Short term business loans for UK companies: 3–24 month funding

Short term business loans work by a lender paying a lump sum into your company's account and collecting fixed repayments over a few months, typically 3–24. Lenders rely mainly on recent trading, so the process is often quicker than for longer loans.

1. Application: you give basic company details, the amount and the purpose.
2. Bank statement review: most short-term lenders focus on the last three to six months of bank statements, looking at income, regular outgoings, existing loan repayments and how the balance moves.
3. Credit checks: the lender checks the company and usually its directors or partners.
4. Offer: if approved, the lender sets out the amount, term, repayment frequency, total repayable and any fees.
5. Guarantee and signing: directors usually sign a personal guarantee alongside the loan agreement, often electronically.
6. Funds and repayments: the money is paid to your business account and repayments are collected by direct debit.

Speed depends on how quickly you can provide documents. Having bank statements and accounts ready often matters more than the lender's own processing time.

Monthly repayments suit most companies, especially those paid on invoice terms. Weekly or daily repayments can suit businesses with steady daily takings, but they need careful checking.

Frequent repayments mean smaller individual amounts, which can feel easier. However, they leave less room for a quiet week, and a missed collection can quickly lead to arrears. Test any schedule against your weakest trading month, not your average one.

It also helps to line up collection dates with when money arrives. For example, a company paid by most customers at the end of the month may prefer a repayment date a few days later, rather than one that falls just before its main receipts. Some lenders will agree a date that suits you if you ask before signing.

The cost of a short term business loan is the total you repay minus the money you actually receive. How lenders arrive at that figure varies, so it helps to understand each type of charge.

• Interest on the reducing balance: interest is charged on what you still owe, so it falls as you repay.
• Fixed charge: some lenders set a single charge for the whole term at the outset, added to the amount borrowed.
• Arrangement fee: sometimes deducted from the loan, so you receive less than the headline amount.
• Early settlement terms: these affect whether repaying early saves money.
• Late payment charges: fees and extra interest if a repayment is missed.

Lenders price on trading history, turnover, cash flow consistency, credit records, existing debt and the term. Annual rates on short loans can look high because the cost is spread over a short period, so the total charge in pounds is often the more useful comparison. Model repayments in our business loan calculator.

Illustrative example only: actual costs depend on the lender and your circumstances.

A wholesaler borrows £50,000 over 12 months to buy stock for a large seasonal order.

• Arrangement fee: £1,000, deducted from the loan, so £49,000 is received
• Repayments: £5,000 a month for 12 months
• Total repayable: £60,000
• Total cost: £11,000 (£60,000 repaid minus £49,000 received)

If the same total were collected weekly, each repayment would be about £1,154 (£60,000 divided by 52). The loan makes sense if the extra profit from the order comfortably exceeds £11,000 and the stock sells within the term.

Most lenders size short-term loans on monthly turnover and spare cash flow. Because the term is short, the repayment is large relative to the amount, so affordability usually limits the loan before anything else.

Lenders look at average monthly income into the business account, existing loan or advance repayments, and whether the account regularly runs overdrawn. Some cap the loan at a proportion of monthly or annual turnover. A longer term within the 3–24 month range may allow a higher amount, as each repayment is smaller.

The main risk with short-term borrowing is that the cost it was meant to cover does not pay back in time, leaving large repayments with less cash to meet them. Check these points first:

• Personal guarantee: if the company cannot pay, the lender can pursue the guarantor. Read our guide to personal guarantees.
• Total repayable: confirm it in pounds, including fees.
• Early settlement: check whether repaying early reduces the cost.
• Repayment frequency: make sure it matches when money comes in.
• Repeat borrowing: taking a new short loan to repay an old one can build up cost quickly. If you need ongoing funding, a facility may fit better.

A short-term loan suits a one-off need with a clear repayment plan. Other products can fit better when the need is ongoing or tied to how you are paid.

• Merchant cash advance: repaid as a share of card takings rather than fixed instalments. It can suit card-led businesses with variable sales, but the total repayable is usually fixed, so repaying faster does not cut the cost.
• Revolving credit facility: a limit you draw, repay and draw again. It suits recurring or unpredictable needs, and you usually pay interest only on what you use.
• Invoice finance: releases cash tied up in unpaid invoices. It suits B2B companies whose cash gap is caused by customers taking 30–90 days to pay, and grows with sales.
• VAT loans: short loans set up specifically for VAT bills. Compare with an HMRC Time to Pay arrangement and with HMRC late payment interest, which is the Bank of England base rate plus 4%.

Sometimes. Short-term lenders often focus on recent bank statements, so some will consider companies that longer-term lenders would decline, usually at a higher cost.

• Short trading history: minimum trading periods range from a few months to two or three years, depending on the lender.
• Adverse credit: older or explained issues may be accepted, while recent defaults or County Court Judgments make approval harder.
• Low profits: strong, consistent bank statement income can help where filed accounts show little profit.

Every lender makes its own decision and runs its own checks.

Short term business loans to limited companies, LLPs and partnerships of four or more partners are generally unregulated business finance. Consumer Credit Act protections generally do not apply, so the loan agreement sets out your rights and obligations.

Welcome Finance is not authorised or regulated by the FCA and arranges unregulated business finance only. Read the agreement and guarantee carefully and take independent advice if you are unsure.

We help you work out whether a short-term loan is the right tool, then approach suitable lenders on our panel. A dedicated relationship manager, a real person, supports you by phone, email and chat from first enquiry until the lender pays out.

1. Check your eligibility in about 60 seconds, without affecting your credit score.
2. Talk through the amount, purpose and repayment plan with your relationship manager.
3. We approach suitable lenders and explain each offer's total repayable and repayment schedule.
4. You decide whether to apply. The lender runs its own credit checks and, if approved, sends the agreement.
5. You sign and the lender pays the funds to your business account.

We charge you no fee. We are paid a commission by the lender when your finance completes. You can ask how much we will receive, and commission can differ between lenders.

What is the difference between a short-term loan and working capital finance?

They overlap. Working capital finance covers day-to-day costs, and a short-term loan is one common way to fund them. See our working capital page.

Can I take a second short-term loan before the first is repaid?

Some lenders allow a top-up once part of the loan is repaid, subject to a new affordability check.

Will a short-term loan affect future borrowing?

Other lenders will see the loan and its repayments. A record of on-time repayments can help future applications.

Is a short-term loan suitable for buying equipment?

Usually not. Equipment generally lasts for years, so asset finance spread over its working life is often a better match.

Can repayments be paused?

Not usually. Some lenders offer an initial repayment holiday at the outset, but this is agreed in advance and may add to the cost.

Can I use a short-term loan to pay staff?

Yes, if the company expects income to recover soon. Borrowing for payroll month after month suggests a longer-term solution is needed.

What happens if I miss a repayment?

The lender may charge late fees and extra interest and contact you. Repeated missed repayments can lead to the full balance being demanded and the personal guarantee being called.

How quickly can funds arrive?

Once approved and signed, many lenders pay within a few working days. Delays usually come from missing documents.