I really doubt whether that would work. The loans aren't necessarily "short term", as the term is pretty much not known, the shares are the lowest on the totem pole when it comes to payout and you have absolutely no control over the company. That's a lot of risk, and if the cost of exercising options is so high as to be difficult, the shares probably don't have the upside that might be required to make it work.

My bad, misunderstood the nature of these type of options. I was making the assumption that the options could be exercised and then sold straight away. Eg, employee has option to buy during this window at a strike of 1.1, current value 1.3. I presumed the issue was raising the initial (options x preferred price) cash plus any taxes/fees involved.

I believe most companies whose stock is publicly traded provide this for their employees. If you have stock in, say, Google, when your stock vests, you can have it sold and take the difference directly--no loan needed. I've never done such a thing, so it's only hearsay on my part, but that's how I've understood it to be.

It's called a cashless exercise. You exercise and sell the stock right away so you don't need to have the money to buy.

However the problem is most startups in this case are not liquid so you cannot sell your shares (with some exceptions). Google and other public companies give you direct shares via RSUs since they can sell part of your shares to cover the taxes.

Something like this already exists.

http://www.esofund.com