How to get a business loan fast

As a small business owner, there are times when you may need access to cash right away.

If that happens, there are several ways you may be able to access the funds you need. And thanks to Australia’s flourishing market of alternative lenders, there’s every chance you could get them within days, or even hours!

Fast Business Loans Illustration

But business finance – especially fast cash – always comes at a cost. No matter how much of a hurry you’re in, be sure to look around and compare your options before you dive in.

So what exactly are your options?

I’ll take a look at the different types of fast business loans in a moment.

But first…

…an important question that will help you decide what kind of finance you need.

There are any number of reasons you could find yourself in urgent need of a cash injection

A customer may be late with their payment, leaving you short of funds to pay your bills.

You could have a big tax instalment due, but you won’t get the income you need in time to pay it by the deadline.

Your suppliers could be offering a killer deal on stock, but only if you buy in bulk.

You could be gearing up for your busy season, but not have the funds you need to hire more staff or buy in extra stock

There may be a fantastic business opportunity – such as the chance to buy out a competitor or secure a store in the perfect location – which you need to snap up before someone else does.

  • A customer may be late with their payment, leaving you short of funds to pay your bills.

  • You could have a big tax instalment due, but you won’t get the income you need in time to pay it by the deadline.

  • Your suppliers could be offering a killer deal on stock, but only if you buy in bulk.

  • You could be gearing up for your busy season, but not have the funds you need to hire more staff or buy in extra stock.

  • There may be a fantastic business opportunity – such as the chance to buy out a competitor or secure a store in the perfect location – which you need to snap up before someone else does.

Before you go looking for a fast loan, you need to be clear on how you’re going to use the funds, how quickly you need them, and how long you’ll need them for.

Why is this so important?

Well, if you’re just looking to boost your working capital to cover an immediate need – knowing that you’ll soon have the income to repay the loan – then all you need is short-term finance. But if you’re making a longer-term investment in your business, like an acquisition – or even if you’re planning to buy big on stock but don’t really know how long it will take you to clear it – then you you’ll need a loan you can pay back over a period of time.

As with any form of business finding, it’s absolutely vital that you match the term of your borrowings to the business need, so that you don’t get stuck with an expensive debt facility you no longer need – or worse, get caught out without finance when you still need the funds.

So what, you might be thinking, are my options for fast funding?

I’ll tell you.


Types of fast business finance

1

Unsecured business loan

If you’ve been in business for at least six months, an unsecured business loan may be the quickest and easiest way to borrow between $5,000 and $250,000, for pretty much any purpose. Most unsecured business loans are for a term of 6 – 12 months.

There are scores of online lenders offering loans to small businesses and most offer a quick and easy online application process.

You can upload your supporting documents as part of your application – many lenders ask for electronic access to your bank statements, which will allow them to assess your application really quickly.

That isn’t as scary as it might sound – they’ll only have temporary, read-only access to specific information. They really do need this information, so they can assess your capacity to repay the loan and decide if, and how much, to lend to you.

If you’re really uncomfortable about giving your potential lender electronic access to your bank statements you may be able to upload PDF versions instead, but that will slow down your application as someone will have to assess them manually.

Speed:

Many lenders offer on-the-spot business loan approvals, while others may want to follow up your online application with additional questions before making an assessment. In some cases, you could have approval the same day and the funds in your account within 24 or 48 hours. That’s fast!

What you need to know:

Unsecured business loans can be expensive, especially if the lender considers yours to be a high-risk business.

The cost is likely to be calculated as a factor rate rather than as an APR, and all too often there will be extra, hidden costs such as transaction or admin fees.

It’s really important that you compare your options and make sure you understand all the terms and conditions before you apply for an unsecured business loan.

You may be asked to provide a personal guarantee of the loan, which could put your personal assets at risk if your business is unable to repay the loan.

2

Credit facility

A credit card, overdraft or line of credit could be the ideal option if you’re likely to need fast access to cash on a regular basis.

A credit facility can take a little longer to set up than an unsecured business loan – credit card providers often take 5 - 10 days to approve applications and then you have to wait for the card to be dispatched – but once you have it, you’ll have instant access to funds whenever you need them.

With credit facilities you’ll only pay interest on the funds you draw down, rather than on the full credit limit, which can make them much more cost-effective than a loan, where you’ll pay interest on the principal even if the funds are just sitting in your account waiting to be used. And many credit cards offer interest-free periods, so they can be an extremely cheap source of funding as long as you clear your balance every month.

Having said that, you’ll probably have to pay a set-up fee and possibly ongoing admin fees for your credit facility – and interest rates on short-term, at-call facilities are often around 15 – 20 percent.

Speed:

It could take a couple of weeks to set up a credit facility, but once it’s in place you can access, repay and redraw funds whenever you need them, without having to get approval from your lender. This makes them an ideal backup for you working capital, especially if your cash flow fluctuates.

What you need to know:

Credit facilities can be withdrawn at any time, so they are totally unsuitable for long-term investments. They also carry higher interest than most business loans, so you should keep your balance as low as possible.

You may be able to get a credit card even if you haven’t been in business for long, since the finance company will assess your application based on your personal credit score. This makes it a good option for new businesses, but, again, could put your personal assets on the line.

3

Invoice finance (factoring)

Invoice finance is a way to get your hands on the cash your customers owe you, without waiting for them to pay their invoices.

It’s not actually a loan – instead of borrowing from a finance company, you’ll sell them your outstanding invoices and receive a cash advance. You’ll usually get somewhere between 75% and 95% of the invoice value right away.

When the time comes to collect payment from your customer, the factoring company will take care of it. They’ll then deduct their fee (anywhere up to 4.5% is common) then transfer the balance to you.

Factoring can be a really good way to access cash if you haven’t been in business for long, since the lender will make their decisions based on the creditworthiness of your customers, not on your own business’s credit score. And since it’s not debt finance, it won’t show on your balance sheet or impact your ability to apply for a business loan.

Speed:

Setting up a factoring facility may take a day or two. You’ll need to apply online and provide details about your business, your customers and the invoices you want to sell.

Once the facility is up and running, you can usually sell invoices instantly and receive your cash advance by the next day.

What you need to know:

There are different types of factoring and it can be expensive. And if you want to pick and choose which invoices to sell, and don’t want to be forced to buy back invoices if the customer won’t pay up, you’ll have to pay more for that flexibility and peace of mind.


Compare Fast Business Loans

Type Time to Funding Term Interest
Unsecured Business Loans same day 1-24 months Highest
Line of Credit 2-7 days 6-24 months High
Credit Card 2-5 days Revolving High
Invoice Finance 2-10 days 3-12 months % of invoice

Conclusion

If you need cash fast to support, grow or boost your business, you have plenty of business loan options.

But before you apply for a loan or credit facility, it’s crucial that you identify how you’re going to use the money, how quickly you need it and how long you’ll need it for.

You can then decide which type of finance you need, so you don’t end up paying more than you have to for your “fast business loan”.

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