Need money fast for your small business? Here are the loan products that often have a quick approval process.
Business Line of Credit
One of the easiest small business loans to get is the business line of credit. These loans are often approved very quickly, sometimes in just one day. If your lender requires a credit score, 500 or above will usually suffice.
Similar to a credit card, a line of credit has a maximum credit amount to be used anyway, any time you need to. The interest rates on lines of credit average can be between 6% and 25%, with a repayment schedule of 6 – 12 months. The borrowing limits for a line of credit are smaller than those of a term loan and can be anywhere from $1000 – $250,000.
With a business line of credit, you use some or all of the available funds and then pay interest on that amount. After you pay some or all of that money back, it is immediately available to you again to borrow. There will be a minimum payment, but you can pay more than that or the full amount you have borrowed. It’s important not to exceed your credit limit.
If the line of credit has low credit limits, they are often unsecured and do not require real estate or inventory to be used as collateral. However, banks and other traditional lenders do like to see a couple of years of a solid revenue stream from your business. When the line of credit has higher limits, then collateral would be required. Nontraditional lenders, like the ones you may find online, will often have credit limits that are lower and sometimes interest rates that are higher average.
Short-Term Loan
This is a traditional and the most common type of loan. You receive a certain amount of money and make payments over a period of time until that amount of money plus interest has been paid off. It is usually less than $35,000 and may have higher rates. However, this loan can be good for smaller companies with little collateral or bad credit.
These types of loans can often be from nontraditional microlenders, making them easier to secure and have a much shorter approval period than long-term loans. Successful repayment of a short-term loan is a good way to build credit for a small business.
Invoice Factoring
This is a situation where you sell your unpaid invoices to an invoice factoring company. They will give your company a cash advance worth the invoice amounts and keep 3% as a fee. Then, as the invoices come due, they will collect from your clients.
Because the invoice factoring company is buying the invoices from you, it is technically not a loan, but it is a good way to get your hands on some cash. What makes this so easy is that you do not need excellent credit for this type of transaction. A bank would require excellent credit, collateral, and a much longer approval process.
SBA Loan
Even though SBA loans have some of the lowest interest rates and longest repayment terms there are, they are more difficult to secure. They have a long application process and require excellent credit, and they are examples of loans that are not considered easy to secure.