When you have business expenses that need to be paid immediately, applying for a loan from a traditional lender is not the most ideal solution. Bank loan applications require the borrowers to submit a lot of paperwork and undergo an extensive background check before they can be approved. The entire process could take approximately three months to complete. If your business needs quick access to cash, you can opt to apply for fast business loans instead.
Alternative lenders do tend to have higher interest rates compared to traditional loan options, but they are easier to qualify for. Whereas bank loan applications have stringent credit requirements, alternative lenders will accept businesses with credit scores less than 500. The loan likely won’t come with the best terms and interest rates, but the additional cost can be worthwhile if your particular needs are very time-sensitive or you have to see an immediate increase in your ROI.
Here are five fast business loan options available for small businesses:
1. Business Credit Cards
Business credit cards are one of the most convenient financing resources for both established and new businesses of all sizes. A business credit card is both a timely and flexible source of financing as it can be used for a wide variety of expenses, such as purchasing equipment and supplies, paying for services and buying airline tickets.
A business credit card is easy to obtain. Your business can qualify even if it hasn’t yet established a strong credit background. Lenders will usually look at the personal credit background of the owner. As long as your personal credit history is good, so are your chances for approval.
A bonus: Business credit cards can help you build your business’ credit profile. This will improve your chances of getting approved for additional business loans with better terms and lower interest rates in the future. All you need to do is make your monthly payments on time and your credit strength will grow.
2. Business Line of Credit
Unexpected business expenses can be incurred at any time so it’s best to have a back-up financing resource in place to cover any emergency costs that may arise. A business line of credit can be a great safety net should you find yourself in a business emergency.
A business line of credit works a lot like a business credit card. The lender will open a credit line with a credit limit from which you, the business owner, can withdraw from as needed. You can use the cash for anything business-related and you’ll have full control over where it goes
Another advantage of a business line of credit is that you’ll only have to pay the interest on the amount you use. Once your credit limit returns to the original amount, you can withdraw funds again as needed.
3. Merchant Cash Advance (MCA)
A merchant cash advance is advisable for businesses that handle credit and debit card transactions daily. The business will receive a lump sum they can use to address any short-term business needs. Payments are then made by funneling a percentage of the credit and debit card transactions.
The only downside of an MCA is that the interest rates may be higher compared to other quick business loans, however, this could be a good financing option if your business needs access to quick cash.
4. Invoice Factoring
Unpaid invoices can create a huge gap in a business’ cash flow, in which case invoice factoring may be a great solution to address cash flow issues. Businesses can ‘sell’ their outstanding invoices to factoring companies in exchange for cash upfront. The factoring company can fund up to 85% of the total amount of the invoices and will also take on the responsibility of collecting the payments from your customers directly.
Factoring companies look at the creditworthiness of the borrower’s customers, as opposed to the borrower itself, when determining eligibility for this type of loan. If you’re a new company or your credit background is less than ideal, it won’t have an impact or your ability to apply.
5. Equipment Financing
Companies need equipment to streamline their business operations, but fulfilling these expenses can be challenging. Particularly if you’re a new business just getting off the ground, financing equipment out of your own pocket could create a big gap in cash flow. Equipment financing, as its name implies, is designed for just this purpose – allowing businesses quick access to funds needed to buy or lease equipment.
With equipment financing, the equipment itself will serve as collateral for the loan. Businesses won’t be required to present any other assets. Once the loan has been repaid in full, the equipment is yours. If you fail to make repayments on time, lenders can repossess or seize the equipment.
Fast Business Loan Options: Can New Business with Bad Credit Qualify?
Yes. Starting a new business is expensive. You may get off on the wrong foot with your credit profile just trying to keep up with all the expenses required to get your operation up and running. Fast business loans provide an immediate solution in these instances – as they don’t require great credit to obtain – so over time you can begin to build a strong credit history by consistently paying your bills on time. As you do, it will continue to get easier for you to qualify for larger and more comprehensive business loans in the future.