Running a small business can be as overwhelming as it is fulfilling, especially when you’re hit with emergencies and unforeseen expenses. Small and mid-size enterprises (SMEs) often need quick access to funding to address unanticipated expenses like recovering from a disaster, repairing broken equipment or managing growing pains.
Fast loans can be your lifeline in keeping your business afloat even amid the most urgent financial situations. As the name suggests, fast business loans are time-sensitive financing solutions accessible to SMEs that need cash in a pinch.
Here’s a list of some of the most popular fast loans every business owner should check out:
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1. Invoice Financing
Companies that invoice clients usually wait 60 to 90 days before getting paid. This payment gap can easily disrupt your cash flow. Through invoice financing, you’ll be able to finance your outstanding invoices by selling them to a lending company. This funding option gives you immediate access to flexible capital which can be put towards day-to-day expenses, inventory purchases and more.
Here’s how it works: A business owner waiting to receive payment on pending invoices sells those invoices to a lender (you can finance your entire ledger or a portion of it). The lender will then immediately advance anywhere from 80% to 95% of the total invoice value to the business owner, holding on to the rest as collateral. Once the customer or client pays the outstanding invoice in full, the business owner will receive that remaining percentage (minus transaction fees).
2. Equipment Financing
Businesses that rely on equipment to operate – such as restaurants, printing stations and transportation companies – can really benefit from equipment financing. This financing option works best if you need capital specifically for equipment upgrades and maintenance.
Equipment financing allows you to purchase or lease vehicles, appliances, furniture, tools and equipment specific to your industry. It’s easy to qualify for because the equipment purchased through the financing serves as collateral for the loan, which greatly lowers the lender’s risk. Repay the loan in full and you’ll own the equipment outright. Failure to make repayments allows the lender to repossess the equipment. This low-risk factor means business owners with less than stellar credit rating have a higher chance for qualifying.
3. Business Lines of Credit
Did you know that in 2019, over 40% of business loan applicants applied for a business line of credit? Business lines of credit are a particularly popular financing option for business owners in need of spending flexibility. Here’s how it works: Lenders provide you with a credit limit that you can withdraw from as needed (up to the specified limit). You only have to repay the amount you’ve withdrawn, plus interest.
Knowing you have a certain amount of capital at your disposal can be extremely helpful for any pressing business need. You can use the funds from a business line of credit for almost any expenditure related to your business, such as daily expenses, equipment purchases, hiring/training employees and payroll, among others.
4. Short-Term Loans
Just like a regular term loan, lenders providing a short-term loan will give you a lump sum that can be repaid with fixed monthly payments over a span of months. The only difference is that borrowers can immediately receive the funds within 24 to 48 hours, as opposed to waiting for weeks or months. Short-term loans do have shorter repayment terms (ranging from a few months to a year), and the payments must be made more frequently.
Benefits of a short-term loan include flexibility of use, limited paperwork and fast funding. The one downside is that the interest rates are usually higher compared to a long-term loan.
5. Merchant Cash Advance (MCA)
A merchant cash advance is technically not a loan, but rather an advance against your future debit/credit card sales. A lender will advance a lump sum upfront and you repay it by giving a predetermined percentage for every card transaction until the advance is paid in full.
An MCA is the quickest and easiest way to get instant cash, but keep in mind that it’s also one of the most expensive solutions. Lenders that offer MCA generally charge a factor rate of 20% to 40%. So, for instance, if you advance $10,000 at a factor rate of 40%, you’ll repay a total of $14,000.
A merchant cash advance is particularly beneficial for SMEs that conduct the majority of their transactions through debit and credit cards, such as restaurants, retail stores and beauty salons. You can use the funds of an MCA to pay for day-to-day expenses, payroll and other emergency expenses.
Fast Loans for Every Business Need
If you need fast loans, alternative lending companies offer more timely solutions than traditional bank loans. These loans options usually take just a few days to process versus weeks or months. Some lenders, like SMB Compass, can fund your business within 24 to 48 hours.
