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- Fast business loans are usually available through online lenders that can deposit funds in a business account within 24 hours
- Expect shorter repayment periods and potentially higher rates and fees than traditional business loan options
- Fast business loans typically have shorter repayment periods than traditional loans from banks
Cash flow problems are common in business when customers pay late or unexpected expenses come up. The 2022 Small Business Credit Survey found that 54 percent of small businesses biggest financial challenges in the previous 12 months were uneven cash flow or paying operating expenses. Fortunately, you may be able to borrow the funds quickly if financial challenges arise.
Fast business loans are a type of financing that generally offers funds within one to five days following an approval that could take as little as a few minutes. But despite their benefits, these loan products are not without drawbacks to consider.
Pros of fast business loans
Fast business loans offer several benefits to keep in mind.
Can cover emergency costs
You can make plans to keep operations running smoothly and go the extra mile to execute your strategy. But there may still be times when issues arise that are out of your control. For example, your company could take a significant hit due to a natural disaster, pandemic or other emergencies. Or market conditions could change, leading to a substantial downturn in revenue. A fast business loan offers a viable option to access working capital when you need it most.
Accessible to subprime borrowers
Many online lenders offer fast bad credit business loans to borrowers with lower credit scores. On top of the potential to provide funds in 24 hours, these types of business loans generally have lower eligibility requirements, including a minimum time in business of six months to a year and annual revenue requirements from $36,000 to $150,000.
Fast application process
Many fast business loans feature a streamlined application process to help you get funded quickly. Most applications can be completed online, and you typically won’t need extensive documentation like you would with a traditional bank.
When you apply with a traditional bank or credit union, receiving a lending decision could take several days or weeks. And if you’re approved, you’ll likely have to wait even longer to receive the loan proceeds. But a fast business loan with an online lender can approve your loan in minutes and provide funds within one to five business days or less.
Cons of fast business loans
Before you try to get a fast business loan, consider the downsides.
Can get expensive
The luxury of receiving fast funding for your business often comes at a cost in the form of higher interest rates. Some lenders also charge steep origination fees to take out a fast business loan. Or you could be assessed a prepayment penalty if you pay the loan off early.
Select forms of high-risk business financing offer fast funds to most borrowers, but they can come with high borrowing costs that could hurt your business financially if the payments lead to cash flow issues.
Low borrowing amounts
Some fast business loans offer smaller maximum loan amounts than traditional bank loans. Depending on the lender, you may find lines of credit that only go up to $150,000 or term loans of $250,000 or less. Unfortunately, this can be a problem if you need to make a sizable purchase or investment for your company to grow.
Short repayment terms
Some fast business loans need to be repaid quickly. Online lenders like Credibly specialize in providing fast and accessible loans to people with credit scores over 500, but the repayment terms can be short, often as little as three to 24 months. This is far shorter than bank loans, which can give you five years or longer to repay loans.
Secured fast business loans are risky because they require collateral to get approved. If you default on the loan payments, the assets used as security become the lender’s property, which they can sell to recover the funds it loaned.
The same level of risk applies to unsecured fast business loans requiring a personal guarantee. It means you agree to assume responsibility for the debt if your business can’t repay it, and it puts your personal assets at risk. This is even true if your business is registered as a limited liability company.
Fast business loans can work for your business if you’re in a financial bind or need working capital to take advantage of a limited-time investment opportunity. Still, these loans are not without disadvantages, and you should carefully weigh the costs before deciding whether they’re a good fit or if you should explore other options. If you choose to move forward, read the fine print so you understand what you’re committing to when taking out a fast business loan.
Frequently asked questions
Some online lenders offer to fund as soon as the same business day. But if your application requires a closer look or more documentation, it can take longer, between one to five days.
Many online lenders offer fast business loans that can approve you in minutes and may even provide same-day funding. You may also have luck with a bank or credit union, though they typically tend to have slower approval and funding times.