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Short term business finance options: Which is best for my business?

Business Finance

Short term business finance options: Which is best for my business?

Updated: 17 October 2022

If you need business finance to help manage short-term needs, such as bridging a cash flow gap, bulk buying stock or kicking off new projects, there are a range of finance options available. Here, we take a look at some of the most popular ones to help you determine which is best for your business.

Business credit cards

Business credit cards are just like standard credit cards, except they have larger credit limits and can be issued to a number of users. You can use them to make purchases for goods and services and then pay the cost at a later date. They can be used to build up a credit profile, manage employee expenses, and help manage your cash flow.

Through a business credit card, you gain access to a line of credit, which can be used whenever you need it. Your limit will be determined by your credit card provider. 


  • Typically available to businesses of all sizes and ages
  • Very flexible — can be used for a wide number of business purposes
  • Some business credit cards offer additional benefits, such as cashback and travel insurance
  • Up to 56 days free credit


  • You may have to pay an annual fee just for having a credit card
  • Interest rates on credit cards can be high, and are offered on variable rates
  • Interest is also compounded daily, which can greatly increase the cost of borrowing
  • Most business credit cards require a personal guarantee

Business line of credit

A business line of credit is a little like a credit card, but without the physical card. It allows your business to access a credit limit, which is determined by your provider. You’re able to withdraw funds as and when needed and typically only have to pay interest on that amount, rather than the total amount available. Lines of credit can expire after a set time, or can be a revolving facility where you can reuse funds after you’ve repaid them, without having to apply again. 

FlexiPay is our line of credit product. You’re able to access a credit limit from £2,000 to £50,000 to pay for business costs, such as paying energy costs or your tax bill to HMRC, buying stock or covering payroll. There’s no interest to pay — you’ll just pay a flat 3% fee on each business cost. You then repay in 3 equal monthly instalments, and once it’s repaid, it’s ready to use again.

Below, we’ve looked at the particular benefits and drawbacks of FlexiPay as a line of credit option.


  • No annual charge or set up fee
  • Quick and simple to set up — apply in just 10 minutes
  • Pay back each business cost in 3 equal payments


  • Smaller amount available versus a standard term loan
  • Not suitable if you have an immediate cost to pay when you sign up, as it can take time to receive your line of credit

Business overdrafts

If you’re in a pinch, and you already have a business bank account, you could use your authorised overdraft facility to tide you through. It can be one of the more quick and simple options, since you can set it up with your bank, and there are typically account options available for businesses of any size or age.


  • Can be simpler to set up if you have a business bank account already
  • Can help you build a credit rating for your business
  • Incredibly flexible — can be repaid when it suits you


  • The amount you can borrow is typically lower than other forms of short-term business finance
  • Interest on arranged overdrafts can be high — if you go into an unarranged overdraft, these fees can increase substantially
  • Interest is also compounded daily, which can greatly increase the cost of borrowing
  • Typically need to pay a fee for having a business bank account and overdraft facility
  • May not receive interest on in-credit balances

Short term business loans

Unlike standard term loans, which are offered over a longer period, short-term business loans are typically available on terms anywhere from 3 months to 2 years. They can be a preferable option for businesses that require a larger amount of funds, such as those looking to refurbish their premises or kick off a new project. 

At Funding Circle, we’re able to offer our own short-term loans, which are available on 1 to 2 year terms. Fill out one simple application and we’ll find the right loan for your business. It takes just 10 minutes to apply and you’ll get a decision in as little as 1 hour. If you’re approved, you could receive the funds in your account within 48 hours.

Below, we look at the benefits and drawbacks of our own short-term loan offering.


  • Available to businesses that have been trading for 1 year or more
  • No fees — interest only
  • Loan terms are shorter, so you pay less interest — and less still, if you pay it back early
  • Fixed interest rates


  • Smaller amount available versus a standard term loan
  • Interest rates and monthly repayments can be higher
  • May require a personal guarantee

Merchant cash advance

A merchant cash advance is a flexible facility that enables businesses that receive payments from customers via credit or debit card to borrow, with the funds then ‘secured’ against future card payments. They can be useful for businesses that receive payments via a healthy number of card transactions, as repayments are taken as a percentage of future card revenues.


  • Available to businesses that have been trading for 6 months
  • Very flexible — can be used for a variety of business purposes
  • No fixed payments, fixed terms or security required


  • You need to be taking at least £10,000 per month in debit and/or credit card sales to be eligible for this type of funding
  • Not appropriate for businesses who primarily take payments in cash or via other transfer options

Invoice finance

If you’re paid a substantial amount through invoices, you could also try invoice finance. As the name suggests, it’s a form of lending based solely on your invoices. Your provider buys up your unpaid invoices, or lends you money against the value of the accounts receivable. 

As you continue to provide services or goods to your customers, you hand these invoices to a provider who will then pay your business a percentage. Once the invoice is paid and the service charge of the provider is covered, you’ll then receive the remainder of the sum. 


  • Allows you to access funds you’re due without waiting for clients or customers to pay the amount owed
  • Can increase the fund request as your revenue grows, and scale it back when you need to


  • Don’t receive the full income from your goods or services — your provider takes a cut, including a monthly interest rate and service fees
  • Invoice finance is not generally available to those that sell to the public
  • Providers will only lend against invoices due from clients or customers they expect to pay

17/10/22: While we want to help as much as we can, the information found here is provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice. 

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