It is beneficial to be prepared if you are considering obtaining a small business loan. It can take time and research to apply for and be authorized for one. And choosing the best alternative for your company is dependent on a variety of circumstances, such as how quickly you need funding.
Some commercial loans might take weeks or months to approve. Following an application, SBA loans might take up to 90 days to receive funds. However, fast business loans can provide money in as little as 24 hours. Continue reading to find out how to get quick cash for your small business.
If you need a quick business loan, start by determining how much you can afford to borrow. Examine your company’s revenue and compare it to its present expenses. Then, using a small business loan calculator, you can see total loan amounts, monthly payments, and how much interest you’ll pay during the loan’s term.
Some types of company loans provide capital significantly faster than others. While certain traditional banks and credit unions may provide swift funding, alternative lenders are more likely to provide fast business loans. Here are several prevalent sorts of rapid business loans, as well as their benefits and drawbacks.
Online term loans
Online lenders often focus on fast funding more than larger, traditional banks can. For example, Credibly business loans can be approved in as little as four hours, with funds possibly arriving in less than 24 hours. Another benefit is that these lenders are often more accessible to a broad range of borrowers, even business owners looking for bad credit business loans.
A potential drawback is that faster online funding may come in smaller amounts. These loans also tend to have higher interest rates compared to traditional loans from banks and credit unions.
SBA Express Loan
SBA loans tend to have favorable rates and long repayment terms, which makes them worth the typically long wait.
For businesses that want an SBA loan, but need cash fast, the federal government created the SBA Express loans. There are two types of these fast business loans, the SBA Express and the Export Express. For the SBA Express, the SBA will respond to your application in as little as 36 hours. The Export Express is set up for the SBA to respond to your application within 24 hours. Even though you get a faster response, receiving your funds will still take longer than the speed of online lenders.
Another downside is that even though these loans are set up for faster approval, credit score requirements for SBA loans tend to be higher than other loan types, usually in the mid-600s. The loan may also require business collateral, meaning the lender can take any assets you pledge to help secure the loan if you fail to pay back the loan.
Business lines of credit
Business lines of credit offer flexible credit that you can borrow from, up to a certain amount and only pay interest on what you use. Online lenders tend to offer fast approval and funding time and have relaxed requirements like lower credit scores.
A potential drawback is that lines of credit tend to have smaller loan amounts and shorter payback periods. With a term loan, you pay back the lump sum you borrowed over the course of the term, often anywhere from six months to up to seven years or more. Repayment terms for lines of credit, especially with online lenders, might run as short as six, 12, or 18 months.
Invoice financing and invoice factoring
With invoice factoring, you sell your invoices to a factoring company and receive a percentage of the invoice upfront right away. On the other hand, invoice financing allows you to borrow directly against unpaid invoices.
Both of these have the potential to be good short-term options when you need fast funding that can be paid back quickly. And since invoice financing and factoring lenders are more concerned with the payment history of invoiced clients, they’re considered a type of bad credit business loan open to startup businesses and business owners with poor credit.
The downside to invoice financing and factoring is that you lose out on getting the full value of your invoices since you’ll have to pay fees.
Equipment financing typically can only be used to purchase equipment, such as office equipment or semi trucks. Many lenders won’t require you to put up anything you already own as collateral for this type of loan since the equipment you purchase secures the loan.
Depending on the lender, you may be able to secure financing within days compared to weeks with traditional lenders.
Merchant cash advances
A merchant cash advance (MCA) allows you to borrow against your future debit or credit card sales. You can find this option through online lenders as well, with one-day applications and funds available in as little as 48 hours in some cases. It can open up quicker and more stable cash flow for business expenses.
The biggest drawbacks with MCAs are the high interest rates and often short repayment periods. Lenders may charge factor rates for this type of financing. Not only does this make it harder to understand the true cost of the loan, but rates can soar upwards of 80 percent and higher.
Once you decide how much you want to borrow and the type of loan that works for you, it’s time to find a lender. You can look at our list of the best small business loans, search for yourself or ask around in your industry.
Next, compare any listed eligibility requirements. Lenders often list how much time you need to be in business, annual revenue requirements and minimum credit scores. Also, assess approval times and funding speeds. Online lenders especially tend to list how long the application process takes and how long funds take to hit your bank account.
Compare rates and terms
Before you settle on one loan, you should compare multiple options from different lenders. The downside to this is that it can be hard to find all the details you need to help you compare. Some lenders may only list starting rates and funding speeds. Some may not list any information at all.
To get an accurate picture, you may have to contact each lender or apply to see the rates and terms you are eligible for.
You have several alternatives for fast finance, which may approve you in minutes to a day. Funds can also be credited to your account within hours. However, it is critical not to let the process’s convenience and quickness lead to rash behavior. Take your time comparing loan types, rates, periods, and other characteristics.