Funding is the lifeblood of any business. No matter how big or small your profits are, there comes a time in the life of each company where it faces an urgent need for cash. There might be a situation where you do not have enough liquid money in hand, and you need to pay for the delivery of an essential piece of equipment, or you need to pay your employees. As a business owner, paying vendors and employees should be on top of your priority list. However, even with all the right intentions in the world, finding the money at the right time can become next to impossible.
Options for accessing necessary business funds can be many, but the chances of obtaining funds in less than a day are usually much slimmer than getting a long-term business loan or a secured loan. Thankfully, there are a few emerging options for same-day business loans that can salvage the situation.
Where can you find same-day financing?
Traditional banks are reliable sources of the conventional business loans, but they are not the place to go when you are in need of quick cash. Recently, Harvard Business School conducted a study on online alternative lenders. The results showed that most of them offer complete online registration and application processes. Applicants can complete these forms in less than 30 minutes on their mobile devices without even leaving their desks. On the other hand, traditional business loans and secured loans can take two weeks to even two months to process. The alternative lenders have an approval rate between 61% and 64%.
Alternative lending is a collective term that encompasses several lenders and loan types. Here are the different kinds of same-day loans that any business owner can explore.
Merchant cash advances
Several online financing companies provide capital cash loans. A merchant cash advance is a lump-sum payment in lieu of a percentage of future debit card or credit card sales. The lender automatically deducts the amount from your merchant account daily or as documented. They are the most accessible form of same-day funds, yet they are the costliest of the lot. Therefore, before you proceed with MCA, you should consider short-term business loans or business lines of credit.
You can approach financing companies with your pending invoice(s) and get a payment in advance. These companies pay your outstanding invoices for a fixed fee. The usual norm is that the companies charge you about 15% to 20% of the invoice amount as a fee. Invoice financing can cover utility bills and late paying customers. There are several accounts factoring options for almost all kinds of businesses right now. Online invoice factoring is popular among real estate agents and brokers.
Short-term business loans
When you need money urgently, and for a short period, it is smart to turn to short-term loans. These are ideal for start-ups and MSMEs. It is quite similar to a traditional business loan, but the repayment terms are flexible. You can pay the lender off in small daily, biweekly or weekly installments. The repayment terms rarely last for more than 12 months. Short-term business loans usually have a fixed payment structure. Thankfully, the providers do not impose stringent credit score requirement, and they allow the utilization of the amount for a plethora of business purposes.
Business lines of credit
Business lines of credit can provide you with a plethora of business finance options. Since it is a source of flexible capital without collateral, you can utilize the amount to pay off your outstanding utility bills, pay your employees, clear vendor bills, purchase new equipment, cover office renovation costs and even install a new Mac for your new office. They can cover the seasonal cash flow gaps in businesses and provide emergency cash in trying times. It works similar to a credit card except for the fact that business lines of credit come at lower APRs, and you have access to liquid capital.
Business credit cards
Business credit cards are costlier than business lines of credit. It is ideal for the smaller businesses that do not have an impressive credit record or financial profile. You can get access to a revolving line of credit that is both flexible and instantly accessible. You can use your business credit cards to clear pending payments with vendors, pay for unexpected expenses and create a cushion for sudden dips in cash flow. Since it does not require collateral, the interest rates are often higher than the previous options. However, you can surely treat yourself to cash back and reward points upon regular use of the credit card.
While looking for any of these loans, you will find plenty of companies that offer competitive rates of interest. You should always shop around, find the ones with the best terms, and choose a company that is reliable. Keep your own qualifying criteria for choosing lending companies.