Get The Business Capital You Need, Fast.
Wondering if fast business loans can be beneficial for your company? Not sure what options you have for securing funding? Learn more about your options in this guide from Progressive Business Capital.
Why Would I Need A Small Business Loan For Fast Funding?
There are many reasons you may want a small business loan to help improve your company. A few common reasons why business owners take out fast loans may include:
- Purchasing or leasing new equipment
- Opening a new location
- Hiring additional staff
- Paying vendors or purchasing supplies
- Covering advertising and marketing costs
- Making mortgage/lease payments
Types Of Loans For Business Financing
Online – Online small business loans usually require reasonably good credit, but are faster and easier to qualify for than bank loans or SBA loans, making them a good option for financing.
Merchant cash advance – This is not a loan at all. With a Merchant Cash Advance (MCA), you sell a percentage of your future sales (say, 10%) in exchange for a lump sum. Then, you repay the lump sum over time to the MCA provider via a credit card split percentage or daily ACH debit. Even with bad credit you can still qualify for a merchant cash advance, and it’s a fast, flexible way to get access to quick funds.
Invoice factoring – Invoice factoring is not a loan. Instead, it lets you sell your outstanding unpaid invoices for a percentage of their total value to a third-party company, who pays you immediately. Then, the invoice factoring company becomes responsible for collecting payment, and you get access to cash that you can use for your expenses.
Bank loans & SBA loans – Bank loans and SBA loans through the SBA Express loan program can often be approved in as little as 36 hours, and you can get funding within 10 days. However, you will need good credit to qualify for these types of loans.
If you need fast business funding, any of the above financial products may be a good option for you. Make sure to consider the needs of your business, your credit score, and how much working capital you need before you apply for a loan!
What Are the Eligibility Requirements for Fast Business Loans?
1. Business Age
Most lenders want to see that your company has been around for at least six months to a year. They need to know you’re not just a fly-by-night operation.
2. Revenue Requirements
Expect to show consistent revenue, typically between $10,000 to $50,000 per month. Think of it as proving your business can handle its own weight.
3. Credit Score
A credit score in the range of 500-600 is often required. While you don’t need a perfect score, showing you pay your bills on time helps.
4. Business Bank Account
A dedicated business bank account is a must. Lenders will peek at your bank statements to see if your cash flow looks more like a steady stream than a trickle.
5. Time in Business
Lenders generally want to see six months to two years of active operation. It’s like showing you’ve got staying power in the business world.
6. Industry Type
Some industries are considered riskier than others. If you’re in a high-risk sector like construction or hospitality, be prepared for extra scrutiny.
7. Existing Debt
Lenders will check your existing debt. If you’re already juggling chainsaws, they might be hesitant to hand you another.
8. Collateral
While many are unsecured, some lenders might want collateral, especially for larger loans. Think of it as putting up a valuable item in a pawnshop.
9. Business Plan
A solid plan shows how you’ll use the loan and how it will benefit your business. It’s like showing your homework to prove you’ve done the prep work.
10. Legal and Regulatory Compliance
Your business must comply with all legal and regulatory requirements. Make sure all your licenses and permits are in order, or you might find yourself out of the game.
How Long Does the Approval Process Take for Each Type of Loan?
Securing a loan can vary in approval time based on the type of loan and lender. Here’s a breakdown of the typical timelines:
1. Traditional Bank Loans
Approval Time: 2 to 6 weeks
Traditional bank loans have the longest approval process due to rigorous underwriting and documentation requirements.
2. SBA Loans
Approval Time: 1 to 3 months
SBA loans require extensive paperwork and government approval, which extends the processing time.
3. Online Lenders
Approval Time: 24 hours to 1 week
Online lenders offer faster approvals with streamlined applications and quick decision-making processes.
4. Merchant Cash Advances
Approval Time: 24 to 48 hours
Merchant cash advances provide quick funding based on future credit card sales, with minimal documentation.
5. Invoice Financing
Approval Time: 24 to 72 hours
Invoice financing involves selling outstanding invoices for quick cash, typically processed within a few days.
6. Lines of Credit
Approval Time: 1 to 2 weeks
Lines of credit can be approved relatively quickly, depending on the lender and the complexity of your application.
7. Equipment Financing
Approval Time: 3 to 10 days
Equipment financing is usually faster as it’s secured by the equipment being purchased, reducing the lender’s risk.
What Interest Rates Can Be Expected with Fast Business Loans?
When it comes to loans, interest rates can vary widely depending on the lender, the borrower’s credit score, and the type of loan. Here’s a breakdown of typical interest rates:
1. Online Lenders
Interest Rates: 7% to 30%
Online lenders offer quick funding but often at higher interest rates compared to traditional banks. Rates depend on creditworthiness and loan terms.
2. Merchant Cash Advances
Interest Rates: 20% to 50% (APR)
Merchant cash advances provide fast access to cash but come with significantly higher costs due to their repayment structure based on future sales.
3. Invoice Financing
Interest Rates: 13% to 60% (APR)
Invoice financing allows businesses to sell their invoices for quick cash. The rates can vary based on the invoice amount and the customer’s creditworthiness.
4. Lines of Credit
Interest Rates: 8% to 24%
Lines of credit offer flexible funding options with variable interest rates depending on the lender and the borrower’s credit profile.
5. Short-Term Loans
Interest Rates: 10% to 80% (APR)
Short-term loans are designed for quick repayment, typically within 3 to 18 months. These loans often come with higher interest rates due to the shorter terms.
Factors Affecting Interest Rates
- Credit Score: Higher scores generally secure lower rates.
- Financial Health: Strong revenue and profitability can lead to better terms.
- Loan Amount and Term: Larger loan amounts and shorter terms can affect rates.
- Collateral: Secured loans typically offer lower interest rates.
Are There Any Prepayment Penalties?
Prepayment penalties can vary widely depending on the lender and the type of loan you secure. Here’s a detailed guide to understanding prepayment penalties for various loan types:
1. Traditional Bank Loans
Likelihood: High
Details: Traditional bank loans often have prepayment penalties to compensate the bank for lost interest. Penalties can be a fixed fee or a percentage of the remaining loan balance.
2. SBA Loans
Likelihood: Moderate
Details: SBA loans may have prepayment penalties, particularly for loans with terms over 15 years. Penalties typically apply if the loan is prepaid within the first three years.
3. Online Lenders
Likelihood: Variable
Details: Some online lenders do not charge prepayment penalties, while others might. It’s crucial to read the terms and conditions carefully.
4. Merchant Cash Advances
Likelihood: Low
Details: Merchant cash advances usually do not have prepayment penalties since repayment is based on future sales. However, the cost is fixed, so early payoff doesn’t save on interest.
5. Invoice Financing
Likelihood: Low
Details: Invoice financing generally doesn’t include prepayment penalties as the advance is repaid when the invoice is paid.
6. Lines of Credit
Likelihood: Variable
Details: Some lines of credit may have prepayment penalties, but many offer flexible repayment options without penalties. Always check the terms.
7. Short-Term Loans
Likelihood: Variable
Details: Short-term loans can have prepayment penalties, though many do not. These penalties ensure lenders recover the anticipated interest.
How to Avoid Prepayment Penalties
- Read the Fine Print: Always review loan agreements carefully to understand the terms related to prepayment.
- Ask Directly: Inquire with the lender about any prepayment penalties before accepting the loan.
- Negotiate: Sometimes, lenders may be willing to waive prepayment penalties if negotiated upfront.
Pros and Cons of Fast Business Loans
Pros
- Quick Access to Funds: Fast loans provide rapid funding, often within 24 to 48 hours, which is ideal for urgent financial needs.
- Less Stringent Requirements: These loans typically have more lenient eligibility criteria compared to traditional bank loans, making them accessible to a broader range of businesses.
- Flexibility: These often come with flexible terms and can be used for various business needs, such as inventory purchase, emergency expenses, or expansion.
- Improved Cash Flow: Quick funding can help maintain or improve cash flow, ensuring the business can continue operating smoothly without interruptions.
Cons
- Higher Interest Rates: These usually come with higher interest rates compared to traditional loans, increasing the overall cost of borrowing.
- Shorter Repayment Terms: These loans often have shorter repayment periods, which can strain cash flow if the business isn’t generating enough revenue.
- Potential for Debt Cycle: The ease and speed of obtaining fast business loans can lead to a cycle of borrowing and repaying, which might trap businesses in a continuous debt cycle.
- Additional Fees: There may be additional fees, such as origination fees, processing fees, or prepayment penalties, which can add to the cost of the loan.
- Impact on Credit: If the business struggles to repay the loan on time, it can negatively impact the credit score, making it harder to secure future financing.
Frequently Asked Questions About Fast Financing
1. What types of options are available?
Options include online loans, merchant cash advances, invoice financing, lines of credit, and short-term.
2. How do I apply?
Typically, you can apply online by filling out a short application form and submitting necessary documentation like financial statements and bank records.
3. What are the typical loan amounts?
Loan amounts can range from $5,000 to $500,000, depending on the lender and the financial health of your business.
4. How does it effect my credit score?
Fast financing can impact your credit score both positively and negatively. Timely repayments can boost your score, while missed payments can lower it.
5. What documentation is required?
Commonly required documents include business bank statements, tax returns, financial statements, and identification.
6. Can I use fast business financing for any business purpose?
Yes, fast financing can typically be used for a variety of business needs such as inventory purchase, payroll, expansion, or emergency expenses.
7. What fees are associated?
Fees may include origination fees, processing fees, and possibly prepayment penalties, depending on the lender.
8. How quickly can I receive the funds?
Funds can be received as quickly as 24 to 48 hours after approval, depending on the lender.
9. Are there restrictions on who can apply?
Eligibility requirements vary by lender, but generally, businesses need to meet minimum revenue and time-in-business criteria. Some industries may also be restricted.
10. What are the typical interest rates?
Interest rates can vary widely, typically ranging from 7% to 30% for online loans, and higher for merchant cash advances and short-term loans.
Get Fast Business Funding From Progressive Business Capital
We offer both online small business loans and merchant cash advances at Progressive Business Capital. If you need fast funding for your business, our team is here to help. Contact us now to learn more about your options, and see which product may be right for your needs.