What is the best financing option for short-term needs?

Invoice finance and merchant cash advances are ideal for short-term needs. They provide fast access to cash with flexible repayment structures tied to revenue or receivables.

Which sectors use merchant cash advances most?

Retail, hospitality, and food services often rely on merchant cash advances due to daily card transactions and seasonal fluctuations.

How fast can I get short-term business funding?

Funding can be approved within 24 hours, with funds deposited as soon as the next business day depending on the lender.

Are there downsides to short-term finance?

Yes, short-term financing often comes with higher interest rates and shorter repayment periods, which may increase pressure on cash flow.

June 30, 2025

Finance

Which Financing Is Best for Short-Term Business Needs?

Discover the top short-term financing options for UK businesses. Compare loan types, sector usage, and metrics to find the best funding solution for your needs.

James Laden

Co-founder and CEO

When your business faces an unexpected cash crunch or a timely opportunity, having access to quick, flexible financing can make all the difference. But not all funding options are created equal, especially when it comes to short-term needs. Let’s explore the best short-term financing types available in the UK—and how different sectors use them.

Understanding Short-Term Business Finance

Short-term financing is designed to be repaid within 12 months and helps businesses manage immediate cash flow issues, cover urgent expenses, or invest in short-lived opportunities.

Top Financing Options for Short-Term Needs

1. Merchant Cash Advance (MCA)

Best for: Retail, hospitality, e-commerce
How it works: Borrow a lump sum and repay via a percentage of daily card sales
Speed: Approval within 24–48 hours
Pros: Revenue-based repayment, flexible
Cons: High cost (factor rates vs. interest rates)

2. Business Credit Card

Best for: Startups, freelancers, small-scale operations
How it works: Use credit for small purchases and repay monthly
Speed: Instant use once approved
Pros: Flexible, easy to use
Cons: High APR if not paid monthly

3. Invoice Financing

Best for: B2B businesses with unpaid invoices
How it works: Borrow against unpaid invoices
Speed: Funds in 24–72 hours
Pros: Unlocks tied-up capital
Cons: Fees, reliant on client payment reliability

4. Short-Term Business Loans

Best for: General small businesses, service providers
How it works: Fixed amount repaid over 3–12 months
Speed: Approval within 1–3 days
Pros: Predictable repayments
Cons: May require a good credit score

5. Line of Credit

Best for: Seasonal businesses, construction, retail
How it works: Access to funds when needed; pay interest on usage
Speed: Access post-approval
Pros: Flexible drawdown
Cons: Interest applies even on small withdrawals

Sector-by-Sector Comparison

Sector	Most Used Financing	% Usage	Key Reason
Retail & E-commerce	Merchant Cash Advance	42%	Tied to card sales, flexible repayment
Construction	Line of Credit	38%	Seasonal project cycles
Healthcare	Short-Term Loans	33%	Equipment & staffing costs
Logistics & Transport	Invoice Financing	47%	Long client payment cycles
Hospitality	MCA / Business Credit Cards	41%	Covers fluctuating daily costs
Professional Services	Invoice Financing	36%	Works with B2B billing cycles
Startups	Business Credit Cards	44%	No collateral, fast access

Data based on aggregated UK SME lending reports from 2024 industry surveys and lender statistics.

How to Choose the Right Option

Assess Your Need: Is it urgent? Is it for growth or survival?
Check Revenue Type: Do you get paid via card sales, invoices, or retainers?
Know Your Credit: Some options don’t need great credit.
Calculate Cost: Compare APR or factor rates.
Think About Flexibility: Will your income fluctuate?

Final Thought

The "best" financing depends on your business model, cash flow, and urgency. From flexible merchant cash advances to invoice finance or quick-access credit cards, the Funding Agent offers tailored solutions for every short-term need.

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FAQs About Short-Term Business Financing

What is the fastest type of business financing?

‍Merchant Cash Advances and short-term online loans are often approved within 24–48 hours.

Can I get short-term finance with bad credit?

‍Yes, options like MCA loans and invoice financing often focus on revenue, not credit score.

What are the risks of short-term loans?

‍Higher interest rates and short repayment periods can pressure cash flow if not carefully planned.

Which sectors benefit most from invoice financing?

‍Manufacturing, agencies, and wholesalers that issue high-value invoices often benefit the most.

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