Is a cash squeeze hurting your business? You might be able to solve your problem sooner than you think.
Considered one of the most important aspects of a business, cash flow is vital to meeting daily operational needs and capturing growth opportunities. This is precisely why lenders offer financing products to get you money fast.
Here are five business loans to consider if you need cash fast:
1. Short-term loans
Short-term loans function much like traditional term loans. You get a lump sum of cash, which you repay over a set period, along with interest charges and other fees. The main difference is that the payments will be more frequent and over a shorter repayment period. Consider whether your cash flow can handle frequency of payments before agreeing to a short-term loan.
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Generally speaking, short-term loans range from $2,500–$250,000 and have a term length of 3–18 months. Interest rates begin at about 10%.
These loans are a great financial tool for handling unexpected cash needs—whether you need to cover an unexpected cost or a new business opportunity. This makes them a quick and easy solution to keep your business running well.
Short-term loans are mainly offered through online lenders. For approval, you generally have to be in business for more than one year, have $50,000 in annual revenue, and have a credit score of at least 525. If approved, you get the money in as little as one day.
2. Business line of credit
A business line of credit provides revolving capital for your business (i.e., the amount you can access replenishes when you pay back the money you previously borrowed). A business line of credit functions similarly to a credit card with a few key differences. First, you get actual cash, which makes it a bit more flexible. Also, interest rates, which span from 7 – 25%, may be lower. Note that you only pay interest on the funds you actually withdraw.
A business line of credit is a great option to ensure you always have cash on hand when or if you need it. For instance, a line of credit can cover you if you need to meet payroll or pay for advertising in a new market. If you’re in an industry that’s seasonal, such as farming, and need cash during the off-season for preparation, a business line of credit can be incredibly useful.
A business line of credit typically ranges from $10,000 – $1 million or higher. You can get approved in as little as one day. Requirements are usually at least six months in business and $50,000 in annual revenue. Collateral may be required. If you cannot pay VAT as well, this may be another great option.
3. Merchant cash advances
You get a lump sum of cash with a merchant cash advance, which you repay using a percentage of your daily credit card transactions. As experts advise, only take a merchant cash advance if you have consistent revenue, as repayment depends on your ability to generate sales.
Often provided through online lenders, a merchant cash advance can range from $2,500– $250,000 and you can get funding within a week. To get approved, you generally need at least one year in business, a credit score over 500, and more than $50,000 in annual revenue.
A merchant cash advance is an option worth thinking about if you need a capital infusion to meet day-to-day expenses, but don’t want to put up collateral. For example, if you own a shop but don’t have a lot of hard assets, a merchant cash advance is a great way to ensure you don’t encounter cash flow problems.
It’s crucial that you understand how you’ll be charged for borrowing. Merchant cash advance companies typically apply a factor rate between 1.14–1.18 if not more. A factor rate is used to calculate the financing charge for a merchant cash advance. To figure out how much you’ll repay, multiply the factor rate by the total loan amount. Here’s a simple example:
- You get a merchant cash advance for $10,000. The factor rate is 15.
- You’ll pay back $11,500, making the cost of borrowing $1,500.
Merchant cash advances can be extremely expensive, so only take one out if you know you can pay it back or don’t have any other loan options.
4. Invoice Financing
According to data from Fundbox, 64% of businesses are routinely affected by late payments. Instead of waiting for clients to pay, you can get cash for your invoices through invoice financing. Funding can arrive in as little as one day.
With invoice financing, you can get 50–90% of the invoice amount upfront. This way, you can put the money back into your business more quickly. You get the remaining 10–50% upon receipt of the invoice.
For approval, you usually need at least six months in business and $50,000 or more in yearly revenue. The invoice itself serves as collateral, with the credit of the invoiced business being considered.
The lender charges a factor fee, often around 3% plus, for each week the invoice goes unpaid, you pay a percentage of it to the lender (usually around 1%). It’s important that you consider how soon your client will pay the invoice, as you end up with less in your hands the longer it takes.
5. Equipment financing
Most businesses need equipment of some sort, whether it’s computers and cash registers or vehicles and heavy machinery. Equipment can be expensive, but you need it to run your business.
Equipment financing is cash upfront to purchase equipment, with the equipment itself serving as collateral. To qualify, you should meet these requirements:
- At least 11 months in business
- A credit score of at least 600
- $100,000+ in annual revenue
Interest rates vary greatly, ranging from 8–30%. The loan term is around the expected life of the equipment. The higher your company’s revenue and your credit score, the better your rates and terms will generally be. Funding can come in as little as two days.
Take control of cash flow today
There are a number of options if you need cash fast. Consider the financing products that align with the needs of your business. When you apply, take time to compare offers from various lenders and crunch the numbers—and remember, the best time to get a business loan is when your business is in great financial standing.
This way, you can get the most favorable rates and terms on a business loan to solve cash flow needs.
Another recommended place to learn more about business loans and how to get: https://www.finimpact.com/how-to-get-a-small-business-loan/
If you cannot pay VAT as well, we recommend checking out this article again and proceed