The 4 Best Emergency Business Loans: How to Get Funding Fast

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The Ultimate Guide to Emergency Business Loans

Emergency business loans are small business loans for when you need capital right away. They could be a short-term business loan that helps an owner cover unexpected damage costs, stabilize cash flow when a crucial customer hasn’t paid, or seize a once-in-a-lifetime opportunity that will pass if you don’t grab it.

If you’re looking specifically for loans and financing options in the wake of the novel coronavirus outbreak (COVID-19), visit our resources on applying for coronavirus-related business loans as well as state-by-state financing options

There are a few different emergency business loan types you can look for when you need a quick capital fix:

  1. Short-term loans
  2. Medium-term loans
  3. Invoice financing
  4. Merchant cash advances

We’re willing to bet that, when it comes to researching your options, you don’t have time to waste. So we’ll cut to the chase. Here are the ins-and-outs of the business loans available for your small business when you’re in a bind.

See Your Loan Options

1. Short-Term Loans

Our first option for an emergency business loan is a short-term loan.

A short-term emergency business loan can be the streamlined solution a small business owner needs to get out of a cash flow crunch. These small business loans work especially well when you only need to handle one-off events to get your business back on its feet.

Short-term loans work just like traditional term loans—except they’re much faster to fund. Traditional term loans from banks can take weeks or even months. With a short-term business loan, you might be able to get the capital you need the same day you apply for it.

How Short-Term Business Loans Fund So Quickly

How can you get these emergency business loans so quickly?

Well, there are a few answers to that question.

Short-term lenders use new technology to make the entire loan application and funding process faster. Instead of handing in a stack of paperwork, you can upload your documents on an online lender’s platform and submit your application in minutes. After that, lenders use efficient underwriting algorithms to approve your business loan application in as little as one day.

Additionally, while banks are subject to strict regulations, alternative lenders aren’t nearly as affected, which is one reason why short-term lenders typically require less paperwork and have more lax requirements. This means that you can secure these emergency business loans without having to jump through hoops to qualify.

Top Short-Term Lenders

If you think a short-term loan can meet your emergency financing needs, here are a couple of lenders you should consider working with.

    CAN Capital

    CAN Capital can give you a short-term loan of anywhere between $2,500 and $250,000 with repayment term lengths from three- to 24-month terms. Factor rates for this short-term lender can range from 1.15 to 1.48.

    And if you’re looking for fast business loans to get you out of an emergency, CAN Capital can help you out—they can often approve qualifying applications the same day they’re sent in.

    To qualify for a CAN Capital short-term loan, you’ll only need $4,500 in monthly revenue, a minimum 600 personal credit score, and preferably one year of business history.

    OnDeck

    OnDeck offers short-term loans ranging from $5,000 to $250,000 at three- to 24-month terms. When you take out a short-term loan from OnDeck, expect to have a 8.5% to 79% APR. And just like CAN Capital, OnDeck offers these emergency business loans the same day a qualified borrower applies for one.

    To qualify, OnDeck likes to see an annual business revenue north of $100,000, a personal credit score of at least 600, and one year of business history on the books.

2. Medium-Term Loans

When you need a quick infusion of capital to get out of a bind, you might not consider traditional term loans as an option for emergency business loans.

It’s pretty common knowledge that applying for a traditional term loan from a bank takes a long time—sometimes nine or 10 months.

So a term loan from a bank probably won’t be a financing solution in an emergency. But have you considered applying to a medium-term loan from an online lender?

Online lenders can’t fund medium-term loans as fast as they can finance short-term loans. But if you can stand to wait a few days for that capital, consider applying for medium-term loans for your business.

Don’t Rule These Emergency Business Loans Out

Lenders recognize that even the most qualified small business owners can’t control everything that happens to their business. And just because your business has found itself in an emergency, that doesn’t mean that it wasn’t strong and successful before you took the unexpected hit.

If you run a business that could’ve qualified for a medium-term loan before the emergency, you should consider applying to one now as an emergency business loan—especially if you know that you’ll get back on your feet once you have the capital. As long as you can prove that you could generate enough cash flow to cover the cost of financing, medium-term online lenders might help you out with the costs of recovering.

And if you do qualify for a medium-term loan from an online lender, you’ll get much lower rates than what you’d find with other emergency business loans.

Plus, depending on the lender you work with, you won’t have to sacrifice speed—some medium-term online loans can be funded within a day or two of applying.

Top Medium-Term Lenders

If you want to save money on emergency business loans, applying for a medium-term loan is worth a shot.

Here are a couple of online lenders that can give you fast capital at a low cost.

    Funding Circle

    Funding Circle is a peer-to-peer online lending platform that offers medium-term loans to small businesses. Loan amounts from Funding Circle can be from $25,000 to $500,000 with repayment terms from six months to five years and rates starting at 5%.

    Business owners will need at least two years in business and at least 620 personal credit to be eligible for this emergency business loan option. If you do end up qualifying and accepting a Funding Circle offer,  you could fund within five days.

    Fundation

    Another online lender, Fundation, offers a medium-term loan that can range from $20,000 to $350,000 with one- to four-year repayment terms. Interest rates on a medium-term loan from Fundation can start as low as 7.9%.

    If you’re working with annual revenue of at least $100,000, personal credit of 600+, and two years of business history, then you’ll be eligible for this emergency business loan option. Fundation can approve you in less than one day, but on average they fund new applications within three days.

3. Invoice Financing

If you find yourself in a cash flow crunch because your customers aren’t paying their invoices, invoice financing might be the perfect solution for your business.

When your cash reserves dip to a dangerous level, invoice financing companies can give you cash upfront for your outstanding invoices. Typically, invoice financing companies advance you a certain portion of your unpaid invoices and hold the remaining amount in reserve. Once your customers pay up, you’ll get the remaining reserve (minus the lender’s fees).

If you’re in this emergency, invoice financing can help you out in a pinch—the approval process and time to funding tends to be pretty speedy. But it can be an expensive way to finance your business, as you’ll only collect a percentage of your invoice value instead of everything your customers owed you.

You’re essentially trading in some of your earnings in exchange for immediate capital when you’re in this sort of emergency.

Top Invoice Financing Companies

If your business’s cash flow emergency really just comes down to those pesky unpaid invoices, invoice financing could be your best solution.

Here are a couple of the best invoice financing companies that can help you out.

    BlueVine

    BlueVine offers business owners a quick and simple way to finance their outstanding accounts receivables. They’ll typically advance you 85% of your invoice value and hold the remaining 15% in reserve. Once your customers have paid their invoice in full, you’ll get the reserve back, minus BlueVine’s fees.

    And when you need the capital fast, BlueVine can help you out: They fund new applications in less than 24 hours.

    All you need to qualify is $100,000 in annual revenue, a credit score of 530 or higher, and three months of business history.

    Fundbox

    Fundbox advances business owners the full amount of their outstanding invoices, letting borrowers pay them back (plus fees) over 12 to 36 equal weekly payments. Fundbox integrates with your accounting application, making it easy to apply online. Once you’re approved, you select the invoices you need financed, and you’ll get the funds in your bank account the next business day.

    All you need to qualify with Fundbox is at least $25,000 in business revenue, a personal credit score of at least 500, and three months of business history.

4. Merchant Cash Advance

If you’re searching for emergency business loans, you’ll absolutely come across merchant cash advances (MCAs).

With an MCA, a merchant capital company advances you a lump sum of capital that you can use as an emergency business loan. You’ll pay that company back by offering a slice of your business’s daily credit card sales. When you take on an MCA, you’ll agree on a set percentage that the lender can take from your credit card sales each day.

A Last Resort

An MCA can give you the immediate cash you need to get yourself out of a capital bind, but proceed with caution: A merchant cash advance is the most expensive financing product on the market. We’re talking 70% APRs in the best cases, and as high as 350% in the worst.

When you need emergency business loans, a merchant cash advance might seem like your only option. But taking out an MCA when you’re in a cash crunch can sometimes dig you deeper into a hole.

Depending on the percentage that your lender takes from your credit card sales, you can pay off your MCA in less than a year’s time. This might sound like a good deal, but there’s really no benefit to paying off your MCA quickly. And with such high daily repayments draining your merchant account, your struggling cash flow will suffer even more.

So when it comes to merchant cash advances, add them to the list of emergency business loans. But only use them if you have absolutely no other choice. Chances are good that you can find less expensive emergency business loans elsewhere.

Top Merchant Capital Companies

If an MCA cannot be avoided, make sure you go with the most reputable lender you can find. Here’s who we recommend.

    CAN Capital

    Along with short-term emergency business loans, CAN Capital also provides merchant cash advances. With a CAN Capital merchant cash advance, you can secure up to $250,000 in funding on six- t0 18-month terms. What’s more, you can get funding in as little as two business days.

    Rapid Finance

    Rapid Finance provides merchant cash advances as well as short-term loans. With a Rapid Finance merchant cash advance, you can secure funding of up to $500,000 on a three- to 12-month term with factor rates starting at 1.22.

    Qualification requirements are minimal: just $5,000 in annual business revenue, a 550 credit score, and three months of business history on the books.

How to Apply for Emergency Business Loans in 5 Steps

Now that you know all about your emergency business loan options, lets talk about how to go about applying for this type of funding. Obviously, if you’re seeking this kind of financing, you’re in a bind. But before you go and do anything rash, you should follow these five steps.

1. Ask the Right Questions

Here are three big questions to answer before you take on an emergency business loan:

    1. Have I researched all my options?

    If you’re searching for emergency business loans, we’re willing to bet that speed is your number one priority. And if you needed that emergency business loan yesterday, you might latch onto the first offer that comes your way.

    We’re here to warn you against that, for one simple reason: The first loan offer you get isn’t necessarily the best offer. With so many small business lenders offering emergency business loans, working with the right one can make a huge difference in the end.

    We’ve given you a list of four emergency business loans that you might consider for your business, but before you commit to any of these emergency business loans, make sure the financing you go with is the right fit for your business.

    2. Do I know what I qualify for?

    Every business owner can find an emergency business loan when they need it. But the quality of the emergency financing you get will depend on what you qualify for.

    Business owners with strong credit scores and business financials might qualify for fast medium-term loans from online lenders. On the other hand, if you run a very young business or you have a less-than-stellar personal credit score, you might only qualify for small (and expensive) short-term loans.

    If you’re searching for emergency business loans on a time-crunch, you’ll save time by knowing your credit score and where your business stands, so you only consider realistic options for your business.

    3. Have I considered the costs?

    In a lot of cases, business owners looking for emergency business loans just need fast business loans.

    And as a general rule, fast cash is expensive cash.

    Yes, these emergency business loans can give you the capital you need within hours, but you’re paying for faster service with higher fees and interest rates. Before you take on any of these emergency business loans, think realistically about whether you can afford fast capital.

    You’re using these loans to get yourself out of an emergency, but if these expensive short-term solutions leave you worse off in the long-run, are they really worth it?

2. Calculate How Much You Need

The next step is to figure out how much capital you need from your emergency business loan.

Asking for the right amount of capital—for both your business and your lender—could make or break your approval chances. And if you’re looking for fast capital to get your business out of an emergency, you don’t have time to apply over and over again.

We recommend taking a close look at your business’s finances and using cash flow projections to figure out the right number to ask for.

3. Calculate How Much You Can Afford

By now you know that emergency business loans come at a price—and you don’t want to take on more than you can afford to borrow.

You’ll want to assess what your ideal monthly payment will be, what your maximum payment can be, how quickly you want to pay your loan back, and how much you can afford to pay in interest.

You can use your debt service coverage ratio, or DSCR, to calculate just how much your business can afford.

Just follow this simple formula:

Cash flow / Loan payment = Debt service coverage ratio

Your DSCR is a mathematical equation that divides your cash flow by your loan payment for the same period of time. So for a loan with monthly payments, you’d take your monthly cash flow and divide that by your monthly loan payment to figure out your DSCR.

Every lender will set a minimum DSCR for their business loans. In general, your DSCR should be more than 1.25, but it could be as low as 1.15 or as high as 1.5—depending on your qualifications and the current economic conditions.

4. Prepare All of the Necessary Documents

When it comes to applying for emergency business loans, here’s the biggest takeaway: prepare, prepare, prepare.

Short- and medium-term lenders can approve you quickly, but only if you give them everything they need to do so right away. So, you’ll only get that same-day funding speed you’re looking for if you’re prepared to complete your application quickly.

To prepare for your business loan application, know the business loan requirements that most lenders will ask for and get those documents together.

In general, the more that you’re prepared to submit, the better. And if your lender asks for additional documentation throughout the approval process, get that information over to them quickly.

Your ability to provide a complete application is often what stands in the way of your loan approval. If you want the fastest time to funding, your best bet is to be prepared before you apply and to be responsive during the process.

The documentation you will need varies by lender, but some of the most common documents include:

  • Personal and business credit score
  • Business plan
  • Profit and loss statement
  • Bank statements
  • Balance sheet
  • Personal and business tax returns

5. Consider Using an Online Marketplace

If you’re looking for fast emergency capital, there are a few reasons why you should work with an online marketplace, like Fundera, over a bank or direct small business lender.

For one, online marketplaces can connect you to a variety of financing options to help you find the lowest rate possible. Plus, you can send your application to multiple lenders at once, saving you time in the application process. Some marketplaces can even help you determine the offers that are the best fit for your small business. All of this makes getting a business loan that much faster.

See Your Loan Options

Alternatives to Emergency Business Loans

Say you can’t qualify for a short- or medium-term business loan, you don’t have outstanding invoices, and you don’t want a merchant cash advance.

What do you do?

Well, there are some alternatives to emergency business loans that can also help you get funding fast. Let’s take a look at these options.

Business Credit Card

It helps to have lines of credit in place before you get hit with a financing emergency. In other words, it helps to have a business credit card.

Credit cards offer a much easier and faster application process than loans. Plus, credit cards offer several benefits that loans don’t have. Rewards points, cash back, 0% intro APRs, cash advances, and balance transfers are just some of the perks that you can access on a credit card.

What’s more, credit cards offer a revolving line of credit, so you have continuous access as long as you pay down what you borrow.

So if you have emergency expenses pop up, a business credit card might be your best financing solution—given that the cost is on the smaller side. Here are some options to consider:

    American Express Blue Business Cash Card

    The Amex Blue Business Cash Card offers a 0% intro APR on purchases and balance transfers for your first 12 months. This is important if you need to use a business credit card to cover emergency expenses, as it means you won’t pay any interest on your balance for the first 12 months. So if you need to cover an emergency cost now and pay it off later, this card is a great option.

    Just keep in mind that after those 12 months, a variable APR will set in.

    Other perks with this card include no annual fee and 2% cash back on all eligible purchases on up to $50,000 per calendar year, then 1% on everything else.

    Capital One Spark Cash Select for Business

    Another 0% intro APR credit card to consider is the Capital One Spark Cash Select for Business. The 0% intro APR period on this card only lasts nine months, but you’ll also be treated to a welcome offer of $200 if you spend $3,000 in your first three months. After your nine months are up, a variable APR will apply.

    Like the Blue Business Cash Card, the Spark Cash Select does not have an annual fee, and you’ll receive 1.5% cash back on all purchases, regardless of where you spend.

Business Line of Credit

A business credit card is one way to cover emergency costs, but a better solution might be a business line of credit. A business line of credit gives you access to a pool of funds to draw from when you need capital, and you’ll only pay interest on what you use. Some lenders even offer revolving lines of credit, making them very similar to credit cards.

The key difference, however, is that you can get approved for lines up credit up to $1 million, making this a good emergency financing option for expenses a credit card can’t cover. What’s more, you can get approved for a business line of credit in as few as 24 hours, and interest rates start as low as 7%.

Let’s take a look at some lenders who offer lines of credit that would work in the event of an emergency.

    Kabbage

    Kabbage can provide business owners with lines of credit up to $250,000, and their approval process is fast and easy, making them a great option for emergency funding.

    To qualify for a Kabbage line of credit, you’ll need at least $50,000 in annual business revenue, and one year of business history on the books. Loan terms range from six to 18 months, and interest rates start at 1.5%.

    OnDeck

    We’ve already mentioned OnDeck Capital as a good option for short-term loans, but they also have a short-term line of credit product that can help out small business owners in a bind.

    With an OnDeck line of credit, you can get a loan of up to $100,000 on a six-month term with interest rates starting at 11%.

    To qualify, OnDeck will want to see an annual business revenue of $100,000, a personal credit score of 600, and at least one year of business history.

The Bottom Line

If you’re feeling a little hopeless after an unexpected hit to your business, know that there are lots of emergency business loans that can help you get back on your feet.

But before you sign on the dotted line for just any quick fix, make sure you’re committing to the right financing option for your small business. A loan that doesn’t meet your needs or is too expensive will only set your business back even farther. If you do your homework and select the right product, you can be sure to get the best deal.

And once you get those funds in your bank account, you’re well on your way to the road of recovery.

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Vice President and Founding Editor at Fundera

Meredith Wood

Meredith Wood is the founding editor of the Fundera Ledger and a vice president at Fundera. She launched the Fundera Ledger in 2014 and has specialized in financial advice for small business owners for almost a decade. Meredith is frequently sought out for her expertise in small business lending. She is a monthly columnist for AllBusiness, and her advice has appeared in the SBA, SCORE, Yahoo, Amex OPEN Forum, Fox Business, American Banker, Small Business Trends, MyCorporation, Small Biz Daily, StartupNation, and more. Email: meredith@fundera.com.
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