Types of SMB Loans You Can Get Quickly

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If you are looking for financing to fund your small business, there are many types of loans that you can use. However, most traditional loans can take weeks and require a lot of paperwork and complex underwriting. When you need to meet short-term or urgent financing needs, there are loans that you can secure faster. Lines of credit, bill financing, and equipment financing are some types of financing that are faster and easier to come by, but can also come at a higher cost.

Fast business loan options

Credit type advantage
Business line of credit Loans are revolving and you only pay interest on what you borrow.
Invoice Financing The repayment terms are flexible and lenders sometimes take responsibility for the collections.
Equipment financing Loans are fully secured and can be approved quickly.
Personal loan for business Underwriting is quick and easy and doesn’t take into account a company’s finances.
Small business credit card It’s quick and easy to apply, and you can earn rewards for everyday purchases.

Business line of credit

A business line of credit is a revolving credit facility that works similarly to a home equity line of credit or other revolving line of credit. Companies that apply can be approved to borrow up to a certain amount of money and then borrow against their line if necessary. Once you pull against your line, you pay monthly interest, but only on the amount you borrowed. Then you pay back what you borrowed if you can. As soon as you have repaid all or part of the borrowed money, you can borrow this money again.

The revolving nature of lines of credit makes them ideal for business owners who need funds temporarily or for a short period of time. These loans can also come in handy when you need to replenish inventory or smooth out seasonally fluctuating cash flows.

While BLOCs can be great for some business owners, they also have downsides. For example, LOCs are not always the easiest to come by, and those you can get quickly may have a higher level of interest. Business loans are also made for a period of time – when they expire you will need to repay whatever you’ve borrowed on your line, have your line renewed, or convert any outstanding amounts into a structured loan and start making regular monthly payments.

So while lines of credit can be great for short-term funding needs, they are usually not a good option when you need funding for a longer term or a large project. In these cases, a conventional term loan can be better.

Invoice Financing

If your company bills its customers on a regular basis, you may be able to borrow against the value of your outstanding bills. There are actually two options for this – classic invoice financing and factoring.

Invoice financing involves taking out an open-account-secured loan that you pay back over time – usually when the customer pays your bill. Factoring, on the other hand, is essentially the sale of an open invoice to a factoring company, which advances you part of the invoice value. The factoring company then takes responsibility for the collection from your customer and releases all additional funds to you when the customer pays (if there is any remaining after fees and interest fees).

Invoice financing can get expensive when fees and interest are taken into account annually. Hence, it is best to avoid if you need funding for more than 30 to 60 days. When you need to meet a short-term financing need – such as payroll or staffing a new client project – invoice financing can be a great option.

Equipment financing

Of all the quick business loans available, equipment finance is the simplest. It’s almost like getting a loan when you buy a new car, just with different rates and terms. With this type of financing, you borrow against a piece of equipment – usually one that you are about to purchase.

The equipment financing works in a similar way to a conventional term loan: You take out the loan when you buy the equipment and then regularly pay monthly repayments and interest until repayment. This makes it ideal when you need new equipment for your business and don’t want to wait long for approvals.

This type of funding is best for companies that need lots of equipment or new machinery to expand or complete new projects – especially if they’ve exhausted other funding options or just want to quickly secure funding. However, it can really only be used to fund equipment; it doesn’t work for other business issues. For example, if you really need funding to meet your payroll, you need to look elsewhere.

Personal loan for business

A corporate personal loan is not really a business loan. Instead, it’s a loan given in person to a business owner – the same type of loan you would use to consolidate student loans or remodel your kitchen. The only difference in this case is that you will be using the money to meet your financing needs for your business.

Personal loans are typically only an option for business owners with strong personal credit scores as the underwriting is based on their personal income and credit report. These loans also require personal guarantees so business owners who fail are held personally liable.

Still, personal loans may be the only option for some small business loans – especially those who need to apply and get their money quickly. Business finance is typically not part of the underwriting process, so borrowers with a strong enough personal credit score can usually get an approval decision within a day or two. Personal loans are also often the only option for startups who may not meet the minimum time in business required to qualify for other types of corporate finance.

Business credit card

Small business credit cards are like personal credit cards – they are usually even secured on the basis of the business owner’s personal credit – except that they are for business use rather than personal use.

There are dozens of small business credit cards available. Some offer long 0% introductory APR periods while others offer cashback or travel rewards that may vary based on spending category. Many of these cards offer rewards for spending on travel, office supplies, or telephone and internet services, to name a few.

Business credit cards are a good way of financing supplies and monthly running costs such as telephones and internet. However, because these cards are typically subscribed based on a business owner’s personal creditworthiness and require a personal credit check, if you default on payments, your personal creditworthiness will be affected.

Business credit cards can also get expensive if you have to pay off large purchases over time. In this case, it is usually better to use a line of credit or a fixed-term loan to finance major purchases or projects.

The pros and cons of quick corporate finance

advantages

  • Underwriting is quick and easy. Applicants can usually make a decision within a day or two and receive their money within a few days.
  • The repayment terms are flexible. The various options offer business owners everything from long 0% introductory times with business credit cards to pure interest payments with credit lines.
  • These options are available online. Most of these types of funding can be secured online without ever visiting an office or meeting with a loan officer.
  • They have mild credit requirements. While most banks limit lending to their best bank customers, borrowers with slightly poorer credit usually have faster funding options available.

disadvantage

  • The prices can be higher. While you can make money in days with quick corporate finance, that speed comes at a price. The interest rates are often several points above the interest rates of conventional term loans.
  • It usually requires a personal guarantee. When applying for quick corporate finance, you will likely be expected to personally guarantee the loan in the event the business goes down.
  • Additional fees and costs may apply. Many online lenders that offer quick business finance have additional fees because they receive so many funding requests.
  • The use of funds is sometimes limited. Many lenders limit the industries in which they can lend, and in some cases certain types of funding can only be used for specific purposes (e.g., equipment finance).
  • Lending ratios can be lower. If you have strong creditworthiness and an established relationship with a bank, you may be able to borrow more relative to your income or the value of the asset being funded – but it usually takes longer to fund it.

When you need financing for your small business quickly, there aren’t many options. With most loans, it takes weeks to fill out an application and receive a funding decision – and then you have to deal with the lending fees and other costs. Meanwhile, your business is hungry for cash. When you need cash quickly, consider one of the options above to get your business the funding you need.

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