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Types of Fast Business Loans

Max Freedman
Max Freedman

When your business needs a quick infusion of cash, what are your options? Learn about the different types of fast business loans and what you need to apply for them.

They say the only two things certain in life are death and taxes, but in business, there's a third constant: the need for money. When you can't immediately cover that need with your own cash or assets, fast business loans may help. These funding sources can get you ample cash more quickly than more traditional lenders can. Read on to learn whether a fast business loan is right for you, what you need in order to get one, and what types of fast business loans are available.

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Who should consider a fast business loan?

If your company is experiencing any of the following situations, you may want to consider a fast business loan:

  • Emergencies. Even if you have excellent business insurance, unexpected emergencies can create urgent needs for your company that require rapid but expensive fixes. That's where fast business loans come in. With these loans, you can fix the damage now and pay off the money used for this work later.

  • New company expenses. Starting a business is expensive, and so is growing one. Both of these crucial business tasks may require more money than you can feasibly generate from sales. With a fast business loan, you can get startup or growth funding much more quickly than you could through your standard revenue-generating routes.

  • Limited-time business opportunities. Let's say you're faced with an obvious business opportunity that requires fast action – a third-party agency that can take you on immediately, a limited-time bulk sale on key items in your inventory, a purchase of a smaller company that will go with another buyer if you don't purchase it now. Fast business loans make the money you need for these transactions immediately available.

  • Marketing campaign rescue. If your company has embarked on a midlevel sales or marketing campaign that isn't getting the results you want, you can change that with more funding. Fast cash that arrives in the middle of a campaign can allow you to upgrade to a higher-level campaign that may maximize your return on investment.

  • General quick-cash needs. Whether your company is brand-new or established, you'll likely have times where you need more cash than you have on hand – such as for payroll when you're waiting on payment for several invoices. If you need cash quickly, fast business loans can get it to you.

What documents are needed to apply for a fast business loan?

When applying for fast business loans, you'll notice that no two providers have exactly the same requirements. However, it's generally safe to prepare the following documents before applying for a fast business loan:

  • Basic business information. Most fast business loan providers will require you to provide your business name, address, contact information, and taxpayer identification number (TIN) or employer identification number (EIN). You may also need to provide all of the business owners' Social Security numbers.

  • Credit history. Sometimes, all you need to provide is proof of your credit score. Other times, you'll need to provide a more detailed credit history. Your credit history should show that you have no history of bankruptcies, as even one bankruptcy is often enough to disqualify you from access to fast business loans.

  • Business launch paperwork. You'll need these documents to prove how long your company has existed. Many types of fast business loans are available solely to companies that have existed for a certain number of years.

  • Business licenses. Occasionally, loan providers will ask for proof that your business is properly licensed. In this case, you can include just your original business license – leave out other licenses, such as fire permits and DBAs.

  • Company tax returns. Most fast business loan providers have a minimum annual company income that applicants must meet to qualify for funding. Use your company tax returns to prove that your income is above this minimum.

  • Bank statements. Often, you'll need to couple your company's tax returns with bank statements for thorough income verification. It's best practice to provide your most recent three months of bank statements when asked for any banking information.

  • Profit and loss statements. Lenders may want to see profit and loss statements to supplement your other financial information.

  • Online software information. Some fast business loan providers require you to detail any online systems that your company uses for e-commerce, sales transactions, payroll and more.

  • Loan history. Be prepared to show your entire history of loan applications and approvals. Some lenders may require this information to determine whether you're a smart choice of borrower.

  • Other basic business documents. You may also encounter lenders that require you to provide other basic business paperwork, such as your office lease, your basic company history and your mission statement.

You may also need to sign a personal guarantee or business lien that your lender provides. When you sign a personal guarantee, you become personally liable for any funds that your company cannot repay. Similarly, when you sign a business lien, you attach a company or personal asset to your loan, and if you can't repay your loan, this asset could be seized.

6 fast business loans

If you've determined that a fast business loan is right for you, gather the documents listed above, and then decide which of these fast business loan options may be the best fit for your company:

1. Business credit cards

Just as you can easily apply for and receive personal credit cards, business credit cards are a convenient funding source for your company. Business credit cards often have low or no fees, and you can avoid interest fees if you repay your balance on time. Approval can take just moments or as long as two weeks. When you apply, you may need to provide more information than the requirements listed above, including your company size, industry and tax classification. Most of the companies and banks that offer personal credit cards also offer business credit cards.

2. Invoice financing

Through invoice financing, or factoring, you can turn an unpaid invoice into a loan. This type of financing is available from factoring companies. If a client whom you've invoiced hasn't paid you and you need their cash now, an invoice financing company can loan you that amount of money. Sometimes, you'll get the cash you need just hours after providing basic financial information to the factoring company. However, collecting your client's actual payment – which you'll need to repay your invoice financing loan, fees and interest – could take much longer.

3. Short-term loans

This broad category of fast business loans comprises any loans you can receive within hours or days. Short-term loans require full repayment, with fees and interest, within one to two years. Short-term lender requirements often overlap with those listed above, though they may vary by company. These loans are available online through alternative lenders.

4. Merchant cash advances

A merchant cash advance comes from your credit card processing company. You'll get a cash infusion from your payment processor, and in return, the processor takes a cut of all your business's future income on that card. Alternatively, your card processor will regularly withdraw fixed amounts from your account. You can usually get cash within a day, but your loan fees may be exceptionally high.

5. Equipment financing

If you've ever paid for an expensive item in monthly installments instead of all at once, then you're familiar with equipment financing. Through this type of fast business loan, you can get equipment immediately and pay for it over time. You can often be approved within two days, and you'll have few paperwork requirements, since equipment financing is low-risk for the provider – the equipment itself is the collateral. If you fall behind on your payments, your provider takes back the equipment, leaving you back at square one with less cash than you previously had. This type of financing is usually available from businesses selling equipment, though many banks offer them as well.

6. Small Business Administration loans

SBA loans are often thought of as separate from fast business loans. After all, SBA loans are known for their lengthy approval periods. However, for SBA loans under $150,000, you may be able to receive funding in one week instead of several. Your requirements will be the same as they would with other lenders, but your interest rate will be lower and your repayment term longer. Though SBA loans are not as fast as the above options, the better interest rates and terms may be worth the wait.

What else to know before pursuing fast business loans

Even if you now feel ready to start applying for rapid business funding, you may encounter unfamiliar terms and concepts throughout your application process. Whenever you have questions, you can use the business.com business loan term glossary to help. Be sure to watch out for hidden gotchas as well – you shouldn't ignore sneaky long-term costs even if you need an immediate solution.

Image Credit: Kerkez / Getty Images
Max Freedman
Max Freedman
business.com Contributing Writer
Max Freedman is a freelance writer who covers best business practices for business.com and culture for publications including The A.V. Club, MTV, Paste, FLOOD, and Bandcamp. He lives in Philly and doesn't miss his native New York.