Key takeaways

  • Traditional lenders often have strict eligibility criteria and longer approval timelines
  • Fast business lenders offer flexible requirements and fast funding
  • Fast business loans are ideal for urgent situations but tend to be more expensive than traditional small business loans

The need for access to working capital can arise at any moment, prompting a choice between traditional and fast business loans. While traditional small business loans may involve a thorough application review, fast business loans excel at speedy approvals and rapid funding, making them ideal for situations where a business needs cash fast.

Whether you’re covering business expenses or seizing time-sensitive opportunities, understanding the key differences between a regular small business loan and a fast small business loan can help in making the right financing decision for your business.

Traditional small business loans vs. fast small business loans

The best fast business loans can offer lending decisions within a few minutes of applying. Most fast business lenders are online lenders specializing in streamlined applications that can help get you funds the next business day or within two or three days. This is often much faster than loans found at banks and credit unions.

Fast small business loans Traditional small business loans
Speed of approval Minutes to hours Days to months
Funding speed 1 to 3 days 1 to 7 days
Eligibility requirements Minimum personal credit score: 500<br />Minimum time in business: Varies; Usually at least 6 months<br />Minimum annual revenue: Varies Minimum personal credit score: 680<br />Minimum time in business: 2 years<br />Minimum annual revenue: Varies
Repayment terms Up to 2 years Up to 25 years
Rates and fees Minimum APR: 7%<br />Minimum origination fee: 2% Minimum APR: 5.75%<br />Minimum origination fee: 2%

We’ll break down the key differences between traditional and fast business loans.

Speed of approval

Speed of approval is one of the first differences you’ll notice between a fast business loan and a traditional business loan.

Fast business loans are all about speed. Most lenders use automated systems that can quickly review your application and business details and provide a lending decision in just minutes. That means there’s no long waiting period for you to wonder whether you’ll get the loan. If you’re denied, you can move on to the next lender.

Traditional business loans from banks can have longer approval processes. Once you submit your application, your loan enters the underwriting process. Traditional lenders may use automated underwriting tools or have someone manually review your application, which can take a few days. If you opt for an SBA loan, the approval process can take months.

Funding speed

Getting approved quickly isn’t all that helpful if you don’t also get access to the money quickly. If you’re looking for a fast loan, you need to get money in your hands quickly to cover your financial needs.

A fast business lender usually offers next-day funding if you apply early enough in the day. Some lenders even offer same-day funding, which can greatly benefit cash-strapped companies.

On the other hand, traditional business lenders could take longer to fund your loan. Many also offer next-day funding, but that approval could take a few days. Others can disburse the funds a few days or a week after approval.

Eligibility requirements

Every lender is free to set its own eligibility requirements. Some prefer that you’ve been in business for a few months or years before you apply for a small business loan, while others are more interested in your business revenue.

Many fast business lenders are online lenders. They may have less stringent requirements than traditional business lenders, though that isn’t always true.

For example, Bluevine offers same-day loans but requires that you’ve been running for at least two years and have $40,000 in monthly revenue. Fundbox, on the other hand, is more willing to work with startups.

Many traditional business loans come from banks or credit unions. They may have stricter eligibility requirements, including longer time in business and higher credit score requirements.

Bankrate insight
Fast business lenders OnDeck and Credibly stand out for their speedy funding and flexible lending criteria, catering to the diverse qualifications and financial needs of small and medium-sized businesses. 

Repayment terms

Fast business loans tend to have shorter repayment terms than some other types of small business loans. This is especially true for lenders with relaxed eligibility requirements who are open to working with business owners with bad credit.

Depending on the type of loan, some fast business lenders will ask for repayment within a year or two, even on term loans. Online lenders that offer business lines of credit and merchant cash advances may also require you to repay your loans on a weekly basis.

Traditional small business loans tend to have longer repayment periods. For example, lenders like Wells Fargo offer long-term lines of credit with no annual review or a five-year annual renewal. This can be far longer than some fast lenders that only offer one- or two-year draw periods on their lines of credit. Additionally, certain types of SBA loans offer repayment as long as 25 years.

Rates and fees

One of the drawbacks of fast business loans is that you often pay the price for speed. This is especially true if you don’t have great credit.

Many fast business lenders will charge higher interest rates or origination fees than traditional lenders if your company doesn’t have a fantastic credit score.

For example, Funding Circle offers fast business loans but charges origination fees from 4.49 percent to 10.49 percent and APRs as high as 30.12 percent. On the other hand, a more traditional lender like Bank of America has an origination fee as low as 0.50 percent of the borrowed amount and interest rates as low as 6.75 percent

If you’re looking for a fast business loan, it’s essential that you shop around to try to find the best deal. It could save you hundreds or thousands of dollars in loan fees and interest and help you avoid defaulting on a loan.

Bankrate insight
Some fast lenders charge interest on loans using factor rates, which can range from 1.10 to 1.50. To understand how much that can cost you, check out our guide on factor rates. We’ll show you what it is, how to calculate it and how to compare it with loans that use interest rates or APR. 

When to consider a fast business loan

Businesses should consider a fast business loan when waiting for funding is not an option.

  • Risk of closure: Urgent funding is needed to avoid closure of the business.
  • Time-sensitive growth opportunity: Seize sudden opportunities like discounted marketing services or real estate purchases.
  • Unexpected expenses: Immediate financial support for unforeseen costs impacting daily operations.
  • Difficulty getting traditional small business loans: An alternative for those with bad credit or startups struggling to get approved with traditional lenders due to strict requirements.

When to consider a regular small business loan

While immediate capital needs may not be a factor, opting for a traditional loan may be a better fit for some businesses.

  • Longer repayment terms: Requiring extended terms to make repayment easier to manage.
  • Lower interest: If you meet the stringent lending requirements for a traditional business loan, you can take advantage of access to business loans with low interest, keeping the cost of borrowing low.
  • Higher loan amounts: If you need access to large amounts of funding, a traditional small business loan would be a better fit, as loan amounts are typically much higher.

Bottom line

If your company needs cash quickly, applying for a fast business loan is probably the best option for you. But if your company isn’t a very strong borrower, you might face high borrowing costs.

Consider whether you can wait for a traditional loan, which might help you save money. If you can’t, take a bit of time to compare multiple fast lenders to try to find the best deal.

Frequently asked questions

  • Many fast business lenders offer approval in minutes and next-day funding, meaning you may be able to get a business loan in as little as 24 hours.
  • Chase only allows business owners to apply for loans in person at a branch. Once you apply, underwriting can take a few days to a week, so you might wait a week or more before getting the funds.
  • Depending on the bank, a business loan can be as fast as an online lender or take weeks to approve and fund. Most banks take a bit longer than online lenders, so be ready to wait for a week or two before you get your money.