In this article, you’ll learn the following:
At some point, your small business is going to need fast cash… and waiting for more than a few days is going to lead to a bad outcome for your small business. A traditional bank loan often has a long application process, however, with the “time to cash” sometimes being weeks or months.
In this situation, you need a fast business loan.
What is a Fast Business Loan?
A fast business loan is a type of loan that gets funding to small business owners’ bank accounts within a few business days.
How is that possible? In many cases, the lender has streamlined the application process and leveraged technology to make a fast decision.
You may be wondering why you would need a quick business loan. There are a number of possible scenarios. Here are a few examples:
- You need a working capital loan to cover short-term business needs – perhaps your buyers are late in paying their invoices or you need to replace a piece of equipment.
- You’ve been presented with an opportunity to acquire another business, but there are competing bidders… and the owner wants to sell immediately.
- You know that you’re going to need financing in two months, but you don’t want to deal with many weeks of uncertainty.
You can think of a fast business loan like buying an item on Amazon and getting it in two days – whether you need it in two days or not, you want
to have it in two days. The difference between a fast business loan and an Amazon item, however, is that the stakes are usually much higher for the small business loan
What Types of Business Lenders Provide Fast Business Loans?
Alternative lenders, with their innovative processes and tech-savviness, are responsible for a high percentage of the fast business loans that are provided to entrepreneurs. There aren’t many banks, on the other hand, that can fund small businesses in a few business days.
Here’s why alternative lenders are able to provide fast business loans, but many banks are unable to match their speed:
- To get a loan with a bank, you may be asked to come into the branch or speak to a representative on the phone during the loan application process. But with an alternative lender, you can typically fill out an online application from the comfort of your home. Here’s another difference: an application with a traditional bank is more likely to ask for unnecessary information, while an online lender’s application is more streamlined in many cases.
- The approval process is typically much faster with alternative lenders. There are a couple of reasons why: they leverage technology and they have flexible eligibility requirements. Many banks still have manual underwriting processes, which can slow down the “time to cash” on a small business loan. And if you don’t meet a requirement? You may struggle to get financing… even if the financial health of your business is excellent.
- In some cases, alternative lenders charge higher interest rates than traditional lenders. They do this to compensate for the higher risk that comes from quickly approving applicants… some of which would have a tough time qualifying for traditional bank loans.
The four-step process at Biz2Credit
shows how you can get funding within a few business days:
- You create your profile – this takes less than a minute because you are only asked for what’s necessary.
- You submit your application, completing a short questionnaire and providing business documentation. The estimated time for this step is four minutes.
- As an online business lending platform, Biz2Credit connects you with best-fit funding solutions from third-party providers and gives you a decision in as little as 24 hours.
- You get funding within 48 hours of final approval.
What Types of Business Loans can be Fast Business Loans?
There are certain types of business loans that take a long time for approval. A Small Business Administration (SBA) loan
could take months to be approved, for example, so an SBA loan
wouldn’t be considered a fast business loan.
A business line of credit and a short-term loan are two types of loans that can be fast business loans.
Business Line of Credit
A business line of credit
gives a borrower access to any loan amount up to the maximum credit limit – the small business owner can borrow what they need, when they need it. This small business financing option works similarly to a business credit card
, with the difference being that a business line of credit may have a lower interest rate and a higher credit limit.
So, how fast can you get approved for a business line of credit? The amount of time varies depending on the business lender and your situation, but it can be as little as 24 hours. You also might be able to qualify with a credit score of 580, making it an excellent option for small business owners who would struggle to qualify for other types of small business financing.
Short Term Loan
A short-term loan provides small business owners with upfront cash that has to be repaid on a predetermined schedule – the borrower sometimes has to make payments as often as once a week.
With an alternative lender, you may be able to get a short-term loan in a few business days or less. But the interest rate is likely to be on the higher end, and if you have to make payments more than once a month, it could put a strain on your small business. On the plus side, if you aren’t qualifying for a loan with a bank, you might have better luck getting a short-term loan with an alternative lender.
What Do You Need to Apply for a Fast Business Loan?
To apply for a fast business loan, you need to provide lenders with some of the same documentation and information that you would need to get a traditional bank loan.
Here’s what lenders want to see from you:
Personal Credit Report
Before applying for a fast business loan, you should look up your personal credit score to get an idea of your small business financing options. You don’t want to put everything together, and then find out that your credit score is 100 points too low for your preferred type of loan.
Business Credit Report
Do you have a startup or have you been in business for a long time? If it’s the latter, your business credit score could play a larger role in a lender’s decision.
You might not need a business plan if you’re applying for a fast business loan with an alternative lender, but you should have it ready just in case. A business plan is crucial to long-term business success, so if you don’t have one at the moment, consider writing a business plan
Lenders want to see your tax returns so they can verify your income – this helps them decide if it’s a good idea to lend you the amount of money being requested.
In addition to your tax returns, lenders want to see your balance sheet, income statement, and bank statements to assess the financial health of your business. You should provide statements that go back a few years, if possible, because a long track record makes you a lower risk to lenders… which makes it more likely you will get a loan with favorable repayment terms.
What are the Common Eligibility Requirements for a Fast Small Business Loan?
The requirements for a fast small business loan vary based on the alternative lender, but there are some commonalities.
You can qualify for some fast small business loans with a bad credit score, but a score of 700 or higher is going to make it possible to secure small business financing with more favorable terms. Is your credit score too low? Learn how to score a higher credit score
There is the widespread perception that the higher a business’s revenue, the lower the risk for a lender. This may or may not be the case in reality, but the fact of the matter is that some lenders have minimum revenue requirements. $10,000 in average monthly revenue is a common guideline.
Did you start your business in the last year? If so, you may have a harder time getting a fast business loan. A high percentage of lenders require that you’ve been in business for at least one year – and sometimes two years – to get funding.
Debt Service Coverage Ratio
Your debt service coverage ratio
, also known as DCSR, is your net operating income divided by your total debt service, with your total debt service defined as your current debt obligations. A debt service coverage ratio of one or higher means that the borrower has enough cash flow to cover debt obligations – a DCSR of lower than one means that the borrower has negative cash flow. An acceptable DSCR ratio varies based on the lender and the small business in question, but many lenders look for a DCSR of 1.25 or higher.
The Bottom Line
In the past, it was a pipe dream to get business funding in a few business days, but luckily that has changed. But as you can tell, the requirements for a fast business loan can vary a lot.
If you don’t need a small business loan right away, focus on maximizing the financial health of your small business
. This way, when the time comes, you have plenty of business loan options.
What if you’re short on time? In that case, a platform like Biz2Credit
can be a game-changer – the platform helps a diverse group of small businesses qualify for fast funding.
Consider the case of Maryam Zadeh, a woman who wanted to open a new workout studio
. She needed $12,000 to close the deal… but she needed it immediately. She looked into peer-to-peer loans, tried to negotiate a deal with her credit card processor, and talked to small community banks, but kept getting rejections.
But she wouldn’t “take no for an answer” and went to Biz2Credit for funding on the recommendation of a friend. She had a deal done by the end of the next business day and was funded by the following Monday.
Zadeh recalled that “Biz2Credit saved the day and 48 hours later, I had the keys to my new fitness studio in my hand.”
How to get instant access to financing