Does your small business need cash fast?
It’s a common issue. Sometimes entrepreneurs need to take advantage of opportunities, stock up on inventory, pay unexpected bills, deal with overdue accounts receivable, cover business checking account overruns, handle cash flow issues, and more.
The good news is that fast funding business loans could provide you with the small business financing you need.
A fast business loan is just that: A loan that can get you money in hours or days, rather than the more common weeks or months a small business loan can take when secured through a traditional bank or other lender or when getting an SBA loan through a provider approved by the Small Business Administration (SBA). The application and approval process of a fast business loan is much quicker than for other types of loans.
In this article, I’ll explain fast loans for small businesses and review the pros and cons of them so you can decide if one could be right for you the next time you need access to quick cash.
Fast Funding Business Loans: The Basics
Several lenders offer fast business loans. Most are digital-only loan providers, and you can apply for a fast-funding business loan online any place, any time, whenever you have a need for cash. Typically, you can expect a decision about your loan application instantly or within 24 hours. This is far less than the several days or more it can take to get a decision on a traditional loan.
If you’re approved, you will likely receive your loan funds within 24 hours or a few days, at most. Money is distributed through a direct transfer, so it arrives in your bank account quickly.
Fast Business Loans: The Pros
There are several advantages to getting a fast small business loan over other types of financing. Some of the top ones include:
Simple and quick application and approval process
The application process for traditional loans can be tedious, time-consuming, and difficult. You typically have to gather many business documents including your latest business plan, bank statements, business bank account information, checking account statements, tax returns, annual revenue projections, accounting, and other records to submit them. The forms also ask for a lot of personal and business-related information. Plus, it’s likely the lender will check your business credit history and require you to have a minimum credit score.
By comparison, the application for a quick business loan is relatively simple and streamlined. The online application can usually be completed in a single session in well under a half-hour. You can expect to get a decision right away or on the same business day. And it’s likely your lender won’t be as diligent about checking on your creditworthiness.
Easier approval requirements
You may be able to get approved for a quick business loan even if you have a mediocre business credit score, haven’t been in business for very long, or are a startup. They typically don’t come with the stringent requirements loans from traditional lenders have. Fast loans are often offered by newer industry players that are willing to take a chance on business borrowers, even ones with bad credit, so their approval requirements are usually more flexible.
Better than super high interest loan alternatives
While fast loans can have relatively high interest rates, they’re not as high as some other financing options, including business credit cards, invoice factoring, and personal loans. This means they can be a great option for small businesses that need to access fast funding without taking out an extremely high interest loan.
No need for collateral
Most fast business loan lenders don’t require you to put up collateral, making them an unsecured loan. This eliminates the risk that you may need to give up business real estate or equipment if you’re unable to make your monthly payments and pay back your loan.
(Almost) immediate funding that can be used for any business purpose
If your loan is approved, your cash will arrive in your bank account quickly, in many cases, the same day. Unlike many other types of business loans, cash from a fast loan can be used for any business funding purpose, including buying supplies, paying workers, taking care of a tax bill, equipment financing, making a down payment on a new location, improving your business location, buying small equipment and more. You don’t need to explain the reason for it before you are approved.
Fast Business Loans: The Cons
In addition to the merits of fast loans, there are some drawbacks you need to consider before you apply for one. Some of the top cons of them include:
Few lenders offer them
Not all online lenders offer fast business loans. And they’re typically not available through banks and credit unions. You’ll have to do your research to find a reputable online fast funding business loan provider. Do your due diligence and learn about fast funders before you decide to work with one. Check things like online ratings and reviews to make sure clients are happy with them, their loan terms and fees, and the service they offer. Also, look out for complaints made to the Better Business Bureau.
They can have high interest rates
Fast funding business loan companies typically take risks other loan providers don’t. Their application qualifying requirements aren’t as stringent, they may not do as much due diligence before approving a loan, their underwriting standards are lower, and they may make loans to riskier clients. This means they often have higher interest rates to cover the risks. Plus, small business owners desperate for cash are less likely to walk away from a high interest loan. However, it is still possible to get good interest rates through online funding if you do your research and take your time.
Fast business loan funders typically charge high fees in return for the speed and convenience they provide. They could include origination fees, upfront application fees, prepayment fees, and more. The dollars associated with them can really add up. Before working with a fast-funding business loan provider, double-check their fees to make sure you’re not caught by surprise. If you can’t find them disclosed on their website, move on to another funder.
Lower loan amounts
If you need to cover a big expense, such as the purchase of a vehicle or large piece of equipment, a fast business loan is probably not right for you. They typically come with lower borrowing levels than other types of business loans, often in the hundreds or thousands of dollars.
How to find a fast-funding business loan
If, after going over the pros and cons, you decide to get a fast-funding business loan, here’s everything you need to know to secure a favorable one from a reputable provider.
- Shop around: Perhaps more than any other loan type, including bank loans, fast business loans vary from lender to lender. And each lender is different. Do your due diligence to ensure you secure the right loan from a reputable provider. If anything makes you feel uncomfortable, move on until you feel confident with the deal you’re offered and the lending company.
- Read the fine print: Fast loans DO come with strings attached. Make sure you double-check things like the interest rates, fees, payment terms, borrowing limits, prepayment penalties, and requirements.
- Check the terms: If you have any questions about the repayment terms in your loan contract, ask them! Be sure you thoroughly understand all aspects of your loan offer, including the ramifications of making a lump sum payment to pay off your loan faster.
- Follow the rules: Make sure you meet all loan requirements to the letter. A late payment, missing paperwork, or other things could trigger fees and other issues that could cost you… a lot. This is the case with any loan – even from traditional brick-and-mortar lenders – so make sure you follow your loan terms carefully.