How to Get an Easy Business Loan
Traditionally, the process of obtaining a small business loan was never easy. Businesses were expected to be operating no less than three years, and were expected to have fantastic financials as well as great credit to get approved. But before being approved and funded the borrower would have to supply an enormous amount of financial and business documentation, followed by lots and back-and-forth between the borrower and the bank before final documents were issued. From beginning-to-end the process could last two, three or even six months to complete. Underwriting was completely done by individuals at the banks, and the layers that a loan request would have to pass through at the lending institution would slowdown the entire process. Since no one at the bank would be willing to stick their neck out and make a decision on loan requests that were borderline, a business owner with marginal credit would find themselves waiting months for a decision.
All of that has changed.
Now, with the advancement of technologies and financial technology companies adopting algorithms used to underwrite business loans, the process of financing a small business is much easier than in the past. Rather than waiting weeks and months for credit decisions to be made by banks, online lenders are now able to provide instant preapproval, and credit decisions made in as little as an hour. Even more: the need for endless amount of financial, business and personal documentation has been greatly reduced by these new innovative commercial lenders. In fact, under the right circumstances, a business can get funded with just a few documents, and sometimes with as little as an outstanding invoice from a customer.
Easy Small Business Loan Uses
- Operating Capital – when a company needs working capital for operations purposes, they can afford to wait weeks and months for funding to occur. While small business owners plan-out their financing needs to run their company’s operations, issues can always arise which cause the need for additional and/or immediate capital infusion to keep the business running smoothly. Few business owners can walk away from their day-to-day business operations to spend hours visiting bank after bank seeking financing.
- Paying Bills: Expenses are part of any company’s operations. Paying these obligations are necessary to keep the small business functioning properly and healthily. At times, total revenue being brought in may not be enough to cover immediate business expenses. These expenses generally are fairly moderate in costs, and traditional lenders aren’t willing to look at a loan request under $100,000 (sometimes even $250,000). Getting short-term help to pay smaller expenses shouldn’t require lots of paperwork and documentation.
- Payroll Funding: Probably the most important asset a small business will have is it’s human capital. The key to keeping your employees happy is to make sure they are paid on time consistently. Missing or delaying payroll simply isn’t an option for any company that expects productive employees.
- Business Emergency: At some point every company will have an emergency financial situation that needs to be addressed immediately. Having access to quick and affordable capital is crucial when these situations arise.
- Refinancing Debt: Repaying loans and other business debt may put a strain on a company’s day-to-day cash flow. One way to relieve that cash-flow stress is to refinance or consolidate business debt and extend the length of the term to help the company service-it’s-debt without a massive strain.
- Equipment Repair and/or Purchase: If you have business equipment that is important, if not crucial, for your company’s operations, going without it isn’t an option. Each day without the equipment hurts your bottom line. Your company can’t wait weeks and months for a bank to provide funding (if they even approve you).
- Advertising & Marketing: If no one knows about your company’s product or service, you don’t get customers. Advertising your small business’s products or services is essential to make sure your company sustains and grows.
- Expansion: The goal of nearly every small business owner is to have their firm continually grow. During that growth process you may find that part of the process of growth may be expanding your retail storefront, operations and/or personal.
Business Loan Funding Times
|Line of Credit||7-30 days|
|Cash Advance||1-3 days|
Ranking the Types of Easy Business Financing?
1. Invoice Factoring
Invoice factoring involves selling a company’s unpaid invoice(s) to a factoring company for immediate cash. Depending on the factoring company, they’ll forward a business about 80% of the invoice’s value while charging the small business a fee. Once the invoice is paid by the third party, the factoring company will then provide the rest of the amount owed.
2. Business Cash Advance
Similar to invoice factoring in that its not an actual loan, a business cash advance involves the business selling a portion of its future bank account receivables to a funding company, and the cash advance funding company provides an immediate cash deposit into the small business’s bank account. The “loan” is repaid by having a set amount taken from the business’s bank account each business day and sent to the “lender” via Automated Clearing House (ACH).
3. Merchant Cash Advance
A merchant cash advance (MCA) is almost identical to a business cash advance. Both are sales of future receivables to a funding company. The only difference between the two is how the funder is repaid. A merchant cash advance is repaid by having a percentage of each day’s credit card sales being sent to the MCA lender until the funding amount if fully-repaid.
4. Fintech Loans & Lines of Credit
Fintech lenders are rarely actual banks or conventional lenders. Mid prime alternative lenders are almost exclusively online lenders who use investor money to lend to small businesses. The preapproval process can often be done via a simple online application with an immediate credit check and preapproval. After preapproval an alternative online lender will request some additional documents (can be emailed or uploaded in portals) with funding occurring within a week.
5. Fast SBA Express Loans
Not all SBA loans are the same. Through the use of the Small Business Administration’s SBA Express Lending program, a small business can apply for a fast SBA loan online, get a nearly instantaneous preapproval, submit documents and get a 36 hour SBA decision. Beginning to end takes about a week – much faster than other financing provided using the SBA 7(a) and 504 programs.
6. Bank Loans
The process is hardly ever easy. If you apply for a bank loan you can expect to provide lots of business and personal information, and wait weeks for a credit approval, and months for funding. With that having been said, if you can get approved for a line-of-credit, you will have preapproved funding at your fingertips whenever your small business should need it.
7. SBA Loans
Finally, we have general SBA loans. This undervalued program involves a bank providing small business financing, but only after the Small Business Administration approves of the loan. The bank provides the funding, but the SBA agrees to cover much of the bank’s losses should the borrower default on their loan. By offering this SBA enhanced guarantee, it makes lender more likely to provide financing to borrowers who wouldn’t have received financing without the SBA guarantee. But because this requires approvals from both the bank and the SBA the process can take a while.