Here’s How to Get Your Short-Term Business Funding in a Few Hours or Days
Did you know that eighty-two percent of small businesses that fail also experience cash flow problems? Ensuring you have a consistent cash flow can prove crucial to the survival of small and medium-sized enterprises. One way that medium-sized businesses can have access to the cash they require comes in the form of short-term business loans.
Short-term business loans can be an effective and fast way for companies to get the money it requires to stay afloat. However, when should a company take out a short-term business loan? And what should it do to get the loan faster? Obviously, if you are looking for this type of funding, you are in the form of an emergency. However, before you go and do anything in a rash, follow the following steps to ensure you get the business loan quickly.
Step 1: As the right questions
Below are the three questions to answer before you take on an emergency business loan:
Have you researched all your options?
If you are looking for a short-term business loan to solve an emergency issue, then speed is your number one priority. And if you needed that emergency business loan yesterday, you could latch onto the first offer that comes your way. This article will warn you against that, for one simple reason: the first loan offer you get is not necessarily the best offer. With so many small business lenders providing short-term business loans within two days, working with the right one can make a great difference in the end. Do shopping and research on these short-term business loans to ensure you go with your business’s right fit.
Do you know what you qualify for?
Every busi9ness owner can find a short-term business loan when they need it. However, the quality of the short-term financing you get will be based on what you qualify for. Business owners with great credit scores and business financials may qualify for fast medium-term loans from online lenders. On the contrary, if you run a very young company or you have a less-than-stellar personal credit score, you may only qualify for small (and costly) short-term loans. If you are looking for an emergency business loan on a time-crunch, you will save both time and money by knowing your credit score and where your company stands, so you consider realistic options for your business.
Have you considered the costs?
In most cases, business owners looking for short-term loans just need fast business loans. And a basic rule is fast cash is costly cash. Yes, these short-term business loans can provide you the capital you require within hours; however, you are paying for faster service with higher interest rates and fees. Before taking on any of these emergency business loans, think realistically about if you can afford fast capital. You are using these loans to get yourself out of an emergency; however, if these costly short-term solutions leave you worse off in the long-run, are they worth it?
Step 2: Calculate how much you need
The next strategy is to identify how much capital you require from your short-term business loan. Requesting for the right amount of capital- for both your business and your lender- can make or break your approval odds. And if you are looking for fast capital to get your business out of an emergency, you do not have the time to apply over and over again. Take a close look at your business’s funds and use cash flow projections to identify the right number to ask for.
Step 3: Calculate how much you can afford
By now, you know that short-term business loans come at a price- and you do not want to take on more than you can afford to borrow. You will need to assess what your maximum payment can be, what your ideal monthly payment will be, how faster you want to pay your loan back, and how much money you can afford to pay in interest. You can use your (DSCR) debt service coverage ratio, to calculate just how much your business can manage.
Simply use the following formula:
Loan payment/cash flow= Debt service coverage ratio
Typically, your DSCR is a mathematical equation that divides your cash flow by your loan payment for the same period. For a loan with monthly payments, you would take your monthly cash flow and then divide it by your monthly loan payment to identify your DSCR. Every lending institution will set a minimum DSCR for their short-term business loans. Generally, your DSCR should be more than 1.25; however, it can be as low as 1.15 or more than 1.5 based on your qualifications and the current economic conditions.
Step 4: Prepare all the necessary documents
When it comes to getting a short-term business loan quickly, here is the biggest takeaway: prepare, prepare, prepare. Short and medium-term lenders can approve you faster; however, only if you give them everything they need to do so immediately. So, you will only get the same-day funding speed you are looking for if you are prepared to complete your application faster.
To prepare for your business loan application, first know the business loan requirements that most lending institutions will ask for and collect those documents. Generally, the more that you are prepared to submit, the better. And if the lender asks for additional documentation all through the approval process, get that information over to them faster.
Your ability to offer a complete application is frequently what stands in the way of your loan approval. If you need the fastest time to financing, your best bet is to be prepared before applying and being responsive during the process. The documentation you will require varies by a lender; however, some of the most common documents incorporate:
- Business and personal tax returns
- Balance sheet
- Bank statements
- Loss and profit statement
- Business plan
- Business and personal credit score
Step 5: Consider using an online marketplace
Suppose you are searching for fast emergency capital. In that case, there are a few reasons why you should consider working with an online marketplace, such as Fundera, over a direct small business lender or bank.
First, online marketplaces can connect you to various financing options to help you find the lowest possible rate. Besides, you can send your application to many lenders at once, saving you time in the application process. Some marketplaces can even help you determine the offers that are the best fit for your business loan purpose. All of this makes getting a short-term business loan that much faster.
Step 6: Know where you look
If you need a short-term business loan that can meet your emergency funding needs, here are two top lenders you should consider working with:
OnDeck provides short-term loans ranging from $5,000 to $250,000 at three to twenty-four-month terms. If you take out a short-term loan from OnDeck, expect to have 8.5 to 79-percent. OnDeck provides these emergency business loans the same day a qualified loan applies for one. To be eligible, OnDeck likes to see an annual business revenue north of $100,000, a personal credit score of not less than 600, and one year of business history on the books.
This lender can give you a short-term loan of anywhere between $2,000 and $250,0000 with repayment term lengths from three months to two years. Factor rates for this short-term lender can vary from 1.15 to 1.48. And if you are seeking for fast business loans to get you out of an emergency, CAN Capital can assist you with that- they can usually approve qualifying applications the same day they are sent in.
To be eligible for a CAN Capital short-term loan, you will only require $4,500 in monthly revenue, a minimum 600 personal credit score, and preferably one year of business history.
Tips to get a short-term business loan quickly
- Also, be clear on how much you can manage to repay (and thus borrow)
- Be realistic with your calculations of how much you need.
- Ensure that you have a positive cash flow and a healthy daily bank balance
- Look to alternative funding options before you dash straight to the bank.
- Get organized with all the essential details and documents on hand to secure your business loan.
- Do some background work to find out the relevant lending criteria.
- Pay your bills on time to build your credit score. However, be honest and transparent with your business finance provider.
If you feel a little hopeless after an unpredicted hit to your business, know that many emergency business loans can help you get back on your feet. However, before you go ahead and sign the dotted line for just any fast fix, ensure you are committing to the right funding option for your small business. A business loan that does not meet your needs or is too expensive will only set your business back even farther. If you do your homework and choose the right product, you can be sure to get the best deal and faster. And after you get those funds in your bank account, you are well on your way to financing your business needs.