Short-Term Loan Calculator: What Can You Afford?

Plug in the numbers to see what your short-term loan will cost you

How Much Will Your Short-Term Loan Cost?

Access to capital is important for all companies at any stage—but it’s especially crucial for small business owners.

When your company is on the verge of an exciting revenue-generating opportunity or when you need funds to cover an emergency for your business, the ability to access funds could make-or-break the future success of your business.

Traditional small business financing—bank loans, SBA loans, term loans, etc.—takes a while to apply to and eventually secure. Small business owners who need funds for whatever business need yesterday may find that their best financing option is a short-term loan.

Short-term loans are business loans that provide fast access to a relatively small amount of capital.

But fast cash often tends to be expensive cash. So how much can a short-term loan cost you?

Use our short-term loan calculator to find out.

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Are Short-Term Loans Your Lowest Cost Financing Option?

Short-term loans offer fast access to financing, but that speed comes with a price. Make sure that you shop your loan options before signing on the dotted line for a short-term loan. Then you'll be confident you're getting the lowest-cost loan for your business.

Check your loan options to find the lowest APR possible.

How Do Short-Term Loans Work?

Short-term loans work similarly to traditional term loans—offered by traditional banks and online lenders alike.

You’ll receive a certain sum of capital, then pay that back with interest and fees over a set amount of time.

But there are a few key differences with short-term loans.

Loan amounts are smaller, repayment periods are much shorter, interest rates are drastically higher, and there are often daily or weekly repayment schedules.

However, that doesn’t mean that a short-term loan isn’t the right fit for any business owner.

A few reasons to pursue short-term loans are their easier qualification standards, faster application processes, and quicker funding times.

Read more about short-term loans

Short-Term Loans: Loan Amounts, Terms, and Rates

Let’s dive into the specifics—what can a short-term loan look like?

Well, short-term loans certainly offer smaller amounts of financing than their longer-term counterparts do, but the do vary in size. Typically, the loan amount for a short-term loan ranges from $2,500 to $250,000.

The main aspect of short-term loans that sets them apart from other financing options are their terms. Term length are much shorter than what you’d get with other business loans—ranging from 3 to 18 months.

What can rates can you expect to see after using a short-term loan calculator?

Well, rates can range, but are typically much higher than what you’d get with other financing options.

For the most qualified borrowers, rates can start at 10%. However, with short-term loans, rates can skyrocket well beyond that—oftentimes reaching 110% APR.

Why Is a Short-Term Loan an Expensive Financing Option?

When you plug the numbers from your loan offer into your short-term loan calculator, you might be shocked by the APR you get as a result.

Why do short-term loans come piled with steep interest rates and fees?

Well, it comes down to a couple different factors.

First off, short-term lenders generally work with less qualified borrowers—meaning borrowers approved have lower credit scores, less time in business, etc.

And because a less-qualified borrower is riskier for a lender to work with, they’ll charge high interest rates on the financing. That way, the lender gets most of its money back via steep interest payments even if the borrower doesn’t end up repaying the loan in full in the end.

Another reason why you’ll get a high APR on a short-term loan calculator is the speed at which short-term loans are approved and funded.

Unlike bank loans or longer-term loans, short-term loans can be approved in just a few days—sometimes even the same day a borrower applies. That’s largely because short-term lenders only a look at a couple pieces of documentation and information before approving an application (namely bank statements and credit rating).

This helps a lender approve applications quickly, but it also means that they’re taking less time to vet your business and make sure that you’re qualified.

All in, this lends itself to a higher cost of capital.

What Will a Short-Term Loan Cost? Here’s an Example to Plug Into Your Short-Term Loan Calculator

Just how expensive can a short-term loan be? Let’s take a look at an example to put some numbers behind that short-term loan calculator.

Say you’re offered a $100,000 short-term loan with a factor rate of 1.18.

Factor rates are another way a lender can quote the cost of a loan. To understand what you’ll have to pay back in interest, you multiply the factor rate by the total loan amount.

The total loan amount, $100,000, multiplied by 1.8, is the total amount you’ll need to pay back: $118,000.

Assuming your lender wants you to pay back in 12 months, you’ll make 264 payments to be fully paid back. (Short-term loans are often paid back daily, and there are 22 payment days in a month.)

Plugging that into your short-term loan calculator, you’ll find that you need to make $446.96 in daily payments, and your APR is 33.54%. That APR is quite a bit higher than what the factor rate made it look like.

How Does This Short-Term Loan Calculator Work?

Wondering how expensive your short-term loan really is, and whether you can afford to pay it back?

Let’s walk through how you can plug in the numbers and use our short-term loan calculator yourself.

Here’s the general gist of how this short-term loan calculator works:

To find the APR of your short-term loan and the amount you’ll make in daily payments, enter the loan amount found in your loan offer.

Next, find the term you were given in the offer—ranging from 3 to 18 months. Plug that loan term in as the repayment period.

You’ll need to plug in your quoted factor rate into your short-term loan calculator, along with any other fees you were quoted with on your short-term loan.

What Fees Might Come With a Short-Term Loan?

As always, you won’t know the true cost of your loan until you’ve considered any fees you’ll need to pay for the service of taking out the loan. (Remember, interest rate does not show how expensive the business loan actually is.)

What fees should you keep an eye out for? Here are the most common types of fees that come with short-term loans explained:

Origination Fees

One of the most common fees charged on a short-term loan (and other loan products, for that matter) is an origination fee.

An origination fee is meant to cover any of the lender’s costs incurred when originating the loan—namely, administrative work. An origination fee is typically quoted as a percentage of the total loan amount.

Application Fees

An application fee could also come attached to a short-term loan. Application fees are meant to cover any costs the lender incurred when processing a loan application.

For instance, it generally costs money to run credit checks or background checks—which are necessary steps for some lenders to approve loans.

Pre-Payment Fees

You need to watch out for pre-payment penalties when you take out a short-term loan (and other business loans). A lender could charge pre-payment fees if you end up paying your loan off early—before your term is over.

A lender would charge a fee for this as it will lose some of the interest payments you were going to keep making if you hadn’t paid the loan off early.

Late-Payment Fees

A short-term lender could also charge a late-payment fee if you miss your repayments.

This is less likely to be a problem if you’ve taken out a short-term loan: Short-term lenders often automatically take daily debits from your business’s bank account.

When Does it Make Sense to Take on a Short-Term Loan?

Maybe you’ve already used the short-term loan calculator, and found that your short-term loan offer isn’t very affordable. Or, you’re just shopping around, and reading that short-term loans can be pretty costly.

If short-term loans are so expensive, why would a small business owner want to apply for one?

Well, in certain circumstances, short-term loans can be the right type of financing for a business.

Access to capital is essential for any small business owner. And if you’re confident that what you’re using the short-term financing for will pay dividends in the end, then short-term debt can be worth it even if it’s expensive debt.

Let’s take an example.

Say you have the opportunity to fill a huge order for a customer who can pay you in 90 days, but your supplier needs to be paid in two weeks?

Without access to the cash to make the order happen, you can wave goodbye to that lucrative customer.

But with a short-term loan, you can get the funding you need to fulfill the order, and pay the loan off easily once your customer can pay up.

Or, maybe you’re approaching your busy season, and need capital on hand to make an extra inventory purchase. Getting a short-term loan would give you the funding you need to stock up before the big influx of customers.

The point here is that short-term debt makes sense when you need financing quickly, and know you’ll be up on the deal in the end.

Who Are the Best Short-Term Lenders to Work With?

If you’re interested in a short-term loan, there are a lot of lenders you could consider working with.

Whichever lender you choose to work with, make sure you’re confident that they’re a reputable financing company that will help grow your business.

And as always, shop around the different lenders offering short-term loans so you know that you’re getting the lowest-cost financing available.

Direct Capital

Direct Capital offers short-term loans ranging from $10,000 to $150,000.

And if you're especially conscious of the numbers coming out of your short-term loan calculator, then Direct Capital might be right for you. They tend to have slightly lower interest rates, with their median APR being around 22% (which is much lower than many other short-term lenders).

However, you'll have to have a slightly higher credit score than other short-term lenders require—around 620 as a minimum.

They also only work with businesses that have been operating for 2 years and have a minimum annual revenue of $150,000.

Read more Direct Capital reviews.

OnDeck

If you need a short-term loan very quickly, then OnDeck might be the right lender for you. An application takes no longer than 10 minutes, and they can approve a full loan application in 24 hours.

Not only is OnDeck fast, it's also accessible: OnDeck sets a minimum personal credit score for their short-term product at 500.

An OnDeck offer will spit out a higher APR on a short-term loan calculator, though. The APR on an OnDeck loan range from 9% to 99%.

Read more OnDeck reviews.

Interested in Short-Term Loans? Here are 3 Other Loan Products to Consider

If you’re interested in short-term loans, it’s worth shopping your options around to see if you could qualify for a lower rate or faster time to funding with a different loan product.

Here are a few other business loans that could offer a fast time to funding or, in some cases, a lower interest rate.

1. Medium-Term Loans

Medium-term loans are structured similar to short-term loans, but with higher amounts, longer terms, and lower costs.

Whereas APRs on short-term loans can range from 10% to 110%, APRs on medium-term loans can range from 7% to 30%.

If you were shocked by the APR on your short-term loan calculator, it’s worth it to see if you could qualify for a lower rate with a medium-term lender.

However, these loans tend to be much harder to qualify for. Typical borrowers have credit scores above 650, two or more years in business, and average annual revenues above $200,000.

Read more about term loans

2. Business Lines of Credit

With the right line of credit lender, a business line of credit can offer a similar loan to a short-term loan.

Some line of credit lenders offer fast access to financing, approving business lines of credit just a few days after you apply. These business lines of credit also offer credit lines similar to the amount of financing a short-term loan offers.

While it’s not an industry standard, we often call these financing products “short-term lines of credit” due to their easy comparison to short-term loans.

But as with short-term loans, you’ll have higher interest rates with short-term lines of credit. Interest rates can range from about 7% to 80%.

Read more about business lines of credit

3. Merchant Cash Advance

When you think of fast financing, the first type of financing that probably pops into your head is a merchant cash advance.

A merchant cash advance offers very fast access to capital—often the same day you apply.

With a merchant cash advance, a cash advance company advances you a lump sum of capital that you’ll pay back by letting them take a fixed percentage of your credit and debit card sales each day.

While a merchant cash advance offers fast, convenient cash, it’s the most expensive financing product on the market.

Oftentimes, you’ll find that short-term loans can offer lower interest rates than merchant cash advance companies can.

Read more about merchant cash advances

See What Other Loan Products Will Cost You

What kind of rates could you get with other business loans? Try these business loan calculators to find out.

Ready to Grow Your Business?

Last updated May 10, 2018