Recently updated on January 11th, 2023 at 10:40 am

In this article, we’ll look at short-term business loans – what they are, the benefits of using them, and common uses for quick access to funds for up to 12 months.

What is a business loan?

A short-term business loan in Australia is used for business-related purposes, such as investing in equipment, purchasing, improving cash flow, or debt consolidation. Short-term business loans can help smooth out the business’ financial ‘ups and downs’ or help you take advantage of opportunities to grow your business. Short-term small business loans are usually for $25,000 to $500,000, with a term of 3 to 12 months.

Why you might consider a short-term business loan

Short-term business loans can be used for a range of scenarios, including:
• Business expansion: “It costs money to make money” is the old adage and growing a business is no different. Advertising, hiring new staff, expanding or renovating, are common costs associated with a growing business.
• Inventory: Investing in inventory, including expansion and replenishment, can be tremendously beneficial to boost revenue. Though it’s often a double-edged sword as expensive purchases can hurt cash flow, especially when businesses have seasonal demand.
• Cash flow: Small businesses, in particular, have to deal with cash flow fluctuations when inventory is slow to move or customers are slow to pay.
• Equipment: Purchasing new equipment, or repairing/ replacing existing equipment, is often an unexpected (and hefty) expense that is required to keep the business moving.

The advantages of short-term business loans

A short-term business loan has many advantages, including:

• Easy application process: Apply online for short-term business loans in Australia, with a relatively simple application process from a range of private lenders and fintechs.
• Real-time access to funds: Once you meet the lending criteria and the loan is approved, funds can be accessed in as little as a few days.
• Keep control: A short-term business loan ensures you retain full control with no external interference, which is often viewed as preferable to inviting investors into the business.
• Temporary: Once the loan is repaid, your obligation ends. Whereas in the case of equity finance (investors), you have new shareholders for potentially a long time.
• Tax-deductible interest: Payments are more manageable as the cost of funding business growth (loan interest expense) can be deducted from income generated.

Types of business loans

There is a range of short and longer-term loans available to businesses in Australia:
• Term loan: Borrow a single lump sum to be repaid over an agreed period of time, with fixed or variable interest rates.
• Line of credit: Access funding up to a certain amount that can be drawn down as required to help manage cash flow or pay an unexpected expense.
• Business overdraft: Attached to your business bank account, an overdraft allows you to overdraw up to a pre-approved amount.
• Business credit cards: Business credit cards are convenient, though it’s easy to be stung with high-interest rates if the card balance isn’t paid off in full each month.
• Equipment lease: Funds provided and secured against specific business equipment (or vehicles).
• Invoice financing: Invoice financing, also known as invoice discounting or debtor finance, pays the business the majority of the customer’s invoice immediately, transfers the liability of a customer’s invoice to the invoice finance firm, then takes a percentage of payment once the customer pays the invoice.

Key takeaway

If you own property, a short-term business loan is increasingly being considered as a way to obtain funds relatively quickly. You can apply online for a short-term business loan through a variety of lenders in Australia – particularly through private lenders and fintechs. This form of funding can be used for a short period of time (3 to 12 months) for a variety of purposes.


Mango Credit

Yanis Derums is the Founder and Director of Mango Credit– a leading private lender specialising in bridging loans for personal use and business short term loans for commercial and/ or investment purposes. Yanis has extensive experience with financial analysis, credit assessment, product structuring, and general business management

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