Loan types

The short term business loan, and the renewal that costs you twice

Three to eighteen months, priced with a factor rate and collected weekly. Here is $50,000 done honestly, and the renewal math that quietly adds $9,000 in cost.

5 minute readUpdated 2026-07-29Written by the Exp Capital desk

A short term business loan is a real loan with a real note, sized between three and eighteen months, usually priced with a factor rate instead of an interest rate and collected by automatic weekly or daily debit. It is the product most owners actually end up in when they need real money fast and their file will not support bank paper.

Start with the one distinction that matters legally. A merchant cash advance purchases your future receivables, so it is not debt. A short term loan is debt. There is a promissory note, a fixed obligation that does not shrink when sales slow, a personal guarantee in most cases, and it shows up as a liability. That is worse for you in a bad month and better for you in every other way, including the fact that state lending and disclosure laws actually apply.

One to three days, start to finish

What $50,000 really costs

Take $50,000 at a 1.28 factor over nine months. You owe $64,000, full stop. That is 39 weekly payments of $1,641. The cost of the money is $14,000.

A $50,000 loan at a 1.28 factor over nine months

Now translate. A 1.28 factor is not 28 percent a year. You are repaying constantly, so your average outstanding balance across those nine months is roughly half the original $50,000, and the term is well under a year. Run the actual payment stream and the nominal APR lands around 67 percent. Anybody who tells you a 1.28 factor is a 28 percent loan is either confused or counting on you being confused. Work through converting a factor rate to an APR and run yours.

Total payback on $50,000, three structures

Shorter terms look cheaper in dollars and are more expensive in rate. The same $50,000 at 1.22 over six months costs $11,000 rather than $14,000, and it annualizes closer to 80 percent because you are repaying $2,346 every week. The same $50,000 at 1.35 over twelve months costs $17,500 and annualizes near 62 percent. Choose the structure your cash flow can absorb, and know which of the two numbers you are optimizing.

The same $50,000, four ways
Product	Total repaid	Cost	Payment	Time to fund
Short term loan, 1.28 over 9 months	$64,000	$14,000	$1,641 weekly	1 to 3 days
Merchant cash advance, 1.24 over 6 months	$62,000	$12,000	About $492 daily	24 to 48 hours
Term loan, 24 months at 18 percent	$59,909	$9,909	$2,496 monthly	1 to 10 days
Line of credit at 16 percent, 6 months	$55,000	$5,000 with a 2 percent draw fee	Interest only, then principal	2 to 7 days

The renewal, with the actual numbers

You took $50,000 at 1.28, so you owe $64,000. Twenty two weekly payments in, you have paid $36,103 and $27,897 is left. The funder offers a renewal at $75,000 on a 1.30 factor. They pay off the $27,897, so $47,103 of new cash reaches your account and you now owe $97,500.

Add up both deals. You received $97,103 of cash in total and you will have paid $133,603. Your total cost of capital is $36,500. Now run the alternative. Finish the first loan, pay the full $64,000, then take a fresh $47,103 at the same 1.28. That second loan costs $13,189. Your total cost across both is $27,189.

The renewal cycle, in order

The renewal cost you $9,311 more for the exact same $97,103 of cash, and it did it while feeling like a favor. This is not a rare abuse, it is the standard economics of the product, and it is why so many businesses end up renewing every four months forever. See refinancing an advance before you accept one.

What underwriting actually needs

Short term loans are underwritten on bank statements, which is why they fund in days. The file is small and the answers come fast.

Three to six months of business bank statements. The whole decision lives here. Average daily balance, deposit count, negative days, and existing debits.
Six months in business, sometimes three. Below that the lane narrows to the highest cost end of the market.
Roughly $15,000 to $20,000 a month in deposits as a practical floor for most funders writing meaningful amounts.
Credit in the 500s and up. All credit profiles are accepted at some level of pricing. Your statements move the offer far more than your score does.
Position matters. A first position deal prices materially better than a second, and a third position is expensive enough that it is usually a signal to stop borrowing. See second position.
Every open advance shows. Funders see the daily debits in your statements, so disclose them. Hiding a position gets the file declined at funding, not at application.

The four lines that decide the offer

Prepayment, and the one question to ask

With a straight factor rate, paying early saves you nothing. The $64,000 is $64,000 whether you take nine months or four. Some funders do offer a genuine early payoff discount, often a tiered schedule that forgives a portion of the unearned fee if you retire the balance inside a set window.

That discount is worth real money and it is never volunteered. Ask this exact question before you sign: what is my payoff amount, in dollars, if I pay this in full at day 60, day 90, and day 120. Get the answer in the contract, not in an email from a salesperson. Read prepayment and early payoff for what a real discount looks like.

Where it sits against everything else

Where a short term loan sits on speed and cost

A short term loan sits just below an advance on cost and just above everything else. It is the right product in a narrow band: you need real money in days, the amount is meaningful, and you have a specific event inside the next twelve months that repays it. Outside that band, something on the lower left of this map is cheaper and you should spend the extra week getting it. The head to head against longer paper is worked out in short term against term loan.

What Exp Capital does with this

Exp Capital Solutions is a broker, not a lender. We do not fund short term loans, set factor rates, or decide who gets approved. We take one file to the funding partners most likely to price it well, then put the offers next to each other with the amount funded, the total payback, the payment, the frequency, and the payoff schedule spelled out in dollars. We will tell you when a renewal being waved at you is worse than finishing the deal you already have, and we will tell you when a line of credit or factoring fits better, even though those pay us less.

Questions people actually ask

What is the difference between a short term loan and a merchant cash advance?

A short term loan is debt. There is a promissory note, a fixed payment that does not change when sales drop, and state lending rules apply. An advance is the purchase of future receivables, so it is not legally a loan, has no interest rate, and often flexes with card volume. The cost of the two can be similar. The legal treatment is not.

What APR does a 1.28 factor rate actually work out to?

On $50,000 repaid weekly over nine months, a 1.28 factor is $64,000 total and works out to roughly 67 percent nominal APR. The factor looks like 28 percent because it ignores the fact that you are paying the money back continuously, so your average balance outstanding is close to half the original amount for less than a year.

Should I take the renewal my funder is offering?

Usually not in the form it is offered. A standard renewal rolls your unpaid balance into a larger new deal and charges a factor on the whole thing, so you pay a fee twice on the same principal. On a typical $50,000 deal that costs about $9,000 more than finishing the first loan and taking a second one. Ask for new money to be quoted separately.

Can I pay off a short term business loan early to save money?

Only if the contract contains an explicit early payoff discount. With a straight factor rate, the total is fixed and paying early just shortens the term without lowering the cost. Some funders offer real tiered discounts at 60, 90, or 120 days. Ask for the payoff amount in dollars at each of those dates before signing.

What credit score do I need for a short term business loan?

There is no firm cutoff and all credit profiles are accepted somewhere in the market, including files in the 500s. What drives the offer is your bank statements: average daily balance, deposit consistency, negative days, and any existing daily debits. Credit mainly influences pricing and how many funders will look at the file.

How much can I borrow with a short term business loan?

Most funders write roughly one to one and a half times an average deposit month, so a business banking $100,000 a month is typically looking at $100,000 to $150,000 across all open positions. Second and third position deals shrink that number and raise the factor, sometimes sharply.

Keep reading

Factor rate to APRThe conversion that turns 1.28 into 67 percent.Why stacking backfiresTwo weekly debits, one revenue stream, one ending.Merchant cash advanceThe faster, costlier product one step up the ladder.