Maintaining a healthy cash flow is essential to the success of every business. Unfortunately, many small businesses experience seasonal cash flows and may be forced to halt operations if there are any shortfalls. So whether you’re experiencing seasonal slumps or need access to capital to cover an emergency expense, fast business funding comes in handy.
Not all business loans are created the same, though. Some get approved and funded in 24 hours or less, while others take days, weeks, or even months. So if you need quick access to cash to keep business operations running smoothly, you may want to consider a fast business loan.
In this guide, we’ll explain what a fast business loan is, how quickly you can get the loan and the available options for fast business funding. You’ll also learn the factors that impact how fast you can get business funding, such as your annual revenue, personal credit score, and time in business.
What is a Fast Business Loan?
As the name suggests, a fast business loan provides quick access to funds, typically within 24 to 48 hours. It allows small business owners to jump on opportunities like acquisitions or cover unexpected expenses, such as equipment breakdown that needs replacing as soon as possible.
Fast business loans are usually offered by online lenders with flexible qualification requirements. Plus, these loans have streamlined application processes, fast approval, and typically disburse the loan amount within one to two business days.
This is in contrast to traditional business loans offered by banks and other institutional lenders, where you may have to wait several weeks (or even months) to receive funding.
How Fast Can You Get Business Funding?
You can get business funding in as little as 24 to 48 hours from certain online lenders. Of course, the exact time frame will vary depending on the lender, the underwriting process, and the type of business loan you’re looking to apply for, among other factors.
It’ll also depend partly on how fast you can meet the lender’s requirements, such as providing the required documentation or collateral. If the funding amount is relatively small, then the time needed for loan approval will be proportionally shorter.
The same loan from a traditional lender (like a bank) may take longer to be approved, but the interest rates will usually be lower than with online lenders.
Factors That May Affect How Fast You Get Business Funding
Several factors can affect the speed at which you receive a fast business loan. These factors include:
Funding Requirements
Every lender has unique funding requirements. For some, you need a good credit score, at least two years in business, and the three major financial statements (income statement, balance sheet, and cash flow statement). You may also have to provide bank statements, tax reports, and documents associated with your collateral if the loan amount is large enough.
Depending on the requirements of the business financing you need, it may take you a few hours to a couple of days to get approved and funded for a fast business loan.
Application Process
The loan application process determines how quickly you’ll receive a fast business loan. While most lenders today have streamlined online applications, some loan types require more paperwork than others, which would slow down the funding speed.
This is especially true if you’re seeking a larger loan since the underwriting process will have to be more meticulous and thorough for larger loan amounts. For example, to approve a big loan, the lender will have to look into your credit history (both personal and business), annual revenue, business plan, debt service coverage ratio, and time in business, as well as the external market conditions affecting your industry.
This is to minimize the risk of losing a significant amount of money if you’re unable to repay the loan. By contrast, a small loan might require a lot less scrutiny and, consequently, be approved a lot faster.
Approval Time
How long does it take to get approval for fast business funding? This varies depending on the lender and the loan type.
For most online and alternative lenders, it takes a few hours to get loan approval. If you prefer working with traditional banks, approval time can take days and sometimes weeks. With some loans, you’ll get an approval decision within one business day.
Funds Disbursement
Small business lenders usually disburse funds as soon as one business day after approval. Much of it boils down to the lender and the type of business loan you need.
For instance, a merchant cash advance or invoice financing from a small private lender will probably entail faster disbursement than an equipment loan taken from a traditional bank. But, conversely, you’ll probably have to pay a higher interest rate on the first loan (from a small private lender) than the traditional bank loan.
What Are Your Options for Fast Business Funding?
There are several fast business funding options to choose from. Here are some of the most popular ones:
SBA Express and Micro Loans
SBA loans are best known for their low-interest rates, larger loan amounts, and longer repayment terms because the U.S. Small Business Administration partially guarantees them. However, these loans take several months to get approved and for the loan amount to be disbursed.
If you recently applied for an SBA loan and you require capital to finance business expenses in the meantime, SBA express and microloans are some of the options to consider. In addition, there are some private lenders that can provide you with access to fast business funding as you wait for your SBA loan application to be approved.
You can refinance the first loan with the SBA loan once it is approved – a strategy that’ll let you benefit from both the speedy financing and the low-interest rates of government-backed SBA loans.
Small Business Term Loans
Small business term loans are perhaps the most common fast business funding that every business owner thinks of when in dire need of quick capital. With online small business term loans, you can make an online application, get approved in hours, and receive funding no more than one business day after approval. Even with the biggest, most cautious lenders, these quick business loans will not take longer than a week to be fully processed and approved.
Term loans are often offered as a lump sum of money, repaid at fixed intervals over a set period of time. For example, your company can access a small business term loan of $5,000 to $2 million through a variety of private online lenders, with flexible repayment terms ranging from 3 to 24 months.
These loans typically have minimum qualification requirements, so you can apply even if your credit score and payment history could be better. They might sometimes require collateral, but unsecured small business term loans are also quite common. They might, however, involve a slightly higher interest rate.
Working Capital Loan
If you’re looking for access to capital to finance the day-to-day operations of your company, a working capital loan might be a perfect option. With this type of financing, you can cover expenses such as payroll, rent, debt payments, inventory purchases, and the fixed monthly payments needed for utilities, rent, etc.
Working capital loans are a very common offering, both from traditional banking institutions and newer online lenders. You can borrow up to $2 million and pay off the loan in 3 to 24 months. The exact amount of money that you can qualify for will depend on the size of your business, your annual revenue, your credit history, and the amount of debt you already have.
Typically, you’ll just need to complete an online questionnaire and submit your loan application in order to get approved and receive the funds within a few hours. At most, it may take about a week if you want to go for banks or credit unions offering conventional business loans at lower interest rates.
Merchant Cash Advance
A merchant cash advance, or an MCA, is a one-time lump sum of money offered by merchant providers in exchange for a percentage of your daily debit and credit card sales. Due to their approval and funding speed, MCAs are considered fast, small business loans. You can get approved and funded for an MCA in 24 to 48 hours with little to no paperwork required.
MCAs are a perfect business financing option for business owners with a considerable amount of debit and credit card sales. And since the future projected card sales serve as security for the loan, lenders typically will not ask for collateral or put too much importance on traditional requirements like credit score, payment history, or DTI.
In other words, you can access this type of small business funding even if you don’t have the best credentials in terms of creditworthiness. It does, however, come with higher fees and other associated costs.
Equipment Financing
If you’re looking for capital to finance an equipment purchase, equipment financing is probably your best bet. From computers to heavy machinery, this quick small business loan could be the best option for business owners with an immediate need for an expensive piece of equipment. You can get approved for equipment financing in one business day or two.
Besides, you don’t need any form of asset to back up the loan because the equipment you’re looking to purchase acts as collateral. As a result, this is one of the best loan options for businesses that need to conserve cash flow and buy the required equipment without depleting their working capital. In addition, the interest rates for equipment financing are usually low since the lender uses the equipment as collateral.
Business Line of Credit
A business line of credit gives you access to funds up to a specific limit. You can access the line of credit on an as-needed basis and only pay interest on what you use. Like a credit card, you can borrow it again once you pay off the line. A business line of credit is a good option if you want to avail the functionality of credit cards while avoiding the higher interest rates associated with them.
Borrowers who need fast business funding can benefit from short-term lines of credit. Although this type of financing comes with shorter repayment terms, usually less than a year, funding is faster compared to traditional lines of credit. Online lenders typically take a couple of days to approve this type of loan and disburse the funds, although the initial approval may only take a few hours.
Invoice Financing
Also known as invoice factoring, this is a financing method that you can use for quick access to capital, even if you don’t have the best credit score or payment history. In this method, the business owner uses the company’s unpaid invoices as collateral for a loan.
A percentage of the total value of these invoices (typically less than 90%) is offered by the lender as an upfront loan. The lender also directly collects the payments from the customers. Once the invoices are paid, the lender deducts a fee and pays back the remaining balance to the borrower.
This is one of the best business loans for companies facing a cash flow shortage due to delayed payments from customers. They can use the outstanding invoices to fund business operations instead of having to wait indefinitely for customers to pay.
Concluding Note
To find the fastest and most suitable funding option for your business needs, you should compare the small business loans offered by multiple traditional and online lenders. While online lenders usually have a faster and more efficient loan processing system, this might not always be the case.
By comparing the different options available, you’ll be able to choose the business financing option that not only offers the fastest disbursement of funds but also comes with low-interest rates and flexible repayment terms.
