Introduction
At some point, your business might need a loan for many reasons.
For instance, you might need some new equipment to help your business grow; or you might want to hire more employees.
In this guide, you’ll find out everything you need to know about short-term business loans, including what they are, when they might be effective and where you can get them from.
What’s in this guide?
Let’s take a closer look and find out more.
Top 10 business loan providers
1. Boost Capital
Type: Alternative Finance Provider
Loan amount: £3,000 – £500,000
Typical APR: 1.5% – 2.5% monthly APR
Loan term: 4 to 18 months
Boost Capital is a highly recommended alternative finance provider in the UK, with many customers giving this lender five stars on trusted websites such as Trustpilot.
They offer fast funding, with minimal paperwork, approval in 24 hours and access to your funds in around two days.
Representative: Borrow £10,000 for 12 months at 47.9% representative APR. Interest rate of 36.74% p.a. (fixed). Total amount payable is £12,100.
Company rating on Trustpilot: 5 / 5
2. Capify
Type: Alternative Finance Provider
Loan amount: £3,500 – £500,000
Typical APR: 67.89% APR
Loan term: 6 to 10 months
Capify is another highly rated lender, who has been around since 2008 and they have helped thousands of business owners to grow and sustain their business.
Focused on small to medium enterprises, they aim to give you a decision within 60 seconds and solutions tailored to your business.
Representative: Borrow £24,000 for 12 months at 67.89% representative APR. Total amount payable is £29,472.
Company rating on Trustpilot: 5 / 5
3. Funding Circle
Type: Peer-to-Peer Lender
Loan amount: £5,000 – £500,000
Typical APR: Rates start from 4.5% per year AER
Loan term: 6 months to 5 years
Funding Circle is one of the peer-to-peer lenders that have been sprouting up around the UK in the last few years.
With a peer-to-peer platform, the lenders are regular citizens that want to help their savings grow by investing in UK businesses.
For businesses, this means low AER and only a couple of extra fees.
Representative: Borrow £20,000 for 12 months with fixed monthly payments of £1,752 a month, with a completion fee of 2.5% and interest of around £526. Total amount payable is £21,026.
Company rating on Trustpilot: 5 / 5
4. Shawbrook Bank
Type: Bank
Loan amount: £250,000 to £25 million
Typical APR: 0% to 19.9% APR
Loan term: Bespoke repayments
Shawbrook Bank offers their business customers a range of services tailored to their companies, like asset finance, working capital solutions, the point of sale finance and structured finance, as well as commercial mortgages too.
This means that for startup businesses you could finance for the road ahead with equipment and salaries, or even established companies can benefit from more substantial amounts to help you fund expansions.
Company rating on Trustpilot: 5 / 5
5. Government Startup Loan
Type: Government Loan
Loan amount: £500 – £25,000
Interest: Fixed 6% interest p.a.
Loan term: 1 year to 5 years
Government loans are loans that are funded by government-backed organisations, who usually offer either regional or national businesses different loans depending on their location.
With this loan, in particular, it is aimed at startups less than 24 months old who could benefit from not only finance but mentoring, to help your business grow and thrive.
Representative: Borrow £20,000 for 12 months with fixed monthly payments of £1,721.33 a month, with interest of around £655.94. Total amount payable is £20,655.94.
Company rating on Trustpilot: 5 / 5
6. Spotcap
Type: Alternative Finance Provider
Loan amount: Up to £250,000
Interest: 22.80%, which includes both interest and fee.
Loan term: 1 month to 24 months
Spotcap is a highly regarded alternative finance provider, who since their launch in 2014, has raised £90 million globally, 500 active partners and over 1000 customers.
Although they are a relatively young provider, they have already become a fast favourite according to their five star Trustpilot rating.
Representative: If you borrow £100,000 over 12 months at a representative rate of 24.2% APR, with an interest rate of 1.40% fixed, you will pay 12 monthly instalments of £9,111 which would mean a total repayment of £109,332.
Company rating on Trustpilot: 5 / 5
7. iwoca
Type: Alternative Finance Provider
Loan amount: £1,000 – £150,000
APR: 49% representative APR
Loan term: 0 to 6 months
iwoca prides itself on providing their customers with fair decisions, lightning-fast applications, outstanding flexibility and service.
Thousands of companies have borrowed £500 million, and they could be an excellent fit for many different businesses regardless of size.
Representative: Borrow £10,000 for 12 months at 49% representative APR. Interest rate of 40% p.a. (fixed). Total amount repayable is £12,165. Actual rate may vary based on circumstances.
Company rating on Trustpilot: 5 / 5
8. Ezbob
Type: A lending platform for banks and financial institutions
Loan amount: £1,000 – £120,000
APR: 38.9% APR
Loan term: 1 to 12 months
Ezbob is bringing a change to the way that banks and other financial institutions lend to consumers and small to medium enterprises.
They act as a middleman between banks and customers, so they can offer the excellent rates that you’d typically find when looking to borrow from a bank, but their exceptional customer service.
Representative: Borrowing £50,000 over 12 months would mean you would be repaying £58,873. These payments would be £4,166 a month plus interest on your remaining balance.
Company rating on Trustpilot: 5 / 5
9. Fleximize
Type: Alternative Finance Provider
Loan amount: £5,000 to £500,000
APR: 46.8% APR
Loan term: 1 – 48 Months
Fleximize was named best business finance provider by the British Bank Awards in 2018.
They claim to allow your business to grow at the pace it needs to, by offering relatively long borrowing terms of up to four years, and up to half a million pounds.
This could be a perfect fit for companies looking to purchase their property or vehicles.
Representative: For loans of £25,000 or below: If you borrow £12,500 over 15 months at a Representative rate of 46.8% APR and an annual interest rate of 39.0% (fixed), you will pay 15 monthly instalments of £1,066.11. The total charge for credit will be £3,491.65, and the total amount payable will be £15,991.65.
Company rating on Trustpilot: 5 / 5
10. Danske Bank
Type: A lending platform for banks and financial institutions
Loan amount: No minimum or maximum
APR: Interest is calculated daily and applied monthly.
Loan term: 12 months
Danske Bank, as the name suggests, is a subsidiary of Danske Bank Group which originates from Denmark.
They can offer their customers a bridging loan, which doesn’t have a minimum or maximum amount and can be used for things such as constructing premises, renovations or letting you close a deal without having to wait for another transaction.
Repayment is usually made in a lump sum at the end of your term.
Company rating on Trustpilot: 4 / 5
This list of the top ten business loan providers mainly takes into consideration the companies customer reputation, how much your business can borrow and the interest your lender will charge you.
FAQ
What is a short-term business loan?
For your business, a short-term business loan is a quick injection of cash that can help launch your business to the next level.
This could be for depositing an office space, hiring some new workers or purchasing things such as a business phone system or other office supplies.
And, instead of making repayments for years, a short-term loan allows you to pay back this money quicker.
For instance, this could be over six months.
So while your repayment amounts might be high, you might be able to pay it off in a few months which will let your budget easier.
These types of loans could be from a bank, peer-to-peer lenders or even alternative lenders; but more about that below.
When a short-term business loan might be effective
Unsure about whether a short-term business loan might be good for you?
Here are a few examples of when this type of loan could be best for you.
- You need to make an investment that will generate a high profit
- Allow fluid cash flow
- You have a poorer credit rating that means you will be rejected for other loans
What are the pros?
✔ Your business will only need to make repayments for a limited amount of time
✔ You will usually pay less overall as it’s a short-term business loan
✔ Sometimes, you can borrow up to £1 million for six months
✔ There are a lot of options for businesses, so you don’t have to rely on banks
What are the cons?
✗ Your business will usually need to repay a high amount
✗ Interest rates can be much higher in short-term business loans
✗ Taking out a loan could be detrimental to the health of your business
Short-term loan top tips
- Make sure that you can make repayments for a short-term loan
- Compare all of your options
- Does your business need this amount?
- Check that your business has the health to sustain this loan
Firstly, you need to make sure that you can make the repayments required for this loan.
For instance, although you will only be making repayments for a short amount of time like a year or six months, your repayment amounts will be a lot higher than with standard lengthy loans.
If this loan ends up crippling your company, then it might not be worth the temporary help.
Now you need to compare all of your options.
Luckily, since the financial crisis, there are far more lenders out there than ever before, especially since there was a gap in the market when banks stopped lending to businesses as freely.
Alternative finance providers have stepped in where banks might reject your application, giving you another option to consider.
There is also peer-to-peer lending, which is a relatively new concept which means that businesses will borrow money from typical citizens through a lending platform.
Using these platforms, millions of pounds have been lent by thousands of average people to startups and established businesses alike over the UK.
Finally, you could consider whether a government grant or loan might be your best option.
In short, the government could lend you up to £25,000 at a fixed interest rate.
Next, you need to decide whether your company needs this amount of funding.
It can seem like an attractive offer to be able to borrow up to £1,000,000, but is it necessary?
Some companies end up harming themselves by trying to borrow too much; either they are rejected, or they end up putting themselves in an awkward position by not being able to make repayments.
Finally, check that your business has the health to sustain this loan.
Conclusion
In conclusion, there are many attractive qualities to short-term loans, but are they right for your business? Have you compared all of your options?
If you could benefit from having almost immediate access to funds which you can pay back typically within six months, this could be the right option for you.
Get in touch to find out more about loans, your finances and everything you might need for your business.
