What You Should Know About Short-Term Loans For UK Businesses

Short-term loans can be both a helpful way to secure funds and a pain when it comes to getting out of their grip, but it you use them right these loans can do what you need them to.

There are different types of short-term loans and different ways to use them, so you should understand what you are getting into before you take one out. Once you understand the loan and how it can help you, you will also know what you will be able to avoid.

Analyzing short-term loans

Short-Term Business Loans

Whether you are looking for increased cash flow or to pay for the costs of expansion, short-term loans can provide the ideal situation for your business. To be eligible for one of these business loans, you will need to have been running the business and actively trading for a minimum of 18 months and earn a turnover of at least £80,000 each year.

Short-term business loans allow you to take out finances. It can last anywhere from three months to a year and after the term is up you’ll need to have paid the full balance. It is also possible to get anywhere between £1,000 and £1 million in financing but the amount depends on a few things.

Getting a Good Loan

In order to get a loan, you need to have a few things in proper standing. The financial health of your business is important. If you are financially strong, you will be able to get a better interest rate. The lender you are borrowing from is also instrumental.

According to the site MoneyPug, which is known as a platform form for short-term loans, each lender has their own policies and terms, finding the right one for you will make all the difference. Finally, the reasons that you are taking out the loan and what you will be spending the money on will come into play.

Yearly interest rates vary a lot depending on the lender and type of business, but they usually range from five to 10 percent. Most will charge you everything they can.

Taking short-term loans

Types of Loans

Before you decide on the type of loan that you need, you will need to consider a few things.

  • First, keeping the amount you borrow to a minimum will help you avoid large interest rates. You can always extend the loan. You should think about what kind of interest rate you can pay before taking it out.
  • You’ll want to consider the length of the term and how it will affect your spending and ability to pay off the loan. It is important to give yourself enough time to pay it back but to do so in good time so you will pay less interest.
  • Finally, application fees are another thing to think about. It’s not always free to apply for loans and it can affect your credit score.

Once you know what you can handle, you will have a better handle on what you can afford.

  • Term loans are the most common kind, and they work like a regular personal loan. Agree to terms and amount of time you will pay it back and you will be charged a fixed interest rate.
  • Invoice financing, on the other hand, is based on unpaid invoices where the bank pays them or lends you money against the value of the accounts. Banks will pay your business a percentage at a service charge, which can help with cash flow.
  • Another loan is asset financing, which is used to buy or replace equipment for your business. You can finance office equipment, computers, machinery, and vehicles.
  • Lastly, business lines of credit give you access to a fixed balance whenever you need it. Cash flow is improved with unexpected expenses that might come your way.


There are a few tips to keep in mind when you take out a loan. Always keep track of your due date and use loans to take care of unexpected situations, not routine struggles. You must familiarize yourself with the terms and conditions and only take out the money that you can afford to pay back.

Borrowing money should be saved for emergencies. If you go through the process diligently and carefully, you will be able to make the most out of your short-term loans and use it to bolster your business and gain the upper hand.