Emergency Business Financing
One of the most important financing decisions a small business will make is to have an emergency supply of cash available in case an emergency comes up with your company. Having enough financing in place in case of an emergency, or worse like a disaster, may be the difference between a company surviving and thriving, and a company that goes out-of-business. Short term small business loans may be the solution to a company facing cash-flow issues until the problem is fixed.
Another reason to have emergency funds available is to take advantage of an opportunity that comes along that could help your business grow. Under certain circumstances the best option for fast business funding may be an emergency business loan with a higher rate than traditional financing.
| Type of Loan | Funding Time |
|---|---|
| Bank Loans | 15-60 days |
| SBA Loans | 10-60 days |
| Alternative | 5-10 days |
| Asset Based Loans | 7-21 days |
| Bridge Loans | 1-10 days |
| Invoice Financing | 1 day |
| Equipment Finance | 550 |
Emergency Bank Loans
For almost all businesses, the ideal form of financing comes from term loans and lines of credit offered by traditional banks (large banks, small banks, community banks, and credit unions). Traditional bank business loans are clearly the best business loans due to their exceptionally low rates and favorable terms. What is not favorable about traditional bank lending is the paperwork and due diligence needed before funding. In fact, a bank loan can take not weeks, but months. If commercial real estate is involved in the financing transaction (especially with a build-out or construction) the funding process can be even longer. Therefore the only real option offered by a traditional bank would be an existing line-of-credit that a small business or company can draw-on when they need without having to go through the approval process:
- Bank rates: 6-12%
- Bank Terms: 1-30 years
Emergency SBA Loans
SBA loans are an excellent source of financing to companies that qualify for this type of financing. SBA financing is a form of business funding offered by traditional bank lenders, credit unions, non-profit community lenders and small banks to small companies in which the U.S. Small Business Administration guarantees a portion of the loan. Should the small business borrower default, the SBA will cover most of the lenders’ losses. Since the government is guaranteeing a large portion of the loan, they want to ensure that candidates that shouldn’t qualify are not funded with the SBA guarantee without having gone through extensive due diligence by both the SBA and the lender. Because of this, funding time for SBAs can be rather slow. To help speed up the funding of smaller SBA loans, the government now offers the SBA Express Program which can fund within days not weeks. In addition, the Small Business Administration also offers SBA emergency disaster loans of up to $2 million for small businesses that meet their emergency financing requirements.
- SBA Rates: 6-8%
- Terms: 5-25 years
Emergency Alternative Loans
For companies with good credit, but have a business emergency that won’t allow for the company to wait around for months for traditional financing, an alternative business loan may be a good option. Mid Prime alternative business lending are actual business loans that can fund within a week while only requiring minimal paperwork and documentation. With a simply credit application and submission of banks statements and tax returns, a company can be pre-approved for up to $500,000 within a couple of hours, and with a few more business documents can be funded directly into the company’s bank account within days.
- Rates: 10-25%
- Terms: 1-5 years
Emergency Asset Based Loans
If you’re a company that is experiencing cash-flow issues and also lack sufficient credit for more traditional forms of business financing, an option may be to use your company or personal assets as collateral. Asset based business loans allow companies to use their commercial real estate, personal real estate, account receivables, inventory, machinery and or equipment as collateral for basis of funding.
- Rates: 8-30%
- Terms: 1-5 years
Emergency Bridge Loans
Another option for companies in need of emergency business financing is emergency bridge funding. Bridge funding is a form of financing that helps a company meet its obligations while waiting for either permanent financing, or payment from a customer or vendor. Typically, bridge financing is secured by some sort of collateral, but under certain circumstances a company can receive unsecured bridge business financing if they have sufficient credit and cash-flow.
- Rates: 10-25%
- Terms: 1-12 months
Emergency Invoice Financing
If a company isn’t looking to actually commit to a term loan or line-of-credit, another way to secure business capital is to sell their unpaid 30-90 unpaid invoices for upfront funding. Invoice financing business-to-business transaction of a company’s unpaid invoice in which a factoring company will buy the unpaid invoice, provide the company with a large percentage of the invoice (minus a fee) and then will forward the remainder of the invoice’s value once the 3rd party have fully-paid the invoice.
- Rates: 1-3%
Equipment Leasing
Every once in a while a vital piece of business equipment may need replacing without notice. When that happens, if a company doesn’t have the capital to purchase the new equipment outright, may instead chose to try leasing new machinery or equipment. Equipment leasing provides companies with crucial equipment without having to commit to buying the machinery long-term.
- Rates: 10-25%
- Terms: 1-5 years
Emergency Business Cash Advance
An emergency business cash advance isn’t a loan, but the sale of a small business’s future credit card deposits or bank account deposits in exchange for immediate funding. While the rates of a merchant advance (ACH loan) are easily the highest of all types of funding, those rates may be worth it should a company need immediate cash.
- Factor rates: 1.16-1.55
- Terms: 4-24 months
