For small businesses needing loans in a hurry, you may think that your options are limited.
But there are plenty of ways to access small business loans quickly. Knowing how each option works will help you choose the right one for you. We’ve put together this in-depth guide to get you started.
What does a ‘quick’ business loan look like?
A quick business loan helps you finance your business without going through the longer traditional approval process. A conventional business loan can take up to four weeks or longer to be processed.
A quick business loan, meanwhile, can be processed within 24 hours. The loan term can last anywhere from three months to a year, depending on the lender.
With technology enabling faster processing, lenders can operate much quicker and provide immediate business loans to help your business’s finances when it needs that the most.
Quick loans for businesses are generally used to finance immediate expenses like:
- Needing more cash flow
- Buying new business equipment
- Repairing business equipment or machinery
- Renovations or to cover the costs to move to new premises
- Increasing your marketing
- Investing in staff training
- Buying new stock during seasonal periods
- Covering employee wages or bonuses
The benefits of a quick business loan
Quick loans are a popular option for business owners who need to access fast funding—here are a few reasons why:
- The application process is simple (and usually online)
- Quick access to finance for immediate needs—usually within one to two working days
- Easy to qualify for shorter loan terms, so you could pay less interest overall
Quick business loans: what are your options?
Usually, quick loans are for small amounts, which are paid back within a year. When looking for quick business loans for startups or other small businesses, there are generally five main types of loan to consider:
- Short-term loan: This is the most common type of loan. You’ll agree to a loan term of anywhere from three months to a year with a fixed interest rate. As with a traditional fixed-term loan, the amount you borrow will be repaid in regular instalments (it can be daily, weekly, or monthly).
- Equipment financing: Equipment financing provides you with fast cash to buy much-needed equipment. This includes anything from essential office equipment like computers and tech gear to machinery and vehicles.
- Merchant cash advance or line of credit: A merchant cash advance (MCA) allows you to get a cash advance against your future sales. Instead of a fixed repayment term and interest rates, the payment will be automatically deducted from your daily card transactions until the balance is paid in full. This is usually used to help cash flow or to help you get through seasonal fluctuations.
- Invoice financing: If you have late-paying customers, you can access fast cash by getting paid for those invoices early. Invoice financing involves selling your pending invoices to a lender for roughly 85% of the invoice amount. Once the invoice is paid, the lender will keep the remaining percentage as their fee for providing the loan.
- Bridging loan: This type of loan is there for when you are awaiting the finalisation of other forms of finance. It’s typically used in purchasing property, effectively bridging the gap between sale and completion. Since they’re only required for short periods of time, they’re usually the cheapest option for raising funds quickly.
If you’re looking for a more flexible option to the traditional fixed-term business loan, you can consider:
- Overdraft: An overdraft allows the account holder to continue withdrawing money even when the account has insufficient funds in it. Typically these accounts will charge a one-time funds fee and interest on the outstanding balance.
- Credit card: Standard credit cards simply extend a line of credit to their users for making purchases, balance transfers, and / or cash advances.
While these options aren’t traditional forms of business lending, they do offer you the opportunity to access cash in a hurry. Unlike traditional fixed loans, these forms of business loan do not have a fixed repayment schedule, so come with a lot more flexibility.
How quick business loans work
First up, you need to apply for a quick business loan. This usually involves submitting an application online.
Before moving on from this step, you should prepare all necessary financial documents.
Here’s a list of everything you might need before you apply to give you the best chance of being accepted:
- Information about your business, including history and stakeholder
- Information about any previous investments
- Your reason for taking finance
- Balance sheets and cash flow records
- Any other financial records
2. Decision in principle
The decision in principle is the first stage that you’ll enter after your online application has been submitted. It usually takes a few minutes and involves soft credit checks to see if you qualify for the loan.
The underwriting stage is more formal and involves a full credit check to examine your annual turnover, profit and loss accounts, and bank statements.
4. Formal approval
Finally, your application will go through the formal approval stage. Once this is complete, your funds will be transferred to your business bank account.
One of the best things about quick business loans is that once you’ve been approved and are set up with an online lender, it’s even easier to return again and again to apply for more financing when you need it—as long as you keep up with repayments.
How to choose the right quick business loan for you
Even though you’re probably in a hurry to make a decision on which loan is best for you, there are still a few important considerations to make.
The amount you want to borrow
Try to earn part of the amount yourself. It is more accessible nowadays because there are many ways to make money online.
When considering interest rates, pay close attention to the length of the loan term, and any repayment charges if you choose to pay off the loan early.The yearly interest rate (or APR) can vary depending on the lender and your business’s risk profile. That’s partly out of your hands, unfortunately, and has as much to do with your industry as your credit score.
Most online banks will have a calculator that allows you to play around and see how much you’re going to be paying back according to your loan amount, interest rate, and loan term. Doing this calculation can help you understand the highest interest rate you can afford.
Many loans come with application fees and administration fees. These vary from lender to lender, and most will give this information upfront, but remember to check the small print.
Eligibility requirements for quick business loans aren’t as strict as longer-term loans. The conditions vary between lenders, but in general, eligibility usually means:
- Your business should have been running for at least 18 months
- You’ll need to have a business current account (this depends on the lender and the amount you’re borrowing). If you don’t have a business account, the application may take longer as the lender will need to perform more checks
- Proof of a minimum monthly turnover
- A good credit score
- You may need to put forward a high-value asset, like a property, to secure the loan (though this depends on the loan amount)
How to get quick loans with bad credit
While it may be harder to get a quick loan with bad credit, it’s not impossible. A bad credit rating means that you represent a higher risk. So, this risk will be passed on to you in the form of higher-than-standard interest rates.
You may also be required to provide some form of security like an asset to secure the loan against. The value of the security you are able to provide must match the amount you are looking to borrow. If your business has no assets, it may be possible to offer the lender a personal guarantee. This considers the value of your personal assets, such as your house or car, as securities held against the loan in case you can’t pay it back.
If your business is not able to pay back the loan, your personal assets will need to be sold to cover the loan repayment. Not only does this mean that you could lose your house or car, but it will also have a negative impact on your personal credit rating. That means it’ll be even harder to secure credit in the future.
A quick business loan could be just what your business needs right now
Quick business loans are there to give your business a quick cash injection that can be used for immediate needs. A few options are available; however, short-term fixed loans are generally the most popular and require you to pay back the loan within three months to a year.
Before making any quick decisions about what business loan to get, make sure you understand the different options available to you and what works best for your business. It’s essential to know how much interest you can afford to pay back and the time frame you are required to pay back the loan, along with any other fees.
At Uncapped, we offer investment capital with offers ranging from £10k to £5m through a revenue share agreement similar to a merchant cash advance. See if you qualify!