When you’re in a pinch, fast business loans often appear to be a good solution. Knowing you can get the funds you need quickly provides you with a mental and financial cushion. But before you get yourself a fast business loan, say “not so fast…” to yourself.
What Are Fast Business Loans?
Fast business loans are a newer innovation. Traditional banks always took weeks, or sometimes months, to approve a business loan. It’s now possible to get a business loan in a matter of days. In some cases, you can get a lender to approve you in less than a day!
Some specific lenders specialize in fast business loans. Many of these lenders can take less than a day to give you your loan. They may describe themselves as “same-day business lenders”. Same-day business lenders are the fastest financing option you will have while under immense financial pressure.
Where Do You Find Them?
If you need fast business loans, your options are a bit limited. If you need same-day business loans, there will be even fewer places to go. In any case, you will most likely have to go to an alternative lender. Traditional banks won’t give out a business loan so quickly.
With the advent of online and payday business lenders, you can get loans faster than ever. Here are your options for fast business loans:
Online Business Lenders
If you’re looking to get a business loan in just a few days or less, you can start online. Some online business lenders will offer you the speed you’re looking for. If you want to get cash on the same day, it won’t be easy with typical online business lenders. Usually, you’ll need a payday loan/cash advance for that kind of speed.
Business Payday Loans
These loans are also known as business cash advances. Regardless of what it’s called, it’s possible to get one in less than a day. The documentation requirements for them are typically low. Approval takes only a few hours but receiving the funds on the same day isn’t as common.
New financial technology (fintech) companies are in the business loans industry. Lenders that have made use of newer fintech developments have an advantage in speed. Technology has allowed these lenders to approve business loan applications quickly and accurately.
The Risks Of Being Too Leveraged With Fast Business Loans
So, we’ve gone over some of your options for getting a fast business loan. You may have noticed that some of these options look great when you focus on the benefits. However, these options aren’t being used by every business owner, and there’s a reason for that. The terms you’ll get are seldom good, and the risk is almost always much higher. We cannot talk about the benefits of fast business loans without explaining the risks of being too leveraged.
According to Moody, the risks of business financing are at an all-time high. This is in large part because leveraged loans are being given out very easily to businesses that already have capital problems.
These faster loans with lower application requirements usually have very high rates. If you fail to make your payments on time, you will find yourself in deep trouble fast. Fast business loans often translate into fast business trouble. When you get loans quickly, especially to help you pay back other loans, issues very often arise.
Cash Flow Problems
When you’re paying your debts with interest, you are certainly losing more than a little bit of money. Once interest expenses begin to accrue, it will affect your overall cash flow. When your debt:equity and cash ratio reaches a breaking point, you will be stuck.
At this point, your business is too leveraged and your cash flow problems will start to snowball into other issues.
Working Capital At Risk
Once cash flow becomes a problem, basic expenses become a burden. Factors like payroll, rent, and inventory start to seem scary. This situation is any business owner’s nightmare.
When you are too highly leveraged, your risk of declaring bankruptcy goes up. The potential for your business to grow in the long-term also takes an often-irreversible hit.
Inability To Afford Loan Payments
Lastly, when your business is too leveraged, you will start to have issues paying off individual debts. This is when the pain starts to kick in.
When you’re unable to pay off your debts, your interest charges will grow out of control. This is especially true of fast business loan options. Many individuals in the US are struggling with out of control payday loan debt. While that issue is closer to home for most Americans, remember that the same disasters can happen to your business.
All these factors mean less flexibility, less freedom, and less profit.
Use Fast Business Loans If You Need To, But Exercise Extreme Caution
If you need an urgent supply of cash, try to look for other options. Ideally, you will know when a problem is coming. The longer you have to prepare, the lower the costs of your loans will be.
Try to always:
- Avoid business payday loans when they’re not completely necessary
- Take fast business loans with caution
- Look ahead for further financial challenges
- Pay close attention to APRs on any loans
As always, try your best to maintain a good credit score. No matter how fast you need a loan, a higher credit score will help you find better terms.