Small businesses can be hit with all manner of unexpected events. Some good (such as a sudden influx of orders, requiring more staff and materials to deliver) and some not so good (like outstanding invoices, or a drop in customer demand, putting pressure on cash flow).
In both instances, a quick business loan can help owners cover the cost.
Fast business loans come in a number of formats. Certain loans are repaid in instalments, others are discounted from revenue. These are the five most common forms of quick business loan:
Secured business loans are traditional instalment loans, backed by collateral. Collateral is anything you stake the loan with, typically a valuable asset, like a vehicle or equipment. In the event that you don’t repay the loan on time, the lender can repossess your collateral to cover the loss.
Though this poses more risk to you as a borrower, it reduces the risk for the lender. This, in turn, can increase the amount of the loan, lower the interest, and give you faster access to capital.
For businesses that want a streamlined version of a traditional instalment loan, there are bridging loans. Commercial bridging loans are designed to quickly provide businesses with a cash injection; they “bridge” the financial gap in acquiring new clients, purchasing new equipment, and so on. Because bridge loans are made for immediate financial needs, they have a very trimmed down and speedy application process.
If your business makes its revenue through debit/credit card transactions, then merchant advance financing is a fast business loan built for your business model. Rather than having to repay the loan in instalments, the lender will automatically take a percentage of your sales, until the loan has been repaid. This protects you from taking out a loan you can’t afford to repay.
Invoice financing is another quick business loan built for a specific business model. Companies that charge clients/customers through invoices can sell their unpaid invoices to lenders at a discounted price.
The lender will then contact your client/customer and receive payment from them when the invoice is due. This allows you to access your outstanding revenue when you need it and free up your accounting team, as the lender will handle receivables for you.
Asset financing involves any sort of payment scheme that allows you to use a piece of equipment without having to buy it up front, like renting, leasing, or paying in instalments — a great alternative for companies who need a fast business loan to buy new, or upgraded, machinery and production tools.b
Most fast business loans promise cash within 24 hours. This makes them an excellent solution for businesses with emergency expenses or that need to make a purchase to close a deal.
Since quick business loans are created with speed in mind, they have a much simpler approval process than traditional loans. The requirements for approval are also more relaxed; there’s less paperwork required and shorter waiting times between application and approval. Many of these lenders use automated approval systems, so you could know if you qualify for a fast business loan within minutes.
For those with poor credit, quick business loans tend to have less strict credit approval requirements, which makes them a viable alternative for those with short credit history.
Every lender will have slightly different requirements, though these are some of the basic requirements you can expect when applying for quick business loans:
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