The 5 Best Quick Business Financing Options for SMEs
While traditional loans can be an ideal solution for businesses in difficulty or in need of an increase in their cash flow, it is not necessarily the best choice for financing if you are dealing with pressing business issues. On average, the turnover rate for traditional loans could vary from 3 to 6 months. If you are looking for a time-limited business opportunity, chances are you will lose it by the time your loan is approved.
Fortunately, different quick loan options are available for small and medium businesses. If you want one for your growing business, here are the top five financing options you can apply for:
1. Business credit cards
Business credit cards are among the first financing options start-ups can apply. It is easy to qualify because credit card providers are not particularly strict about their requirements. For example, instead of looking at a company’s credit history, credit card providers look at the personal credit reports of business owners.
With a business credit card, businesses will have easier access to cash in the form of a card. They can use it to buy office supplies, pay for services, or even buy airline tickets. Simply put, credit card users can take advantage of the flexibility that credit cards offer.
In addition, business credit cards also help businesses improve their credit rating. As long as they make repayments on time, they can improve their credit rating. In turn, this will diversify their credit portfolio and make them a better candidate for other business loan options in the future.
2. Business line of credit
When businesses incur unforeseen expenses, having immediate access to cash is essential. In this case, a business line of credit can be the safety net if your business is facing an emergency expense.
Business lines of credit (LOC) work a lot like business credit cards. The bank or other alternative lenders open a line of credit and establish a credit limit. Business owners can withdraw money from their line of credit whenever they need it. Once they have paid off the amount they withdrew, their credit balance reverts to its original amount.
Business letters of credit are a type of revolving credit. This means that the business can borrow and repay funds when needed.
Just like business credit cards, lines of credit also provide flexibility for business owners. With this, they can control where the money goes as long as it is tied to the business.
3. Equipment financing
Most businesses need equipment and tools to streamline business operations. However, meeting expenses related to equipment can be difficult for small enterprises. This is true for businesses that are still in the early stages of operation. This is where the financing of the equipment comes in.
As the name suggests, equipment financing helps provide financing to businesses that need to purchase a part of certain equipment. With equipment financing, the business can buy or lease vehicles, buy expensive equipment such as ovens, cranes, computers and manufacturing machinery without harming their cash flow.
However, it should be noted that the funding will be linked to the equipment purchased. This means that if the business fails to make the required repayments, the finance company can seize the equipment and use it as payment for the loan balance.
4. Financing of invoices
Businesses with unique payment terms can sometimes experience cash flow shortages due to unpaid invoices. For businesses that need to wait 60 to 90 days to get paid, invoice financing can be a viable financing choice.
With invoice financing or accounts receivable financing, the business essentially “sells” the invoices to a third-party finance company. The finance company provides the business with a lump sum in cash. In turn, the business can use cash to meet daily expenses, inventory, or invest in business opportunities.
In some cases, the finance company could take over the corporate ledger and have full control over the pursuit and collection of payments. For businesses that don’t have the resources to constantly seek out customers, this could be beneficial. However, some businesses may also find it uncomfortable because their clients will be aware of their relationship with the finance company.
5. Short term loans
Like a regular term loan, a short term loan provides businesses with a lump sum of cash that can be paid within a specified time. Since the loan is short term, the payment period can be anywhere from 3 to 12 months. Lenders could collect the payments on a daily or weekly basis, depending on the agreement.
However, unlike long term loans which take months to approve, a short term loan has a faster approval period. Alternative and online lenders, in particular, could approve the loan 24 to 48 hours after submitting the application.
Other benefits of short-term business loans include spending flexibility, limited paperwork, and faster financing. However, since the loan is short term, business owners can expect lenders to charge a higher interest rate than a long term loan.
Choose wisely between the different quick loan options!
Every business is unique and will face different types of challenges. When it comes to loans, there is no one-size-fits-all choice. You must be able to identify your business needs before you can choose the quick finance option that will meet your business needs.
The various quick loan options mentioned above are great options to consider. Take a look at the loans individually and see if it will solve your current financial situation.