How to Get Same-Day Funding for a Small Business
January 5, 2022
January 5, 2022
What we will cover in this article:
Having access to working capital and cash flow is vital for small businesses. However, it is easy for small businesses to run low on these, which can result in an otherwise healthy business being forced into bankruptcy. As a result, it is beneficial for small business owners to know about same-day funding options that they can take advantage of to access cash when they need it. Even if you don’t need to fill a cash flow gap now, you may need to in the future, so it is a good idea to get a sense of the industry and the options available. In this article, we will discuss some of the options small business owners have and cover all the basics you need to know when considering same-day funding.
Not all loan types are available for same-day funding on account of the quick application process and the limited amount of time lenders have to assess prospective borrowers. Same-day business loans are typically limited to the following types of business loans:
Short-Term Loans: Short-term loans are just traditional terms loans with short repayment terms. It is typically not possible to get a long-term business loan in a short period of time since these loans are for higher amounts and require both planning and careful analysis on the part of the lender. Short-term loans allow businesses to borrow a set amount of money one time and pay it back with interest over a period of anywhere from a few weeks to several months. These typically come with a pre-set payment plan, which you will agree to beforehand.
Business Lines of Credit: A business line of credit is different from a term loan in that it provides a business with a set amount of money they can borrow at any time. Businesses do not have to reapply each time they want to draw money from their line of credit, and they can borrow over and over again as long as they repay their outstanding loans (the line will reset each time you pay back your withdrawals similar to how a credit card does).
What is nice about business lines of credit is that they provide flexible and fast access to cash, and you will only be charged interest on the amount you actually borrow (i.e. you can have a credit limit on your line of credit of $250,000 but if you only borrow $50,000 that is how much you will pay interest on). Plus, since you don’t have to reapply, they are always there when you need them, allowing you to fill cash gaps easily.
Invoice Factoring (aka Invoice Financing): Invoice factoring, sometimes referred to as invoice financing, is the process of converting outstanding invoices or accounts receivable into cash. In this situation, you sell a lender your unpaid invoices at a discount. This means that invoice factoring is not actually a “small business loan” in the strictest sense.
Typically, businesses will get an advance of about 80% to 90% of the value of their invoices. Then, once your customers pay you, you will receive the remaining amount of the invoice minus the fees charged by the lender.
Invoice financing is a good way for newer businesses without a long credit history to access cash quickly since the outstanding invoice works sort of like collateral in that it provides some extra guarantee to your ability to pay back the loan (which makes it easier for lenders to approve you). However, it is not the same as collateral, since there is no guarantee that the customer will actually pay their outstanding invoice, which adds risk for both you and the lender.
Merchant Cash Advance (MCA): A merchant cash advance (MCA) is a lump sum of money that you can borrow at one time. This loan is then repaid over time using a portion of your business’ credit card transactions. This is a less common form of loan for many small businesses, but it is one of the loan types offered by lenders that can be obtained quickly.
It is important to keep in mind that MCAs are usually one of the most expensive forms of financing that businesses can access. As such, you will probably want to consider the other same-day loan options we have mentioned before you turn to MCAs.
Traditional brick-and-mortar banks and lenders will not offer borrowers same-day funding. Instead, they will typically have drawn-out application processes that give them time to assess your credit score, bank statements, annual revenue, business plan, and more. While this allows traditional banks to offer better interest rates, it slows the process down considerably, eliminating their ability to provide funding in a matter of hours or days. This means that traditional loans and many small business-oriented loans, like those offered by the small business administration (SBA), cannot be used to fill cash gaps in a quick and timely manner.
Alternative lenders are the best resource for a same-day business loan. Unlike traditional banks, alternative lenders have online applications and process applications based on considerably more limited information (for example, you won’t need to submit a business plan). Additionally, they are typically much more lenient and flexible regarding what sort of credit history and minimum credit score they require (they compensate for this, however, with higher interest rates and fees).
Biz2Credit helps connect borrowers with lenders each and every day through a quick, online loan application that matches borrowers with a wide array of financing options and loan amounts. Borrowers can apply in as little as 4 minutes, receive a decision in as little as 24 hours, and receive funding in as little as 72 hours.
We recognize that Biz2Credit, while fast, typically cannot provide same-day funding to small businesses (meaning both approval and money in your bank account in just 24 hours). As a result, we have compiled some of the best same-day lenders that can provide your business with fast business loans. Here are some of the online lenders you might want to consider if you need same-day funding now or in the future:
BlueVine provides borrowers with an array of loan products and funding options. These options include invoice factoring and lines of credit with terms of 6 or 12 months. You can gain approval for credit lines of up to $250,000 in as little as 5 minutes from BlueVine, and you can withdraw the funds through an online, personalized dashboard in just hours. This is a revolving line of credit, so once you repay the funds you can withdraw additional funds in the future without having to reapply.
If your business has a strong credit rating and credit history, BlueVine can also offer fairly competitive interest rates, starting at 4.8%. However, they can also reach exorbitantly high levels of over 50%.
The minimum credit score required by BlueVine is a personal credit score of just 650. However, they are not an option for new businesses, as they require that businesses be at least two years old and have at least $360,000 in revenue.
Another alternative lender that borrowers can utilize is Fundbox. Fundbox provides small businesses with both lines of credit and term loans through an online application.
Fundbox can provide a decision on your application in just minutes, and the funds can transfer as soon as the next business day, meaning you can access cash in less than 24 hours. Each borrower has access to an online dashboard that they can easily draw funds from, and which emphasizes transparency about interest rates and fees (this way, you will know what your total repayment obligation will be).
Fundbox also has no prepayment penalty, which is great for small businesses that just need to fill a cash gap of a day or two, since they will be able to repay the loan just a few days later without incurring a penalty.
Repayment times vary based on whether you choose a term loan or a line of credit. Term loans through Fundbox offer a repayment plan of 24 or 52 weeks. Lines of Credit come with a repayment plan of 12 or 24 weeks each time you draw. Lines of credit also give you the ability to redraw again once you have repaid your initial draw (or if you have additional available credit) – this means you can draw funds repeatedly without having to reapply each time.
Fundbox also allows relatively new businesses to access funding since they have less stringent eligibility requirements. They only require that businesses be six months old. Additionally, they require a relatively low minimum personal credit score of 600 and annual revenue of $100,000 (remember though that the interest rates will be very high for borrowers who only meet the minimum thresholds for borrowing). Interest rates can also be as low as 4.66% for highly qualified borrowers, a very competitive rate.
OnDeck can provide small businesses with same-day lines of credit and term loans. Plus, they come highly rated, with an A+ rating from the Better Business Bureau. To date, they have provided roughly $13 billion to businesses globally.
OnDeck offers lines of credit ranging from $6,000 to $100,000 with a 12-month repayment term for each withdrawal. Plus, their lines of credit reset after each withdrawal, allowing you to access the funds repeatedly. This can all be accessed and managed from an online dashboard.
OnDeck’s term loans come in amounts ranging from $5,000 to $250,000 and offer a relatively long repayment term (compared to other same-day term loan options) of 24 months.
That said, OnDeck’s interest rates are less competitive than other lenders. Their interest rates range from 11% to 61.9% on lines of credit and 9% to 99% on term loans, with rates typically falling somewhere in the middle of those ranges. This makes their loans quite expensive.
To understand the terms of OnDeck’s loans, you can use their proprietary SMART Box tool. This online tool shows prospective borrowers the exact terms of the loan options available to them and what their total liability will be in a clear and easy-to-understand format. You can see an example of the SMART Box tool and how it works on OnDeck’s website.
While the alternative lending industry is relatively new and has seen some impressive growth over the last few years, CAN Capital is actually one of the oldest players in the industry, making them a trusted resource for funding. Indeed, they have been operating for over 20 years and have provided over $7 billion in funding to over 81,000 small businesses.
As an alternative lender, their core loan products include short-term loans that can range from $2,500 to $250,000 with terms between 6 and 18 months – relatively good in comparison to other same-day alternative lending options.
CAN Capital also offers merchant cash advances (MCAs) that small businesses can take advantage of. However, these funds typically take 2 days to be deposited, meaning this option is not a same-day funding option.
Borrowers also have access to an online dashboard, automated ACH deduction, pre-payment discounts, and more. All great features that can make the loan process much easier to keep track of and manage.
That said, CAN Capital requires that businesses be at least 3 years old, a relatively long period compared to other online lenders offering same-day funding. They also require a minimum annual revenue of $150,000. Additionally, compared to other lenders, CAN has a much more thorough application process, which allows them to assess potential borrowers to a more in-depth degree. The result is that CAN capital sometimes cannot provide same-day funding in the way that some other alternative lenders can.
Rapid Finance is yet another option for same-day loans for small businesses. Rapid Finance offers merchant cash advances (MCAs) to small businesses, as well as more traditional short-term loans. Funding is often available on the same day for both options. As an established lender, they have already provided roughly $2 billion in funding to businesses across various industries.
Rapid Finance’s short-term loans come in amounts ranging from $5,000 to $1 million (a very high amount compared to other same-day lenders). Their terms also can extend to 60 months (again, a very long term length compared to other same-day options).
Rapid Finance’s application is online and easy to fill out. It will require that you submit your bank statements so that they can assess your cash flow, which will then determine what financing products, terms, and amounts you qualify for.
Same-day business loans come with both pros and cons that must be considered. Indeed, oftentimes, it is best to only access same-day funding when you absolutely need it. Otherwise, it can be beneficial to shop around and learn about the different interest rates and loan options available to your small business.
â€‹The biggest pro of a same-day business loan is obviously the speed with which small businesses can gain access to them. They are great for filling short-term cash gaps and making emergency repairs (which can then be refinanced later on if necessary). Whatever the issue is, same-day business loans allow you to keep your business up and running while you consider other financing options.
Same-day business loans are also relatively accessible in this day and age. With the emergence and growth of online alternative lenders, many small businesses can gain access to fast funding. Indeed, the degree to which access to capital is available today is completely unprecedented. You can have funds in your business bank account in just hours – a truly amazing development for small businesses.
Plus, alternative lenders have fairly lenient eligibility requirements, meaning a wide variety of businesses can utilize their funding, even those who have unestablished or short credit histories.
â€‹The biggest con of same-day business loans is the interest rates and fees associated with them. Because online alternative lenders have less stringent requirements for borrowers and make decisions based on less information than traditional lenders, they have to charge higher interest rates to compensate for the added risk (even to businesses with strong credit histories). This means that you can end up paying a lot in interest rates and fees to access capital quickly.
Same-day loans also come with short repayment terms, since longer term loans are riskier for lenders. However, this is not a huge con since you will want to seek out traditional lenders or alternative lenders with better interest rates and a more thorough due diligence process for long-term loans (that way, you can get the best interest rate available to you).
The online lending industry is far less regulated by the federal government than traditional lenders. As a result, you need to make sure you are doing your due diligence when using online lenders since there are predatory lenders out there looking to take advantage of struggling small businesses. Always check the reviews, testimonials, and more on any lender before using them (the Better Business Bureau is a good resource for this). This does not mean there are not numerous reputable lenders out there for you to choose from (in fact, there are! – just like the ones we have mentioned above). It just means that you should always consider your lender, your loan, and your loan terms carefully.
Same-day loans should typically only be used for cash flow-related emergencies. For example, you may have a lot of outstanding accounts receivable which will be paid soon, but which you still don’t have the money for. As a result, you may be unable to pay your monthly bills since you just don’t have the cash to cover them (even though you have made enough in revenue to cover them). This would be an ideal time to access same-day funding in order to cover some short-term cash flow issues and meet your debt obligations. Then, once those accounts receivable are paid off by your customers you can pay off the loan.
Another example of when it would be prudent to access same-day funding is if you have an unexpected repair that you have to make, such as to some machinery, which is vital to the operation of your business. If you don’t have the cash to make the repair but the repair is necessary in order for your business to produce revenue in the future, then you will be forced to obtain outside funding for the repair. The longer that machine is down, the more days you will be forced to forego revenue. As a result, same-day funding can get you back up and running much faster and would be something to consider in such a situation.
Cash flow issues tend to plague startups and new businesses in particular since they have not had time to build up a large cash balance and a rainy-day fund. As a result, any emergency they face can easily put them in a cash crunch.
Certain types of businesses are also more vulnerable to cash flow crunches, particularly those that provide long-term payment options to their clients for large, high-dollar projects. These sorts of businesses provide a service without receiving all the money upfront, which means they have lots of outstanding accounts receivable. These accounts receivable are technically revenue incurred and money earned, but the money cannot actually be used until it hits your bank account. As a result, a business can be doing really well on paper but struggle to meet the monthly bills.
Just remember, fast funding business loans should be reserved for times when you actually need and require immediate funding. Under other circumstances (such as if you want to buy a piece of real estate, expensive equipment, etc.), you should seek more traditional loans which provide lenders more time to evaluate your credit and your business – that way, you can get better terms.
Same-day loans should be considered carefully depending on the interest rate you qualify for, as they can be incredibly high if you have a bad credit score and a poor credit history.
Because of the high interest rates and fees associated with same-day lending, if you think your business will need to fill cash flow gaps in the future, you might consider opening a line of credit with a traditional lender. While the process can take some time, once you have the line of credit you can get access to cash from it quickly and painlessly without ever having to reapply.
This will lower your fees and interest rate whenever you need cash, as well as save you the time of having to fill out an application and get approved for last-minute funding.
Remember, whenever you take out a loan, you should read the fine print carefully and fully understand what you are agreeing to before signing the dotted line. The lenders we have discussed in this article are relatively transparent and make their fees and interest rates clear upfront, however, this is not always the case, so you should read all the paperwork and terms carefully.
Additionally, make sure you plan out the loan in relation to your revenue and cash flow carefully. You should try to borrow only what is necessary and what you will actually be able to repay. If your business is struggling financially, you do not want to compound the issue by continually taking out high interest loans that will only serve to sink you and your business into further debt.
When borrowing for your business, you should also be careful about personal guarantees. Many same-day lenders will require a personal guarantee on loans made to relatively risky borrowers (which is why they will assess your personal credit score often). A personal guarantee will make you liable for the loan if your business fails to repay the loan, jeopardizing your own personal assets (such as your house, for example). This can be financially disastrous for you personally if your business ends up defaulting. As such, this is something you should consider very carefully before agreeing to.
As noted, cash flow problems are one of the biggest and most frequent challenges faced by small businesses across the United States. It is not an understatement to say that how small business owners respond to these problems can make or break their business.
However, nowadays, there are tons of same-day and fast funding options available to small businesses, making it easier than ever to fill cash flow gaps and respond to sudden business emergencies. By carefully researching and understanding the options available to you and using reputable lenders like those discussed in this article, you can gain quick and fast access to the working capital you need.
At Biz2Credit, we work hard each and every day to support the millions of small businesses operating across the United States. Given the ongoing global pandemic, we realize this work has never been more important than it is now. So, please continue to check back here at our Biz2Credit blog for all the latest information.