Nowhere is the saying “you need money to make money” more true than in the crowded, competitive, fast-moving world of small business. As you seek to establish and grow your enterprise, access to capital (or the lack thereof) can be one of your biggest hurdles.
How Can I Get Money for My Business Fast?
For small business owners facing expenses that just can’t wait, traditional approaches—loans from banks, for example—can be difficult and ultimately disappointing.
Alternative lenders tend to not only evaluate creditworthiness differently, but they are also able to respond much faster to a loan request than their more traditional counterparts. If you’re looking for a quick business loan to meet a pressing business need or opportunity, an online lender is often able to give you an answer to your loan application today and maybe even fund your loan tomorrow.
However, there is a correlation between access and cost in small business lending every small business owner should be aware of. The interest rate (or the cost of capital) will often be less with a traditional lender like a bank or credit union, but their qualification criteria may be much more strict, and it can take weeks or longer to qualify.You should also expect that the costs of small business financing will likely be higher for the convenience of a quick answer and a fast loan.
Nevertheless, depending on your business need, the increased costs could be worth the expense if it helps you meet a critical business need or increase the ROI of a current business initiative. Let’s take a closer look at a few business lenders and see what they have to offer by way of fast small business loans.
How Do Fast Business Loans Work?
Alternative lenders typically look at other criteria besides creditworthiness, such as annual revenues and assets. They can make a decision on approval faster, sometimes instantly after you click “apply.” If you’ve set up your business bank account with the lender, the funds will be deposited in as little as one business day, giving you the access you need to cash.
Common Reasons for Needing a Fast Business Loan
So why would you need a fast business loan? If you didn’t anticipate a cash shortage, you might be struggling to pay your bills. A quick loan can get you the cash you need to cover those expenses.
You might also have an opportunity to take advantage of an opportunity to purchase another company and don’t have time to wait, nor cash on hand. That’s another example of where a fast business loan could come in handy.
How to Qualify for a Fast Business Loan
Because alternative lenders don’t always require high credit scores, there may be other ways you can qualify for a fast business loan.
First, your business may be required to be in business for at least a year or two.
Typically it must meet minimum annual revenue requirements as well. These lenders will often require the business owner to provide business checking account statements, or a link to a business bank account, to verify revenues.
Can I Get a Fast Business Loan With a 500 Credit Score?
Getting a business loan with a credit score of 500 can be very challenging since a credit score of 500 is considered “very poor.” Most traditional lenders, such as banks, have strict credit score requirements for business loans, and a low credit score might disqualify you from their offerings.
However, there are alternative options you could consider:
- Online lenders: Some online lenders and alternative financing platforms have more lenient credit score requirements than traditional banks. They might consider other factors, such as your business’s revenue, cash flow, and overall financial health metrics.
- Short-term loans: Short-term loans are often available from online lenders and can have more flexible requirements. These loans typically have higher interest rates and shorter repayment terms, so make sure you’re comfortable with the terms before proceeding.
- Merchant cash advances: This type of financing provides you with a lump sum payment in exchange for a percentage of your daily credit card sales. Credit score requirements might be less strict, but keep in mind that the costs can be quite high.
- Microloans: Some nonprofit organizations and government agencies offer microloans to small businesses, particularly those owned by women, minorities, or veterans. These loans might have more flexible credit score requirements.
- Peer-to-peer (P2P) lending: P2P lending platforms connect borrowers with individual investors willing to fund loans. While credit scores are still considered, these platforms might have more lenient requirements than traditional lenders.
- Secured loans: If you have valuable assets, you might be able to secure a loan with collateral. This can reduce the lender’s risk, making them more willing to work with a lower credit score.
Remember that while these options might be available, they often come with higher interest rates and stricter terms due to the increased risk associated with a lower credit score. Before applying for any loan, it’s important to consider the terms, interest rates, and repayment terms to ensure they align with your business’s financial situation and goals.
The Best Lenders for Fast Business Loans
So what’s the best loan for you? Here are some of the most common types of fast business loans.
Business cash advance (MCA)
If you accept credit cards and have a fairly consistent flow of credit card and debit card receipts flowing through your business, a business cash advance or MCA can be a viable option for your business. A cash advance is not a loan, but rather an advance on your credit card sales. You can get a lump sum based on past receipts. Most providers are able to give you an answer to your application the day you apply and can have funds in your account within a day or two after that.
The cost of a cash advance will likely exceed the costs of an unsecured loan from most online lenders. Costs are not typically stated as an interest rate, but rather as a factor rate.
Credit cards don’t always seem an obvious choice for people looking for fast business loans, but if used right they can be a quick and easy source of business capital. If you have good personal credit, you may be able to qualify for a business credit card.
While credit cards are known for carrying higher interest rates, the average APR for a credit card is 16%, significantly lower than some of the options we’ve mentioned. A number of cards offer introductory 0% interest rates for 9—12 or more months, as well as rewards such as cash back with purchases, frequent flier miles, hotel stays, etc.
The ideal way to use these cards is to pay the full balance every month, or before an intro rate expires. As you do, you’ll keep the credit line available for times when you need access to a quick loan. Pay on time and you can build your business credit scores at the same time.
Credit cards are also one of the most common financing options for new businesses because most don’t have time in business requirements.
Do you have irregular cash flow because you’re often waiting for your customers to pay you for services or products you’ve provided? Invoice financing (invoice factoring) can be a good option for B2B businesses with long invoice cycles. Invoice financing allows you to get paid immediately rather than waiting for your customers to pay you.
If you need to purchase a piece of equipment, equipment loans are a great solution. The equipment you purchase acts as collateral for the loan amount you borrow, which can reduce the interest you pay. Some of these loans offer approval in a few days or a week or so.
SBA 7(a) Express Loan
If your credit is solid, and you can wait at least a few weeks for the loan, you may consider a SBA 7(a) Express loan. These loans, made by financial institutions and guaranteed by the U.S. Small Business Administration, offer up to $500,000. The best thing about an SBA loan is that it will offer some of the lowest interest rates for which your business can qualify.
SBA loans in general are not known as fast business loans. The application process requires significant paperwork, and approval requires acceptable credit. But of all the SBA loans, SBA Express loans are designed to be the fastest one and some lenders may be able to fund in around a month or less. A personal guarantee is required.
Online business financing can come in the form of a business line of credit or a term loan. While traditional banks often have fairly high approval standards, some online lenders may have more flexible approval standards. Many of these lenders have fairly simple online applications. They are often short-term business loans and repayment terms often range from a few months to two years.
Business credit cards
While it may not be the first thing to come to mind when you think of business funding, business credit cards can be an extremely valuable tool to increase flexible cash flow. Many business owners use credit cards to fill in cash flow gaps, build credit, and get rewards for everyday purchases. Combining more than one business credit card may give business owners the right amount of working capital.
Family or friends
No one likes doing this: it’s hard and feels embarrassing, with the potential for injured relationships down the road. But loans from friends or family remain an incredibly popular way for many businesses (of all sizes) to find capital. If you have someone you particularly trust, and who in turn has faith in you and in your small business, receiving this type of loan may be worth exploring.
Fastest Way to Get Business Loans for Startup Businesses
Getting a business loan for a startup can be a bit challenging, as lenders often want to see a track record of business operations and financial stability. However, if you’re looking for the best way to secure funding quickly — possibly even same-day funding — for your startup, consider the following steps:
- Research loan products: Understand the types of loans available for startups, including traditional bank loans, online lenders, microloans, working capital loans, and more. Each option has different eligibility requirements and application processes. Use Nav to find what you can qualify for before you apply.
- Prepare a solid business plan: A comprehensive business plan demonstrates your understanding of your business’s market, competition, revenue projections, and growth strategy. Lenders want to see that you have a clear plan for success.
- Check your credit report: Even for startup loans, your personal credit score might be considered. Review your credit report for inaccuracies and try to improve your credit score if necessary.
- Explore online lenders: Online lenders often have a streamlined application process and quicker decision times compared to traditional banks. Some might have more lenient requirements for startups, focusing on factors like business revenue and cash flow.
- Consider microloans and alternative financing: Microloan programs and alternative financing options designed for startups might have more flexible eligibility criteria. These sources include nonprofit organizations, angel investors, and crowdfunding platforms.
- Gather documentation: Different lenders will require various documents to assess your startup’s financial health. Common documents include business and personal tax returns, financial statements, business licenses, and legal documentation.
- Optimize your application: Make sure your loan application is complete and accurate to prevent delays. Provide all required documents and answer any questions the lender may have promptly.
- Prepare for negotiations: If a lender is interested, they might offer terms that are negotiable. Be prepared to discuss interest rates, repayment terms, and other conditions to ensure they align with your startup’s needs.
- Consider collateral: If you have valuable assets, you might be able to secure the loan with collateral. This can increase your chances of approval and potentially result in more favorable terms.
- Be ready to demonstrate potential: Highlight the growth potential of your startup. Lenders want to know that your business has a solid chance of success and that the loan will be repaid.
Remember that even with fast processes, securing a business loan can take time. Be patient and thorough in your preparations, and be cautious of any offers that seem too good to be true. Always carefully review the terms and conditions of any loan before accepting it.
What’s the Interest Rate for a Fast Business Loan?
The interest rate for a fast business loan can vary widely depending on several factors: the type of loan, the lender, your monthly revenue and creditworthiness, the loan amount, the repayment schedule and terms, and the overall financial health of your business.
Here are some general guidelines for different types of business loans:
- Traditional bank loans: For business loans from a traditional bank, interest rates can range from around 4% to 13% or more. Keep in mind that these loans often have stricter requirements and longer application processes.
- Online lenders: Online lenders offer faster processing times, but interest rates can be higher than those of traditional banks. Rates might start around 7% and can go up to 30% or more, depending on various factors.
- Short-term loans: Short-term loans typically have higher interest rates due to the shorter repayment period. Rates can range from 10% to 50% or higher, depending on the lender and your credit profile.
- Merchant cash advances: Merchant cash advances come with a factor rate instead of a traditional interest rate. This factor rate is multiplied by the loan amount to determine the total repayment amount so you’ll know upfront how much the advance will cost. Factor rates can range from 1.1 to 1.5 or more, which translates to an interest rate higher than traditional loans.
- SBA loans: SBA loans, backed by the Small Business Administration, generally have lower interest rates compared to other options. Current rates for SBA loans fall between 11.5% and 15%.
- Microloans: Microloans from nonprofit organizations or community lenders might have more reasonable interest rates, often falling between 6% and 18%.
Remember that these are approximate ranges, and actual rates can vary. Your credit score, business financials, loan term, collateral, and the lender’s specific terms will all influence the interest rate you’re offered. It’s essential to shop around, compare offers, and carefully read the terms and conditions of any loan agreement to understand the total cost of borrowing.
Also, be aware that some lenders might also charge fees beyond the interest rate, such as origination fees, application fees, and prepayment penalties. These fees can significantly impact the overall cost of the loan, so it’s crucial to factor them into your decision-making process.
What Are Quick Business Loan Options For Bad Credit?
If you have bad credit it can be more challenging to find a loan, but there are still options for a business borrower with less-than-perfect credit history. Specifically, merchant cash advances and business cash advances, as well as invoice financing, often have fairly lenient minimum credit score requirements.
In the case of merchant cash advances, revenues are the primary driver of approval, and in the case of invoice financing it’s the credit of the company that owes the invoice that’s most important.
What’s the Difference Between a Fast Business Loan and a Personal Loan?
A fast business loan (or even same-day business loan) and a personal loan are two distinct types of loans that serve different purposes and are typically used by different entities: businesses and individuals, respectively.
Here are the key differences between the two:
1. Purpose and user
- Business loan: A fast business loan is specifically designed for business purposes. It’s intended to provide funds to support a business’s operations, growth, or other business-related needs. Business loans are typically obtained by business entities, like sole proprietorships, partnerships, LLCs, and corporations.
- Personal loan: A personal loan is used by an individual for personal use. It can be used for various purposes, like debt consolidation, home improvement, medical expenses, education, or any other personal financial need.
2. Borrower eligibility
- Business loan: Business loans can be granted based on the financial health and creditworthiness of the business itself. Lenders assess factors like the business’s revenue, cash flow, credit history, business plan, and potential for growth. They will also often look at the business owners’ personal credit history as well.
- Personal loan: Personal loans are granted based on the creditworthiness and financial situation of the individual borrower. Lenders evaluate factors such as the borrower’s credit score, income, employment history, and existing debt.
3. Loan amounts and terms
- Business loan: Business loans typically offer higher loan amounts than personal loans. These loans are tailored to meet the financial needs of a business, which might require significant capital for expansion, inventory, equipment, or other business-related investments.
- Personal loan: Personal loans generally offer smaller loan amounts compared to business loans. They’re meant to cover personal expenses, which tend to be of a smaller scale.
4. Interest rates and terms
- Business loan: Business loan interest rates can vary widely depending on factors like the type of loan, lender, business and personal credit history, and the overall financial health of the business. Loan terms are often structured to align with the business’s cash flow and revenue streams.
- Personal loan: Personal loan interest rates are determined by the borrower’s creditworthiness, and rates can vary based on credit scores. Loan terms are generally more standardized and might not be as tailored to individual financial situations.
5. Application and approval process
- Business loan: Business loan applications often require detailed business financial documents, business plans, and other information that demonstrates the viability of the business. Approval might take longer due to the need to assess the business’s financial health.
- Personal loan: Personal loan applications are typically easier and faster to complete. Personal loans might have quicker approval times, especially for individuals with strong credit histories.
6. Collateral and guarantees
- Business loan: Business loans might require business assets or personal guarantees from the business owner as collateral, especially for startups or businesses with limited credit history.
- Personal loan: Personal loans are often unsecured, meaning they don’t require collateral. However, some personal loans, such as home equity loans, might be secured by assets like a home.
A fast business loan is tailored for business-related needs and is obtained by businesses, while a personal loan is meant for individual financial needs. The eligibility criteria, loan amounts, interest rates, and application processes differ between these two types of loans.
Nav’s Verdict: Fast Business Loans
With so many types of business loan programs to choose from, it can be difficult to choose the right funding option. In general, fast funding comes with higher interest rates or fees. You’ll want to choose carefully to make sure the business funding makes sense.
FAQs about Fast Business Loans
This article was originally written on June 15, 2020 and updated on October 3, 2023.