Whether your business is experiencing an emergency or you just need to make a payroll, you will likely need access to funding immediately.
All You Need to Know about Quick Business Loans
Whether your business is experiencing an emergency or you just need to make a payroll, you will likely need access to funding immediately. You will find yourself looking for a quick service loan in most cases. This type of loan allows you to receive the money as little as 24 hours after application.
What are Quick Business Loans?
It typically takes several days to get approval for a loan application. However, where will business go when the need for emergency funding happens? When a company cannot cover that need with the owner’s cash or assets, a quick business loan might be there to rescue. These alternative financial sources will provide enough money quickly than conventional lenders can.
What Are the Possible Situations where a Quick Business Loan is Needed?
If companies experience any of these situations, it might be ideal to consider for a quick business loan
Even if your business has excellent insurance, unexpected situations can create urgent needs for your business that may require fast yet expensive fixes. It’s where a quick business loan comes in. These loans can fix what’s been damaged in the company now, and borrowers can pay off the money used for the work later.
Marketing initiatives rescue.
Suppose companies have embarked on marketing campaigns or mid-level sales which have not produced the desired results; owners can change them with more funding. The fast cash that arrives in the middle of a marketing campaign allows companies to upgrade to high-level campaigns to maximize investment return.
New expenses in the company
As expensive as starting a business, so is growing one. These critical business tasks may need more funding than a company can actually generate from its sales. Using a quick business loan, companies can secure growth or startup financial sources much more quickly than one could, using conventional revenue-generating outlets.
Time-sensitive business ventures.
When your company is faced with potential business opportunities that require immediate action, like a third-party agency that can immediately partner with you, a bulk sale on essential items, or a smaller company purchase, a quick business loan can provide the funding you need for these opportunities immediately.
Any business quick-cash needs.
Whether a company is new or already established, it is still likely to experience instances where a business needs more cash than what is on hand, like preparing for payroll or waiting for invoice payments. Here lies the purpose of a quick business loan.
What are the Necessary Documents for a Quick Business Loan Application?
No two lenders are similar when it comes to the requirements for quick business loans, but it is generally ideal for preparing the following documents before applying for a loan:
Most quick business loan companies will need the borrower’s business name, employer identification number (EIN) or tax identification number (TIN), contact information, and address. Some may ask for the Social Security numbers of the business owners.
Some lenders might only need the borrower’s credit score. Others may require a more detailed credit history that shows that the borrower does not have any bankruptcy records, as even a single bankruptcy can cause the disqualification of the application.
Loan providers will commonly ask for proof that a business is properly licensed. Borrowers can include their original business license and leave out other licenses like DBA (doing business as) and fire permits.
Business launch document.
Several lenders may only entertain borrowers whose companies have existed for a particular number of years. This is why it is necessary to have paperwork proving how long your company has been operational.
Company’s tax returns.
To qualify and approve the loan, lenders might implement a minimum annual business income that borrowers must meet. Have your business tax returns to prove that your income exceeds the enforced minimum.
Statements of Profit and Loss.
Financial sources may require profit and loss statements to supplement the borrower’s other financial information.
Lenders may base their approval depending on the borrower’s loan history. Details from the loan history will determine whether you are an intelligent borrower.
Online system information.
If the company uses any online systems for sales transactions, e-commerce, payroll, and more, lenders might know all the details about it.
What are the Kinds of Quick Business Loans?
Within the scope of quick business, loans come in various kinds. Each type implements different terms and requirements.
One may discover that short-term loans are popular for borrowers looking for fast business financial sources. This type of quick business loan is ideal for addressing emergency cash flow needs. Borrowers for a short-term business loan may qualify and get approval in a matter of two days.
How do short-term loans work?
A short-term loan works similarly to a traditional term loan. Both follow the same payment structure. It is a simple loan product – a borrower will receive a certain amount of money upfront, which the borrower agrees to pay back, together with interest and fees, over a specific period. Lenders usually offer smaller amounts with this loan which range from $2500 to $250,000, and instead of using interest rates, the short-term loan usually implements factor rates. To estimate how these loans will cost you, multiply the factor rate by the total amount loaned, and the product will be the amount you need to pay the lender back. Since these loans are short-term, borrowers can expect to pay daily or weekly.
Short-term loans are best for:
These loans are helpful when a business has an opportunity to secure revenue. For example, a company might decide to create seasonal sales on holidays, purchase essential equipment to keep the business running or buy a huge inventory to fill an equally huge pending order. When extra revenue comes in, borrowers can now repay their short-term loans and turn an immediate profit for the business.
Short-term lines of credit
This type of loan may not be a standardized term in small business financing; it generally means a line of credit involving repayment terms of less than one year. It typically provides funding quicker than long-term alternatives making it another ideal option for immediate business financial support. The borrower readies the accounting software and financial paperwork to be guaranteed the funding within one day.
How does this loan work?
The short-term line of credit functions the same way as the standard business line of credit. They only differ in terms of the amount, the rate, the time of funding, and the repayment period. Financial sources can approve a maximum amount of approximately $250,000 with a steep annual percentage rate in some cases.
The borrower will be approved of this loan through a revolving line of credit, where one can get financial sourcing from a pool of funds whenever the need arises. You will only be paying the interest of the amount drawn, and once fully repaid, the credit line gets refilled to the original amount.
Suppose your business needs to purchase expensive and high-end equipment; equipment financing might be your best option. This kind of loan can be an excellent solution for businesses that need immediate financing for fixed assets from office furniture, types of machinery, and vehicles. Equipment financing usually approves a loan application in a little as two days and potentially finances 100% of the equipment cost.
How does equipment financing work?
Equipment financing is asset-based lending which sets it apart from term loans. Instead of requiring borrowers with excellent credit scores, bank statements, and tax returns, lenders offering an asset-based loan rely on the value of the new asset the borrower is buying. This new asset will serve as collateral if the borrower defaults on the loan.
Equipment financing is best for:
Suppose you need to buy specific equipment for your business, then equipment financing can be your go-to loan type. While loans might be an ideal option to finance your equipment purchases, it is also ideal to save to afford equipment purchases regularly. You would not want to be taking out loans every time you need to purchase equipment. However, if unexpected situations happen in the business and need an equipment upgrade to ensure business productivity, this is an excellent reason to turn to equipment financing.
Unpaid invoices because of slow-paying customers will affect the business’s cash flow. The inconsistent cash flow will also result in the growth of the company. However, business owners can remedy this situation with invoice financing. Most lenders approve loan applications in a matter of one day.
How does it work?
Delayed or missed invoice payment is a common business problem that creates a significant cash-flow gap. Consequently, the business is about to miss essential payments as well. Invoice financing or accounts receivable financing is also another ideal solution for a business’s cash flow concerns. Similar to equipment financing, the outstanding invoices will serve as collateral for invoice financing. Lenders advance borrowers up to 85% of the overall value of the collateralized invoices, giving them cash for the outstanding invoices immediately. Borrowers will have the remaining 15% back, less the lender’s fee, once the customers pay
This loan type is best for:
Invoice financing is an excellent quick business loan option if you manage a B2B business and find ways to quickly smoothen out cash flow concerns. You can utilize this loan type for regular operating expenses payments without waiting for payments on outstanding invoices. It is also essentially helpful if the gaps in the company’s cash flow cannot support payments to suppliers on time; hence the credit rating is suffering because of the inconsistencies.
Also, invoice financing is an ideal option for business owners that cannot qualify for many loan options. As discussed, lenders look more closely at the company’s outstanding finances and not so much at the credit and the business’s financial status. Hence, borrowers find this more convenient to secure than other kinds of quick business loans.
Merchant Cash Advance
MCAs are feasible options for a borrower who does not qualify for any other financing opportunity but needs quick cash for the business. With its speed in providing financing, merchant cash advances are also associated with a fast, small business loan. However, the accessibility and speed make MCAs the most expensive funding to secure. Lenders offering MCAs can approve and provide financing in a day or two with no paperwork involved in most cases.
How does MCA work?
MCA are lump-sum loans given to borrowers or businesses depending on their monthly revenues. It basically works with the borrower agreeing to pay back in advance, including an additional fee, by allowing the lender to take a percentage from the company’s daily debit and credit card sales. These loan types might be accessible, but they also cut significantly into the regular cash flow.
One notable advantage of an MCA is borrowers will not be punished when their businesses experience slower weeks or months. The lender will just cut less if companies are not making profitable sales. It’s on successful and profitable days when the cut is relatively high. Rates do not define the cost of an MCA; borrowers will instead pay a factor fee to the lender.
MCAs are best for:
An MCA is an ideal option if you have exhausted and tried all financing opportunities. You will appreciate the MCA better if you have a not-so-ideal credit score or regular cash flow problems. However, this loan type is one of the most expensive financing outlets in the industry; hence, you need to assess and take caution before applying for it.
The Pros of Quick Business Loans
Quick business loans bring various advantages. For these reasons, these types of loans are one of the most popular and common among small business owners.
Applying for a quick business loan is generally straightforward and is typically and relatively quick to process. There may be a few documents that lenders will need, like bank statements and other business information, so ensure to have them ready for a seamless application process.
When searching for lenders offering quick business loans, one of the most common features they have is fast funding. Borrowers can receive money in a matter of days. There are even those that provide and approve loans within the day of application.
Lenient and minimal requirements
Several lenders who offer quick business loans are relatively flexible regarding loan requirements. They can take a chance on borrowers who do not have an excellent personal or business credit score or do not meet the required business tenure.
No collateral needed
Even without business or personal assets, borrowers can still be approved of quick business loans. Most lenders do not need collateral, so you won’t have to worry about securing a loan in exchange for commercial equipment or property and risk losing them if you opt to default the loan.
The Cons of Quick Business Loans
When business emergencies arise and there’s a need for financing, businesses will turn to quick business loans as lenders offering these loans approve and release funds in hours or days. Sure, this is one of the benefits of a quick business loan; however, some drawbacks come with it.
Quick business loans are not accessible everywhere. Borrowers must do their research to find the most appropriate that offers these types of loans. Also, it is rare to get quick business loans from a credit union or a bank. They are usually provided by online lenders, including Booster Financial.
It’s not new for lenders to ask borrowers to pay for fees like prepayment fees, origination fees, and other fees. These loan charges typically add up quickly and cause the overall loan cost to increase as well.
Higher interest rate
Lenders might charge borrowers a higher interest rate in exchange for a quick business loan. However, this is a case-to-case basis as a lender also has to assess your credit score and other financial documents. If a borrower has an excellent credit score, then they might be able to secure lower rates. Also, various kinds of quick business loans have different interest rates, so you might as well check what kind of quick business loan fits your business.
It may be prone to debt
Given that quick business loans are accessible and easy to qualify, business owners may be tempted to borrow more than what the business needs. While this situation will not matter if a borrower can religiously repay the loan, this can also lead to a debt cycle that might affect businesses in the long run. Suppose you already have outstanding balances like a credit card debt; you need to be especially careful before applying for a loan.
Low borrowing amount
If your business needs to cover significant expenses, it might be ideal to check with lenders how much they can fund thoroughly. This is because most quick business loans come with lower borrowing funds than those traditional lenders.
Tips to Find an Excellent Quick Business Loan
If you have decided that quick business loans will suit your business needs, then you can follow these points to find ideal options.
The requirements and the types of quick business loans vary from lender to lender. It will be beneficial for borrowers to research and find different financing sources that offer quick business loans that suit their emergency business needs.
Before choosing the right lender, comparing and evaluating their loan options must be fitting. Remember to look at several critical factors, including fees, interest rates, requirements, and borrowing limits. Also, check what kind of funding lenders offer. Do they have lines of credit or merchant cash advances? These might be a better choice for your business.
A loan that worked for your business partner or friend does not necessarily mean that it’s also the right financing option for you. Remember to choose the lender with the best offers that will address your current business concerns and suit your budget.
Clarify terms and conditions
Ensure you understand and comprehend all the costs involved in your loan. Before ending the transaction, it is ideal to clarify with your lender about the repayment terms to avoid any misunderstanding on the process.
Industries that are Likely to Request for Quick Business Loans
A business essentially needs funds to keep its operation running, expanding, and growing. There will come a time when the business has to turn to loans for immediate funding, especially during emergencies. Each business belongs to a specific industry here; we list some sectors which are most likely to request a quick business loan. While there could be more, these are some of the top industries.
This industry heavily relies on financing to function effectively. Some businesses often fail to receive payments until 15 days to two months after completing the invoice, with usually longer payment terms. As a result, they might experience cash flow gaps and concerns which call for extra funding. Suppose a delivery truck breaks down and does not have enough resources to repair it or replace it with a new one, they will lose a significant amount of revenue.
Businesses can immediately address the repair and possible replacement with quick business loans to avoid revenue loss.
Most bars and restaurants deal with fluctuating customers – sometimes it gets busy, often it’s slow. Both times, business owners need quick access to financing to prepare for any situation that might come their way. Operations can be affected quickly by outcomes beyond the owner’s control, like a leak in the roof, broken oven, or damaged interiors. Business owners need immediate funding to address whatever unexpected circumstance that will happen.
The manufacturing industry deals with several expensive machinery and equipment to maintain its smooth operation. Businesses in this industry also cover various operating and overhead expenses. If business owners lack available funding, it can disrupt the operations and endanger the company. Without immediate financing, any emergency expenses can significantly affect company operations. Manufacturers need to move quickly to ensure smooth manufacturing processes.
Companies in this industry face a large number of upfront expenses. The total costs can go up to millions from the daily operating costs to supplies and equipment. Also, with longer payment cycles, businesses might experience gaps in cash flow, making it even harder for the company to cover regular expenses. With tight deadlines to meet, business owners use a quick business loan to ensure that there is available capital to have the right supplies and equipment to accomplish projects on time.
Medical practices and doctors
Medical professionals also deal with slow-paying insurance providers and several overhead expenses. The extended payment terms can lead to inconsistencies in their cash flows and make them challenging to function effectively. Medical supplies are also costly, and with no proper funding, it can drain the professional’s cash reserves. Whether one needs to buy machinery and equipment or cover payroll, quick business loans help you cover all these necessary expenses.
With innovations almost every day, the technology industry is significantly expensive. Hence, it can be a handful to manage cash flows with all the expenses piling up. While it is usual for tech companies to partner with separate investors and improve their capital, they still need to have some cash available to cover emergency needs. This is essential equipment, and software in this industry is relatively expensive.
Similar to construction companies, tech businesses also cover time-sensitive projects, and they must have access to immediate funding to meet deadlines and entice more clients and customers.
Like any other business, the retail industry also experiences seasonality, which can significantly cause strain and inconsistencies in the cash flow. Building in this industry can be challenging if owners do not have any access to funding in a timely manner. There must always be money available to cover and maintain inventory. With inventory and overhead expenses, access to quick funding becomes critical for every retail business to thrive.
FAQs on Quick Business Loans
What is an alternative lender?
The most straightforward business loan is online or from an alternative lender. These lenders offer various loan options and products that borrowers can quickly apply online and receive the funds within days. These financing outlets require minimal documentation and impose lenient qualifications, which means they will be easier to get. Generally, a quick business loan is easier to get compared to long-term products and loans.
How to apply for quick business loans?
Lenders have different application processes when it comes to quick business loans. Online lenders believe that business owners’ time is of the essence, so they ensure that online loan applications will not take much of their time. Basically, an online lender will ask applicants to fill out a loan application form. Once submitted, you can expect a representative from your chosen funding source to contact you and discuss more loan options. Remember to provide the necessary documents to avoid any delays with the application. It will take days or hours for you to get your quick business funding.
Is it possible to repay earlier than scheduled?
Upon application, lenders will discuss with you the terms of repayments. Some lenders will provide repayment schedules with a fixed monthly installment; others can be more flexible and will accept early repayments. It is also essential to note that there is a fixed amount you need to pay back. However, repayments can vary depending on the interest distribution.
Some lenders will allow early repayments without a prepayment penalty. Remember that there could be extra costs if you decide to settle for early repayments or pay everything back at once.
How does it affect my credit score?/h3>
When you settle repayments on time, you have a higher chance of getting better credit scores because they show reliability, which in turn positively affects your loan applications in the future. On the flip side, lenders might see you as a high-risk borrower if you default on repayments, affecting future loan transactions.
It is also not advisable to apply for several credits in one go, as this can harm your credit score. This is why you need to talk to advisors first and weigh your options before applying for a quick business loan.
How much can I borrow?
Several factors affect the amount you can get once the loan is approved. Every lender has its process and criteria for determining a borrower’s eligibility. Loan providers need to evaluate various factors to determine how much the business will be eligible for. Remember that they will not approve an amount you cannot afford to repay.
The concept of quick business loans is very ideal for borrowers who need the money now. It is convenient, straightforward, and fast, given that you provide all the necessary documents. However, business owners must also be cautious and be aware of the possible circumstances that can affect their businesses in the long run. Like any other loan product, it must be thought of seriously and accordingly. That is why most lenders have advisors where borrowers can discuss options, expectations, and possible situations that may arise during the process.
Before diving into a quick business loan, ensure that you understand the contract. Be familiar with the interest rates and any charges to avoid unwanted surprises along the way.
Understand Your Options
Find out more about the different finance opportunities available in your area and get funded today!