If your business needs cash fast, you’re not alone. This is a common issue for entrepreneurs. Whether you need to take advantage of opportunities, stock up on inventory, or pay unexpected bills, sometimes you just need a solution for cash flow issues. Thankfully, fast funding business loans can provide you with the small business financing you need.

A fast funding business loan is just that: A loan that can get you money—sometimes in just a day or two thanks to a streamlined application and approval process. Contrast that with the weeks it might typically take to get a small business loan through a traditional bank or business lender (it can be even longer if you’re applying for an SBA loan).

In this article, we’ll explain fast funding business loans and review their pros and cons so you can decide if they are the right solution for you.

Fast Funding Business Loans: The Basics

Fast business loans are available from many lenders, but most are digital-only loan providers rather than traditional banks or credit unions. The advantage to this is that with a fast funding business loan, you don’t have to visit a brick-and-mortar location, you can apply online 24 hours a day. Many lenders have automated systems that can provide a decision about your loan application almost instantly. If approved, you can expect funds to be transferred to your account soon.

There are several types of fast business funding available, including both loans and other financial products.

Loans

• Term loans: These fast funding business loans provide a lump sum of money in exchange for a monthly repayment schedule with interest. They can be secured or unsecured, and fixed or variable interest rates. Eligibility criteria for term loans often include a minimum time in business as well as a good credit score and a business plan that outlines what you will use the fast funding business loans for.

Alternative financial products

• Business lines of credit: A business line of credit is a flexible funding option. Similar to a credit card, once you qualify for the line of credit you can draw on it as needed, and you only pay interest on the amount you use.
• Revenue based financing: Revenue based financing provides fast business funding in exchange for a percentage of future sales. The Payment amount is calculated based on a percentage of estimated future receivables. Revenue based financing agreement includes both a factor rate and a retrieval rate. The factor rate defines the total amount that needs to be repaid. For example, if the factor rate is 1.2 and you borrowed $10,000, then you would repay $12,000. Factor rates are commonly between 1.1 and 1.5. The retrieval rate refers to the percentage of your sales that go to the lender and often ranges from 15-25%.

• Invoice factoring and invoice financing: With these approaches you can get working capital using your unpaid invoices, receiving up to 85% of the value. With invoice factoring, you sell your invoices to the lender at a discount, who then collects from your customers. With invoice financing on the other hand, you receive the funding from the lender but are still responsible for collecting the unpaid invoices and repaying the lender.

Fast Business Funding: The Pros

There are several advantages to getting a fast funding business loan or another type of fast business funding:

Simple and quick application and approval process

The application process for traditional loans can be tedious, time-consuming, and difficult. You typically have to gather many business documents including:

• business plan
• bank statements
• business bank account information
• tax returns
• annual revenue projections
• financial statements

The application forms ask for a lot of personal and business-related information. Plus, it’s likely the lender will check your business credit history and require you to have a minimum credit score. You may even have to meet with a banker, as the approval process can be fairly manual.

By comparison, the application for a fast small business loan or fast business funding is relatively simple and streamlined. You’ll need to submit some documents, but the online applications can usually be completed in a single session in less than half an hour. You may get a decision right away or on the same business day.

Easier eligibility requirements

You may be able to get approved for fast business funding even if you have a mediocre business credit score, haven’t been in business for very long. This type of financing typically doesn’t come with the stringent requirements unsecured business loans from traditional lenders have.

Lower costs

While fast business funding solutions can have relatively high interest rates, they’re typically not as high as other financing options, like business credit cards or personal loans. This means they can be a great option for small businesses that need to access fast funding but don’t want to pay the highest interest rates.

Faster funding

Perhaps the primary benefit of fast funding business loans and other types of fast business financing is that the money gets into your account faster than it would with other loan options. As already noted, you can get same-day approval for financing, and then receive the cash within days. Unlike other types of business financing, like equipment financing or commercial real estate loans, fast funding business loans and other fast financing can be used for any business needs—they typically aren’t tied to a predetermined use.

Fast Business Loans: The Cons

There are some drawbacks you need to consider before you apply for a fast funding business loan or another type of fast financing. Cons include:

Fewer lenders to offer

Not all online lenders offer fast business financing. And they’re typically not available through banks and credit unions. You’ll have to do your research to find a reputable online fast funding business loan provider. Do your due diligence and learn about fast funders before you decide to work with one. Check things like online ratings and reviews to make sure clients are happy with them, their loan terms and fees, and the service they offer. Also, look out for complaints made to the Better Business Bureau (BBB).

They can have higher interest rates

Fast funding business loan companies may take risks other loan providers don’t. Their application qualifying requirements aren’t as stringent. This means they often have higher interest rates than you would get with a traditional loan. So, you’re essentially making a tradeoff and paying a little more to get the funding faster.

Higher fees

In addition to higher interest rates, fast business loan funders typically charge high fees in return for the speed and convenience they provide. This might include origination fees, upfront application fees, prepayment fees, and more. Before working with a fast-funding business loan provider, double-check their fees to make sure you’re not taken by surprise.

Smaller loan amounts

If you need to cover a large expense, such as the purchase of a vehicle or large piece of equipment, a fast funding business loan or other type of fast financing may not be large enough to cover it. Fast financing typically comes with lower borrowing limits than other types of business loans.

How to find a fast funding business loan

If, after going over the pros and cons, you decide to get a fast funding business loan, here’s everything you need to know to secure a favorable one from a reputable provider:

• Shop around: Perhaps more than any other type of business financing, fast financing options vary from lender to lender. And each lender is different. Do your due diligence to ensure you secure the right financing product from a reputable provider. If anything makes you feel uncomfortable, move on until you feel confident with the deal you’re offered and the lending company.
• Read the fine print: Make sure you double-check things like the interest rates, fees, payment terms, borrowing limits, prepayment penalties, and requirements so you know exactly what you’re paying and what you’re receiving.
• Check the terms: If you have any questions about the repayment terms in your loan contract, ask your lender about them. Be sure you thoroughly understand all aspects of your loan offer, including the ramifications of making a lump sum payment to pay off your loan faster (sometimes prepayment can have a penalty).
• Follow the rules: Make sure you meet all loan requirements to the letter. A late payment, missing paperwork, or other things could trigger fees and other issues that could cost you. This is the case with any loan – even from traditional brick-and-mortar lenders – so make sure you follow your loan terms carefully.

FAQs about fast funding business loans and other fast business financing

What is a fast funding business loan?

A fast-funding business loan is a type of financing that offers quick financing via a streamlined application process.

What types of fast financing options are available for small businesses?

Fast financing options include term loans, business lines of credit, revenue based financing, invoice factoring, and invoice financing.

How can fast funding business loans benefit my small business?

Fast funding business loans or other types of fast business financing can provide you with fast access to capital. If you’re in urgent need of funding, traditional loan products may take too long, whereas a fast funding option can get you what you need, when you need it.

What are the eligibility requirements for fast funding loans?

Requirements will vary by lender, but typically include things like at least six months in business, a minimum revenue amount, and basic business documents showing that you are a business and not just an individual.

Are there any drawbacks to fast financing for businesses?

The drawbacks to business loans with fast approval or other types of fast financing include higher interest rates and fees, limited loan amounts, and shorter repayment periods.

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