Who can’t offer an emergency business loan?
Before we go into some of the forms of emergency business finance, we need to eliminate bank term loans. Although this is what many business owners think of funding options, these loans are not practical when you need money fast. First, the applications processes of most banks are too slow when you need an urgent business loan. It will usually take several weeks to get approved after you submit your loan application. Second, these business loans require some form of collateral. For most business owners, this is residential real estate. For those who don’t own property, or don’t want to put it at risk, this is not an option if you need and urgent business loan.
Business credit card
A business credit card can be a fast option when seeking emergency business finance. Some lenders can approve the application within one business day and send out the card within one day. Others can take several days to approve and up to two weeks to send out the card, so you would want to confirm the timeframes before seeking this form of urgent business finance. One shortcoming with business credit cards is the interest rates which can be substantial if you keep a running balance. Learn more in Tips for Choosing the Right Business Credit Card.
Merchant cash advance
Although this form of emergency business finance can be approved fast, it only applies to businesses that take many credit card payments from customers. With this form of finance, the lender provides the funds to the business and gets repaid through a small percentage of eftpos and credit card transactions. This will work for a retail or hospitality business that has many of these transactions but is not applicable to businesses that offer payment terms. Find out more in What Is a Merchant Cash Advance?
This form of finance is suitable for businesses that offer invoice payment terms to their customers. This usually applies to companies that sell to other businesses. With this form of finance the lender uses the value of invoices as collateral and lends a percentage of this value, which could be 85% or more. Depending on the type of invoice finance, the lender or the business will collect the outstanding amounts from the customers. The company providing the finance charges a fee plus interest for invoices that remain outstanding. Invoice finance can be a fast option if the borrowing business has its accounting in order and has reliable debtors on its books. Get more information in What Is Invoice Finance?
Business lines of credit and overdrafts
These are similar forms of revolving credit. With a business overdraft, you are able to overdraw your business transaction account for a predetermined amount and pay interest on the value of funds your use. With a line of credit you get access to a predetermined amount of funds to use. Interest is also charged for the money you are using. For both forms of emergency business finance, you are will be charged an ongoing line fee. This type of funding also includes an establishment fee charged when these facilities are opened. For existing bank customers with a good credit score, business overdrafts and lines of credit can be approved in a few days. Learn more in What’s a Business Overdraft? and What Is a Business Line of Credit?
Unsecured online business loans as emergency business finance
In recent years, more businesses have been turning to unsecured online business lenders for emergency business finance. The rise of fintech (financial technology) lenders has made it easier to access fast business loans. With Moula for example, you don’t need to complete stacks of paperwork and then wait weeks for an answer. Moula safely and securely accesses bank account and accounting data and can provide an answer in 24 to 48 hours. Moula loan terms are from six to 24 months, so they are suitable for meeting urgent business finance needs.