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) will be one of your biggest hurdles.
For small business owners facing expenses that just can’t wait, traditional approaches—SBA loans from banks, for example—can be burdensome, inconvenient, and ultimately disappointing. 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 is much more strict, and it can take weeks or months to qualify.
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.
That being said, if you have bad credit it will be more difficult to find a loan, but there are still options for a business borrower with less-than-perfect credit history. You should also expect that the costs of 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.
If you accept credit cards and have a fairly consistent flow of credit card receipts flowing through your business, an MCA could be a viable option for your business. Although a merchant cash advance is not a loan, but rather an advance on your credit card sales, 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 an MCA will likely exceed the costs of an unsecured loan from most online lenders—including the two we’ve mentioned above.
Finally, let’s take a quick look at a few more affordable options for fast business funding. While these approaches may not be as fast as going to new lenders like OnDeck or Kabbage, depending on the business need you’re trying to meet, the extra effort might be worth it in the long run, given the amount of money you stand to save.
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 reasonably good credit, you might want to consider getting a business credit card. The ideal way to use these cards is to pay the full balance every month. As you do so, you’ll keep the credit limit available for those times when you need access to a quick loan and build your business credit score at the same time. The average APR for a credit card is 16%, a significantly lower than some of the options we’ve mentioned. And while it’s true that you’re limited to your credit line regarding what you can and can’t purchase, another advantage of credit cards is that many of them offer introductory 0% interest rates as well as rewards such as cash back with purchases, frequent flier miles, hotel stays, etc.
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. BlueVine is one such option B2B businesses may want to consider.
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 a fast business loan this way is not a bad way to go.
Want to learn more about business loans? Reach out to one of EcoCredit specialists now.