Short-term business loans
A short-term business loan is a type of secured or unsecured business finance. It is used by an established business to cover sudden business expenses, and is highly popular with seasonal businesses in Australia. Terms are generally between one month and three years.
In this guide, you’ll learn:
What is a short-term business loan?
A short-term business loan provides access funds from a lender for any genuine business purpose. Lenders will assess the revenue of a business to determine whether it can comfortably repay the loan amount. The business will agree to repay the loan amount plus interest over an agreed term. The best loans will allow you to repay the loan amount early and without penalties.
There are two types of short-term business loans: Secured and Unsecured. A secured loan uses an asset - such as residential property - as a guarantee on the loan, while an unsecured loan does not require any security (also known as ‘collateral’).
Who uses short-term business loans?
A short-term business loan is used when a business needs fast approval on a loan and can demonstrate an ability to pay it back quickly. They are often used by small businesses to cover sudden expenses or to capitalise on a limited-time business opportunity.
There are a few different types of short-term finance available in Australia:
In some cases - such as renting or purchasing assets for long-term business use - you may want to consider applying for equipment finance.
The best short-term finance for your business will depend on the type of business you operate, the stability of your business revenue, and what you plan to use the funds for.
Where can I apply?
Banks will offer short-term business loans, though you’ll get the fastest approval by applying with a specialist lender. You can apply with these lenders online, and they will often only require your business bank statements to assess your application and grant approval.
You can also apply through a business loan broker. These finance experts can be found in Melbourne, Brisbane, Perth, Adelaide, Newcastle, Canberra, Sydney, and anywhere else your business may be located. Brokers may charge a small fee for their services, but will help you compare the best options available from local and national lenders.
If you are applying for less than $150,000, it’s highly likely that you can get same-day approval by applying online. However, to ensure your application isn’t declined, your business bank statements must illustrate your ability to comfortably repay the amount you are applying for.
You can apply for a Short-term Business Loan online with a number of specialist lenders. You can see how each business finance lender compares in our reviews below:
If you’d like to see a full list of business loan lenders in Australia and learn how to compare various offers, you can visit our Lender Reviews section.
The main benefit of applying with a specialist lender is the approval speed, while the main benefit of a bank is that they often offer lower rates and fees.
What is the minimum I will need to apply?
As short-term business loans are often used when a business needs fast access to cash, specialist lenders won’t require extensive documentation to assess your application. The minimum requirements in Australia are:
- An ABN
- A GST-registered business
- Permanent Citizenship or Residency
- A minimum business-operating time of six months
- Business bank statements
If you are applying for more than $150,000, you will need to also provide a lender with:
- Profit and Loss Statements - (provided by your accountant)
- ATO Portal access
Do I qualify?
Qualifying for a short-term business loan is very simple - if your business bank statements illustrate an ability to comfortably repay your desired loan amount within the agreed loan term, you will qualify for approval. It really is that simple!
If you are applying for an amount up to $150,000, you will likely be approved the same day. If you are applying for more than $150,000, you will need to demonstrate to a lender that your business revenue is sufficient to repay the higher amount, and that your business revenue will remain stable for the term.
How to avoid being declined
The number one reason a short-term business loan application will be declined is because your business financials do not illustrate an ability to service the loan amount. You can strengthen your application by providing a lender with a business plan - a detailed plan showing how you plan to use the funds and meet your repayments.
There may be other factors that influence a lender’s decision to decline an application, including:
- A bad credit rating - i.e. a business-owner or director has bad credit
- Limited customer base - i.e. your revenue is too dependent on a small number of customers
- Poor projected growth - i.e. the outlook for your market sector is poor and your business may struggle to meet repayments over the term
- A new business - i.e. your business hasn’t been operating for long enough and a lender cannot accurately assess your revenue
Bad credit? No problem! Read our guide to learn how to get approved for a bad credit business loan.
Bad credit business loans will often have higher interest rates than other types of types of business loan.
How can I compare lenders for short-term business finance?
If you're considering short-term finance for your business, you'll want to compare lenders to get the best deal available. When comparing lenders, there are three important aspects to consider:
- The loan amount
- The interest rate
- The fees or charges for your loan
How much can I borrow?
In Australia, short-term business loans will allow you to borrow between $5,000 and $500,000. The actual amount you can borrow will depend on the type of short-term loan you are applying for and your ability to repay the total loan amount plus any interest.
Minimum and Maximum Amounts
|Minimum Amount||Maximum Amount|
Important: The actual amount you can borrow will vary between lenders
What are the rates?
The interest rates on a short-term business loan in Australia range between 5% to 30% - different types of short-term loans will attract different brackets of interest rates. For example, an unsecured business loan will often have higher rates than a business line of credit.
The interest rate applied to your loan will depend on:
- The amount you wish to borrow; and
- The lender you apply with; and
- The profile of your business
|Loan Amount||Interest Rate|
Important: This is an example and actual rates may differ.
What are the terms?
Terms on a short-term business loan can range from one month up to three years. The average term on a business loan in Australia is around 12 months. If you are needing a business loan for a longer term, you may want to consider other types of business finance.
Minimum and Maximum terms
|Minimum term||Maximum term|
|1 month||3 years|
Short-term vs Long-term finance
Short-term business loans are often used by established businesses to cover sudden expenses, and can be either secured or unsecured. Using short-term finance for major investments is a risky and expensive strategy, however, and could leave you struggling to meet your repayments.
- Interest or factor rates on short-term business finance are usually higher than long-term facilities, making them a very expensive option if not repaid swiftly.
Long-term business loans are often used for financing vehicles, assets, and equipment. Using long-term finance for short-term business needs could leave you locked in to an expensive facility even if you no longer need it.
Short-term finance versus Long-term finance
|Type of Business Loan||Benefit|
|Short-Term Business Loans||Ideal for covering sudden expenses|
|Long-Term Business Loans||Ideal for major business purchases|
Short-term Business Loan Case Study
Type of Business: Retail
Loan Amount: $50,000
A retail business has been working hard for a number of years to operate in the same area as a competitor. Through hard work, persistence, and providing excellent levels of service, they are able to compete at a higher level than their rival retail store.
The competitor announces they are entering liquidation, and will be selling their remaining inventory at a heavily discounted price - but only for a few days. To maximise on the opportunity and secure the discounted inventory, the owner of the retail business takes out a short-term business loan to access immediate funding and close the sale on the remaining stock.
As the inventory is heavily discounted, the retail business greatly increases its profit margin on each sale, and the loan is able to be repaid in full before the end of the loan term. The following year, the influx of sales and new customers boosts both the retail store’s profile and profits.
Want us to do the calculations for you? Using our quick-and-easy business loan calculator, you can see the total repayment and interest amounts on any business loan in Australia.
Short-term loans summary
Short-term business loans are used in Australia by businesses that require fast access to finance and can demonstrate an ability to comfortably repay the loan amount over a short period of time.
- Are available from banks and specialist lenders
- Will get fastest approval from specialist lenders
- Only require your bank statements to assess approval
- Can range from $5,000 to $500,000
- Are offered between one month and three years
Pros and Cons