A short-term loan can simply be defined as a type of loan that is acquired for personal or business purposes. A short-term loan requires the principal amount to be paid with interest before due date. They have a deadline to be paid and this is usually within a year after acquiring the loan from the lender.

For most small businesses, and start-ups in need of capital, acquiring a short-term loan is the best course of action. This is because, small businesses as well as most startups usually don’t qualify for credit line from the banks. Short term loans can act as a lifeline.

Short term loan lenders usually grant amounts that range from $100 & can go as much as $100,000. Individuals with temporary cash flow problems are also eligible to apply for short term loans. Short term loans are easily accessible.


As per its name, short term loans are usually expected to be paid off very quickly. In many cases, the duration for a short term loan to be paid off is usually between six months to a year. Short term loan repayment durations in certain cases can stretch up to 18 months. Any form of loan expected to be paid off after 18 months can be classified as a medium term loan or a long term loan.

Long term loans however, can be expected to be paid between just over a year and to 25 years. The payment plans for some short term loans are very flexible. They allow you to pay back at your own pace. These types of loans do not come with a specific due date. However, there are always terms and conditions the borrower must agree to before the lender approves of the loan process.


1. A merchant cash advance. Even though this type of short term loan is a cash advance, it still is in a form of a short term loan. In these instances, the lendee makes the loan payments by allowing the lender have access to the lendee’s credit information.

2. A line of credit. A line of credit is similar to using a business credit card. A credit limit is usually set and the business or start up is allowed access into the line of credit whenever they need it. Monthly instalment payments are usually made for whatever amount is being borrowed.

According to how much line of credit has been accessed by the business or state up, monthly payments may vary. One major merit of a line of credit compared to business credit cards is that, line of credit comes with a lower Annual Percentage Rate (ARP).

3. Payday loans. One major characteristic of a payday loan is that it is very easy to obtain. Payday loans are emergency short-term loans. They are very common to acquire the fact that, even high street lenders offer this form of a loan. However, the major disadvantage to acquiring this form of loan is that the entire amount of the loan as well as its interest is expected to be paid back in one large sum on the due date. The lender can simply take the loan repayments from the lender’s bank account using a continuous payment authority. Another disadvantage of this form of loan is its high-interest rates. This makes it sometimes difficult for some borrowers to meet their deadlines.

4. Online or installment loans. The process of acquiring this short-term loan is done online. This process is usually smooth and easy from the application process up to the approval process. Once finalized, the funds are wired to the bank account of the borrower. The borrower will first have to agree to a series of terms and agreements before the lender realizes the funds.


Short term loans come with many advantages for the borrower and some of these include;

1. Short time frame for incurring interests: in most instances, short-term loans are required to be paid off within about a year however, there are lower total interest payments incurred. Long term loans have a significantly huge interest rate.

2. Quick funding time. Short-term loans are usually considered to be less risky compared to long-term loans due to the fact that it has a short maturity timeline. This means that the borrower doesn’t have to go through too many hoops in order to acquire a loan from the lender.

3. Ease of acquiring. One major advantage of a short-term loan is due to the fact that the requirements to obtain a loan is quite easy to meet. Small businesses, start ups as well as individuals with low credit scores consider this form of loan a lifesaver. The reason short-term loan processes are fairly easier to obtain is due to the fact that the amounts are relatively smaller compared to long-term loans which take a while to process loan applications.


Although not many, the main disadvantage of a smaller loan is the fact that it usually provides small amounts of money to the borrower. This is however due to the fact that the timeframe of the loans is expected to be paid soon so that the borrower won’t go through the stress of huge monthly payments.

Short-term loans are essential to most small businesses that are in need of capital as well as individuals. Individuals who have to make big purchases usually opt for this form of loan so that they do not burn through their life savings. Many people have different reasons for taking short-term loans. Some might include, buying a new car, or paying for the services of a real estate lawyer when trying to close a deal on a new property.  This is what a friend of mine who lives in Markham did.  He went for a short loan to pay for closing costs with a real estate lawyer in Markham