Maskot/ Getty Images; Illustration by Austin Courregé/Bankrate
Key takeaways
- Fast business loans are usually available through online lenders that can approve and fund loans within one to two days
- Expect shorter repayment periods and potentially higher rates and fees than traditional business loan options
- Fast business loans typically have more lenient eligibility criteria than traditional loans from banks
Cash flow problems are common in business when customers pay late or unexpected expenses come up. The 2023 Small Business Credit Survey found that small businesses’ biggest financial challenges in the previous 12 months were the rising costs of goods (77 percent), paying operating expenses (52 percent) and uneven cash flow (49 percent). Fortunately, in situations where you require funds fast, you have options.
Fast business loans are a type of financing that generally offers funds within one to three days following an approval that could take as little as a few minutes. But since these loans have drawbacks, consider the pros and cons of fast business loans before making a final decision.
Compare pros and cons of fast business loans
Pros
- Can cover emergency costs
- Accessible to subprime borrowers
- Fast application process
- Fast funding
Cons
- Can get expensive
- Low borrowing limits
- Shorter repayment terms
- Liability
Pros of fast business loans
Fast business loans offer several benefits to keep in mind.
Can cover emergency costs
You can make plans to keep operations running smoothly and go the extra mile to execute your strategy. But there may still be times when issues arise that are out of your control. For example, your company could take a significant hit due to a natural disaster, pandemic or other emergencies. Or market conditions could change, leading to a substantial downturn in revenue. A fast business loan offers a viable option to access working capital when you need it most.
Bankrate insight
While you can use a fast business loan to cover emergency costs, it’s best to keep a business contingency fund that you can draw from for those unexpected expenses. Having an emergency fund will help you avoid taking on more debt than your business can handle.
Accessible to subprime borrowers
Many online lenders offer fast bad credit business loans to borrowers with lower credit scores. On top of the potential to provide funds within several days, these types of business loans have lower eligibility requirements. Those requirements typically include a minimum time in business of six months to a year, annual revenue requirements from $50,000 to $150,000 and a personal credit score around 600 or higher.
Fast application process
Many fast business loans feature a streamlined application process to help you get funded quickly. Most applications can be completed online, and you typically won’t need extensive documentation like you would with a traditional bank.
Fast funding
Where you apply for a fast business loan impacts funding time. When you apply with a traditional bank or credit union, receiving a lending decision could take several days or weeks. And if you’re approved, you’ll likely have to wait even longer to receive the loan proceeds.
But a fast business loan with an online lender can approve your loan in minutes and provide funds within one to three business days. Many even advertise sending funds to your account within 24 hours.
Bankrate insight
Rapid funding is one of the draws of fast business loans. Two top lenders for fast business loans that offer funding within one business day and flexible lending requirements are:
Cons of fast business loans
Before you try to get a fast business loan, consider the cons of fast business loans.
Can get expensive
The cost of the fast business loan ultimately depends on the lender. With alternative lenders who offer fast business loans, the luxury of receiving fast funding for your business often means higher interest rates and fees. Some lenders also charge steep origination fees to take out a fast business loan. Or you could be assessed a prepayment penalty if you pay the loan off early.
Select forms of high-risk business financing offer fast funds to most borrowers, but they can come with high fees and borrowing costs. For example, bad credit business loans may charge a factor rate like 1.1 or 1.5 rather than an interest rate. These rates often convert into high interest rates, such as 30 percent to 90 percent.
Bankrate insight
Common types of high-risk financing offering fast funds include:
Low borrowing amounts
Some fast business loans offer smaller maximum loan amounts than traditional bank loans. Depending on the lender, you may find lines of credit that only go up to $250,000 or term loans of $500,000 or less. Unfortunately, this can be a problem if you need to make a sizable purchase or investment for your company to grow.
Short repayment terms
Some fast business loans need to be repaid quickly. Online lenders like Credibly specialize in providing fast and accessible loans to people with credit scores over 500. But the repayment terms can be short, often as little as three to 24 months. These terms are far shorter than bank loans, which can give you five years or longer to repay loans.
Lenders may require short terms to ensure that they get repaid quickly rather than extending the risk of lending to your business over a long term.
Bottom line
Fast business loans can work for your business if you’re in a financial bind or need working capital to take advantage of a limited-time investment opportunity.
But there are pros and cons of fast business loans. You should carefully weigh the costs since fast business loans often come with higher interest rates and fees and shorter repayment terms. If you decide a fast business loan is right, read the fine print and loan agreement carefully to understand what you’re committing to. Otherwise, other options are available to help you find the best small business loan for your business.
