How Can I Get My Business Loan Approval Fast?
June 14, 2022
June 14, 2022
Do you need business financing fast? Small businesses often require emergency working capital, whether to deal with a cash flow crisis or take advantage of an opportunity. This article will explain all you need to know to get approved for a loan as quickly as possible.
Different types of business loans serve a range of small business funding options. Some fast business loans can be approved in hours or days. Others could take months. Here are some common types of financing, organized by how quickly applications for them can be approved.
Applications for the following business loan options are usually approved fast, or no application is necessary:
The following types of loans take a while to get approved:
Answer these questions to help you figure out if you will qualify for small business financing. It will help you understand whether or not you can expect a quick approval.
What’s your credit score?
You can access a free credit report from the three major credit bureaus: Equifax, Experian, and TransUnion. You can also access your credit score for free from credit card issuers and finance companies.
Banks and traditional lending companies prefer to approve loans for borrowers with credit scores above 680. If your score is below this, you may be able to get approved by an online lender or microloan provider.
Your business must be in operation for at least one year to qualify for most online small-business loans and at least two years for bank financing.
Most lenders require a minimum annual revenue before approving a loan, ranging from $50,000 to $250,000. If your revenue isn’t high enough, look into short-term business loans, SBA microloans, equipment financing, or other alternative sources of cash. Just be aware that many of these funding options come with high-interest rates and short repayment terms.
Review your current business cash flow and monthly revenue to determine how much you can afford to put toward repaying your loan each month, or more frequently, with some lenders. This is the only way to figure out the loan amount you can afford.
A good benchmark for knowing you can repay your loan is having a total income of at least 1.25 times your expenses, including your loan repayment amount.
Example: If the monthly income of your business income is $10,000, and your expenses, including rent, utilities, and payroll, are $7,000 in rent and payroll, you should be able to afford a $1,000 monthly loan payment. Your income ($10,000) is 1.25 times $8,000 worth of expenses.
You can speed the loan approval process by identifying the collateral youâ€™ll put up for the loan ahead of time. A secured loan requires business collateral, such as property or equipment, or personal collateral, like a car or home, that the lender can take if you cannot repay the loan.
Putting up collateral is risky. You could lose things you need to conduct business or personal items that help you live a comfortable life. Still, it can increase the amount lenders will let you borrow and possibly qualify you for a lower interest rate.
Some lenders may also require a personal guarantee, even for qualifying for unsecured loans. You will have to personally repay the loan if your business cannot, and the lender can come after things like your house or car if you donâ€™t repay.
There are three sources of small business financing:
Selecting the correct type of lender for your business situation will help you get approved quickly. Youâ€™ll avoid wasting time on rejections from funding companies that donâ€™t want to lend to small businesses like yours.
Online lenders and other alternative lenders are ideal for small business owners who:
Online lending companies offer small-business loans and lines of credit from $1,000 up to $5 million. The average annual percentage rate (APR) on loans from online lenders can range from six percent to 99 percent. The APR depends on:
Bottom line: Loan approval rates for online lenders are higher, and funding is faster than with banks. You may get approved and have funds deposited into your business bank account in one business day after completing an online application.
Banks are ideal for small business owners who:
Loan options from traditional lenders include term loans, business lines of credit, commercial mortgages, and more. Many also offer loans backed in part by the U.S. Small Business Administration, including 7(a) loans, 504 loans, microloans, disaster loans, and others associated with the loan program. Banks provide small business loans up to $5 million and more.
Bottom line: Bank funding takes longer than other options, and you must have a solid credit and business history. Traditional lenders arenâ€™t good if you need fast cash, but theyâ€™re usually the lowest-APR option.
Microlenders are a good option for small business owners who:
Microlenders are nonprofits that typically offer short-term loans of less than $50,000. The interest rates on these loans generally are higher than those of bank loans. The application process often requires a current business plan, financial statements, a detailed description of what the funds will be used for, and more, making it a lengthy process.
Bottom line: Microloans may be the only option for some startups, but itâ€™s unlikely youâ€™ll get approved for one fast.
Youâ€™ll speed up your loan application process and make it more likely to get approved fast if you pull together the required documents before applying. Depending on the lender, you may need:
Take time to learn about lenders that offer the type of financing you need. Check that theyâ€™re financially sound and review online ratings and reviews to determine which ones provide a superior customer experience. You may even figure out which lenders are more likely to approve your application quickly by reading reviews.
If you donâ€™t understand anything about a lender or their offer, check out the frequently asked questions (FAQs) on their website or contact a company representative.
Youâ€™ve done your due diligence, and now youâ€™re ready to complete a loan application.
Start by looking at two or three similar options from reputable based on loan terms and annual percentage rate. Because APR includes all loan fees and the interest rate, it’s the best way to understand the total cost of a business loan for the year.
Apply for your loan from the providers with the lowest APR that has payments you can afford.
In the end, itâ€™s up to you to find the best combination between fast loan approval and access to cash coupled with small business loan costs to meet your financing needs.