What is a fast business loan and how does it work?

What exactly is a fast business loan, and how does it work?

The main points

Fast business loans are a form of finance for business owners that need funds quickly.

Fast business loans might be unsecured or secured, and some lenders may need you to provide a personal guarantee.

Fast business loans are usually offered by online lenders, but there are other options such as SBA Express Loans.

Business loans come in different forms. Some are more easily accessible than others, and loan amounts and financing times vary by loan product.

If you are a small business owner and need cash right now, a fast business loan might be ideal. But before applying, understand how it works and how to use it. It is also best to understand the advantages and disadvantages of taking out a fast business loan to determine if it is a good idea.

What is a fast business loan?

An fast business loan is a type of financing for business owners who want quick access to capital. Like any business loan, payday loans can be cash or a business line of credit. But rather than waiting weeks, these loans offer quick online applications, approvals that can happen within minutes, and funding in your account within one to three business days.

How does a fast business loan work?

You usually need to apply for a fast business loan through an online lender that specializes in quick applications as well as quick approvals and financing. These lenders often have relaxed eligibility requirements and offer fast business loans to business owners with bad credit.

Fast business loans can be unsecured or secured. If you do not qualify for an unsecured loan, you must provide an asset or assets, also known as a business guarantee. It may be easier to get approved for a loan with better rates and terms, but if you are late in making financing payments, your assets can be forfeited.

Some lenders also require you to sign a personal guarantee, which means you agree to take personal responsibility for the loan if your company can't repay. This is a common practice, even for companies registered as limited liability companies (LLCs).

What are fast business loans used for?

Fast business loans are used for several reasons. Some business owners obtain financing to fill cash flow voids during slow periods. These loans are also useful when unexpected expenses arise that drain reserves. Others use fast business loans to cover expenses needed to continue operations or to consolidate business debt.

You can also use the loan proceeds to take advantage of time-sensitive opportunities. Alternatively, if current demand surpasses supply and you lack the means to buy goods, a quick business loan might assist.

Do you qualify for a fast business loan?

Each lender has its own set of conditions for rapid business loans. Some lenders, such as traditional banks and credit unions, usually want to know that your business has been in business for at least two years and has revenues of $250,000 or more. But it is possible to find loans that only require six months of work and an annual income of about $100,000.

You can get a business loan with a credit score of 500 but it depends on the lender and the type of business loan. Most loans generally require a fair credit and above.

Advantages and disadvantages of fast business loans

Fast business loans can be useful if you need quick financing, but they are not without their downsides. For more information, see our guide on the pros and cons of fast business loans.

Advantages

Accessible to mortgage borrowers

Fast and flexible financing

Simplified application process

Disadvantages

Higher interest rates

Short return terms

You are personally liable if you default on the loan

Where to get a fast business loan

Online lenders are known for faster funding times than traditional banks and credit unions. Here is a look at some of the best small business lenders that offer fast business loans:

Lender                        Fatest Funding Times                                Best for

OnDeck                        Same day                                                     Working Capital

SMB Compass             24 to 48 hours                                              Low interest rate

Fundible                       Same day                                                      Bad credit

National funding         1 business day                                                Equipment loans

Credibly                       1 business day                                               Short term loans

Fast small business loans are a convenient form of financing, but they charge high interest rates and fees. It is also not uncommon for online small business loans to come with short repayment terms.

If you'd like to explore other options, consider an SBA Express loan, which usually comes with more favorable interest rates and payment terms. Unlike other SBA loan options with slowly approval timeframes, SBA Express loans have a response time of 36 hours. Unfortunately, it can take 30 days or longer to close a loan and receive financing.

Listick Tip

To avoid taking out a small business loan for short-term needs, consider keeping a business credit card on hand. If you can pay off your balance each month, you can avoid interest charges. Business credit cards also usually have helpful features such as discounts on work-related purchases, free employee cards, and rewards programs.

Bottom Line

The best fast business loans can help your company overcome financial difficulties or expand operations. But before applying, carefully weigh the pros and cons to decide if it's worth it or if you should explore other options.

If you decide to apply, use the business loan calculator to find out how much business loan you can afford.