Fast business loans can help most companies meet their short-term capital needs and finance growth for their business. Sometimes fast access to additional funds is vital, so a company can take advantage of a certain opportunity to meet a business challenge or create additional ROI. The funding, in this case, is required in a matter of hours or days not months or weeks. Traditional business loans from the bank are always a good and reliable option for most borrowers. But, you need to follow the set criteria to access fast business loans. Here is a guide to some essential things you need to consider to get a business loan quickly from the bank.
What is a business loan?
This is the money an enterprise borrows from a lender for covering business expenses. The money is supposed to be paid back to the lender over a specified period, ranging from several months to about 25 years, with fees and interests. The longer you take to pay, the more interest and fees you pay.
A fast business loan differs from a personal loan since they are limited to costs of business. The loan is also taken out in the business’s name, instead of yours. So, the amount of loan, interest, and fees will be determined the finances of the business.
How does a fast business loan work?
How these loans work usually depends on the type of loan you get. The traditional fixed-term loan will typically come in a lump sum. Before you can receive the funding, both parties agree on the set time to pay the money off with monthly repayments.
On the other hand, a line of credit works by offering accessibility to ongoing funds to a scheduled limit. You will be required to pay interest only on the drawn amount and make weekly or monthly repayments.
How much can be borrowed with a fast business loan?
When it comes to quick funding, a company can borrow between $2,000 -$500,000. Any amount exceeding this limit can take more time. The amount your business can borrow usually depends on various factors, such as:
- How long the company has been operating
- The cash flow the business has
- Why the funds are required
- The business owner’s credit history
It is ideal to take these things into account before you can apply for a quick loan. The bank will consider them to determine if the business is eligible for that much-needed loan.
Common business loans you can get
Selecting the right form of funding is a crucial step to accessing cash for the company. There are numerous kinds of financing options designed to cater for various needs of businesses. Some common ones include:
Term loan – this kind of finance is suitable when a company knows exactly how much they need to borrow including when to repay it back. Your firm can get fixed term loans with repayments periods that often range between 5-20 years.
The line of credit – this loan is very similar to business overdrafts. A line of credit offers additional funds when the company needs it. Note that your guarantee secures this finance as a company owner.
Credit card – in this case, a company owner uses both their business and personal credit cards to finance short-term and small costs. This loan is similar to personal credit except that the money is supposed to be used exclusively for business purposes. You will enjoy interest-free grace periods and rewards points for the company, but it can get expensive if the loan isn’t paid back in full every month.
Invoice financing – if you are running a company that relies on accounts receivables heavily, invoice financing will provide ongoing funding for the outstanding invoices. The loan is usually paid back in three months or as soon as the invoice payment is received.
Vehicle finance – companies that need to buy vehicles, can get various vehicle financing options. The loans are secured, meaning the company will get more competitive rates and tax benefits (determined by the vehicle’s use)
Equipment finance – when you need additional equipment, be it for an office, medical lab, construction site or manufacturing equipment, your business may require financing to purchase or lease it.
How to find the best fast business loans?
Obviously, you will go to your bank or any reputable financial institution each time you need quick financing. But, no matter the choice you make, you will end up paying more if you avoid shopping around. Be sure to weigh these factors when you compare business loans to make informed decisions.
Amount of loan – use the amount you’d like to borrow to narrow your choices down. The maximum and minimum amounts will vary from one bank to the other, with some offering $2,000 minimums and $1,000,000 maximums.
Interest rate – the rates vary widely depending on the bank, amount and the type of loan you have selected. Be sure to pay attention to this feature because a small change in interest rate percentage will have a significant effect on the entire cost of the loan. Also keep in mind that interest rates can be negotiated, so don’t be shy to ask for an extra percentage in savings.
Loan term – conventional fixed-term business loans have loan terms that range from 1-7 years. The short-term ones are meant to be paid in a few months. Get to know what your company can afford so you can select a loan term that suits the business’s cash flow best.
Collateral – Even though unsecured loans are advantageous because you won’t put up any of your assets as collateral, secured loans have benefits too. They come with low-interest rates and long repayment periods depending on the guarantee provided.
Is your company eligible for a fast loan?
Eligibility requirements vary depending on the type of loan and bank. But, there are two key factors to keep in mind:
- Age of the business – your company, will be required to meet the bank’s minimum age requirement, often set between 6 months to two years.
- Revenue – most banks need a company to meet the minimum yearly revenue of approximately $50,000- $75,000. If a company is more than a year old, these requirements will be higher.
Additional eligibility requirements may include the location of the business, your business or personal credit score and the industry. Some banks also request the company’s financial projections or a business plan when you apply for a fast business loan.
When facing an emergency, you can always rely on your bank to get fast business loans. When you don’t need a loan but a bank pre-approves you for a loan; take it and don’t use it. This will slowly increase your credit and you can use it in case of an emergency. Be sure to put all these guidelines into consideration, and it will be easy to get a quick loan from the bank.