Need a Same-Day Business Loan? These Are the 6 Best Options

Sometimes your business can’t afford to wait for funding—when cash reserves are low and demand is high or you’ve had an unexpected expense, immediate access to cash could make or break your business. That’s where same-day business loans come in. In some cases, you could have the cash you need in under a day.  

The options for funding are many, and that’s why we’ve created this list of options to guide you in your choice when looking for same-day or otherwise quick funding options that will get you the cash you need when you need it.

Where to Look for a Same-Day Business Loan

Generally speaking, if you need money quickly, your best bet is to turn to alternative lenders. These lenders can loan you money outside traditional banks. Small business owners can easily work with new, online lenders to access a variety of business financing—from term loans and lines of credit to invoice financing and short-term loans.

According to a study by Harvard Business School, most major alternative lenders offer full loan applications online over desktop or mobile platforms and take just 30 minutes to complete. Meanwhile, applying for bank financing can take an average of 25 hours for a single loan. And that’s not even accounting for the additional weeks—often months—of waiting to hear back, meeting with the bank multiple times, handing in physical paperwork, and more.

Additionally, big banks have earned an approval rating of between only 13% and 20% over the past five years, whereas alternative lenders have accepted on average between 61% and 64% of small business owners looking for funding. So, not only are alternative lenders faster, they’re also more accepting.

Other benefits of alternative lenders include less paperwork and more flexibility in terms of what you can use the loan for and how you pay it back. Of course, what you get in speed of funding, you might pay for in qualification requirements, annual interest rates, fees, or other variables.

All that said, let’s take a look at all the options small businesses have for fast funding through alternative lenders. Starting with…

1. Short-Term Loans

Short-term loans are designed to meet short-term financing needs. A short-term loan operates somewhat like a traditional term loan, but you pay back the money, plus interest, with daily or weekly payments over 3 to 18 months.

They can be a flexible financial tool to better manage cash flow, deal with unexpected needs for extra cash, or take advantage of an unforeseen business opportunity. To qualify, you’ll need 6+ months in business, a 500+ credit score, and $100,000+ in annual revenue. Short-term loans are exclusively applied to online.

Pros

• Set payment structure
• Limited paperwork
• Bad credit is accepted
• Suitable for a wide range of business purposes

Cons

• Annual costs are higher than those of longer-term loans (but you’ll pay it off in a shorter amount of time)
• Weekly or daily payments could prove difficult to make for businesses with sporadic revenue

Fine Print

• Loan amounts are usually $2,500-$250,000
• Loan terms are usually 3-18 months
• Interest rates start at 10% but can get very expensive
• Can fund in as little as 1 day

2. Merchant Cash Advances   

A merchant cash advance (MCA) is a lump sum of capital you repay using a portion of your daily credit card transactions. To qualify, you need to be 5+ months in business with a 400+ credit score and around $75,000+ in annual revenue.

Merchant cash advances are often provided through online financing companies and repayment is automatically deducted each day through your merchant account. They are the most expensive product on the market, so you might want to compare an MCA with something like a short-term loan.

Pros

• Quick access to funds
• Easy approval process
• Bad credit is accepted
• Suitable for a wide range of business purposes

Cons

• Higher fees than with traditional loans
• Less flexibility to change merchant service providers
• Daily deduction of credit card receipts reduces cash flow

Fine Print

• Maximum advance amount is usually $2,500-$250,000
• Factor fees are usually 1.14%-1.18 % but can get very, very expensive
• Can fund in as little as one week but sometimes faster

3. Business Lines of Credit

A business line of credit gives you capital to meet a whole variety of business needs. Draw on your business line of credit to get more working capital, buy inventory, handle seasonal cash flow gaps, pay off other debts, or address almost any other business emergency or opportunity.

A business line of credit is flexible “revolving” capital that works almost like a credit card, except you get access to cash and, in some cases, lower APRs. General qualifications include 6+ months in business and $50,000+ in annual revenue. You can get a traditional line of credit through your bank, but if you do not qualify or need access to a line quickly, you can apply to online lenders as well.

Pros

• Only pay interest on funds drawn
• Capital is available when needed
• Suitable for a wide range of business purposes
• Bad credit can be acceptable with certain lenders
• Excellent way to build your credit score

Cons

• Might need to provide updated documents upon each draw
• May require collateral
• Higher rates for lower credit scores

Fine Print

• Lines can range from $10,000 to over $1 million
• Interest rates can range from 7% to 25%
• Can fund in as little as 1 day

4. Invoice Financing

Also known as “accounts receivable financing,” this option lets you get paid for your outstanding invoices right away—for a fee. With invoice financing, you could get a fast advance of about 85% of the value of your invoices, with most of the other 15% paid to you later. It’s the perfect solution to cover for late-paying customers or breaks in cash flow.

To qualify, you need 3+ months in business and $50,000+ in annual revenue. There are different types of invoice financing, but most of these options can be found online. 

Pros

• No need to wait for invoice payment
• Invoices serve as collateral, so no need to put anything else on the line

Cons

• Can have higher fees than traditional financing
• Fees based on time for invoice to be paid off

Fine Print

• Your advance will most likely be approximately 50% to 90% of the total invoice amount
• You repay when customer pays the invoice—you receive the remaining 10-50% reserve amount, minus the fees
• The factor fee is approximately 3% plus a certain %/week outstanding
• Can fund in as little as one day

5. Business Credit Cards

Whether you’ve just started a small business or you’ve been at the helm for some time, a business credit card can come in handy. It gives you easy access to a revolving line of credit, which you can use for purchases or cash withdrawals when you need them, without hassle or delay.

And it can easily give yourself a cash flow cushion if you’re waiting on invoices to come through or other unexpected expenditures arise. Even if you don’t need one right now, it might be a good idea to snag one just in case.

Pros

• Track, categorize, and analyze your expenses through your monthly statements
• Only pay interest on funds drawn
• Suitable for a wide range of business purposes
• Doesn’t require collateral
• Usually includes cash back or rewards points

Cons

• Like with consumer credit cards, small business credit cards need to be used wisely. Otherwise, you might get caught up with unnecessary debt or tarnish your credit score.
• High interest rates

Fine Print

• You can usually get a credit card within one week. It can depend on the application and the issuer. In same cases, it is instantaneous.

6. Business Charge Cards

Like business credit cards, business charge cards extend lines of credit to users. They also have similar rewards, perks, annual fees, and foreign transaction fees. But there are two key differences:

1. There’s no preset spending limit.
2. While business credit cards let you roll your balance over from month to month, building interest along the way, business charge cards need to be paid in full every month.

If you miss a payment, you’ll get charged typically 3% of the balance or more—and risk getting your line of credit suspended.

Pros

• No preset spending limit
• Borrow as much as a little as you need each month
• Suitable for a wide range of business purposes  
• Doesn’t require collateral
• Cash back and rewards points
• No interest on expenditures

Cons

• If your balance isn’t paid in full every month, you’ll be charged a hefty fee.
• Like with consumer credit cards, small business charge cards need to be used wisely. Otherwise, you might get caught up with unnecessary debt or tarnish your credit score.

Fine Print

• You can usually get a charger card within one week. It can depend on the application and the issuer. In same cases, it is instantaneous.

If you need fast cash, it’s certainly possible—but not without some risk. However, risk is always a factor when it comes to borrowing. Just make sure you’re fully aware of the fine print to help mitigate that risk and get you the safest cash you need, when you need it.

The post Need a Same-Day Business Loan? These Are the 6 Best Options appeared first on Fundera Ledger.

from Fundera Ledger https://www.fundera.com/blog/same-day-business-loan