You only need to figure out which one would be of most benefit to you and your business.
- For a start, we suggest you go with OnDeck if you’re looking for large loan amounts and a longer repayment term.
- In case you wish to save on the extra expenses attached to borrowing funds and are looking for a small loan amount, PayPal Working Capital would suit you better. It is relatively inexpensive. However, you do need an active PayPal account to qualify. That is, your business must use PayPal to process its payments.
- Kabbage is a viable option for businesses that do not generate excessively high revenues and are looking for a line of credit.
- Opt for BlueVine if you have large invoices at hand at need to be financed and you’re earning at least $120,000 in annual revenues. Also, you should be flexible on creating a new bank account that BlueVine uses to handle your repayments.
- Fundbox is great for businesses that have low annual revenues and a bad credit score. Choose the Fundbox option if you’re looking for amounts up to $100,000 to factor your invoices.
The WiseSmallBusiness Team is full of industry experts and successful business owners willing to contribute important business articles.