You didn't plan for it, but it's happened. A counted-on payment from a customer has been delayed. Or your landlord renewed your lease--at double the rent. Or you can't complete that project on deadline without some extra manpower. Whatever the reason, you need cash, and you need it now.
What to do? Getting a business loan or line of credit from a bank is the traditional way small businesses solve their cash flow problems, but if you need funding quickly, you may not have time to wait out a bank's approval process. Luckily, you don't you have to. A growing crop of alternative lenders and other options can help you get money quickly when the usual bank process would take too long.
Here are X approaches suggested by SBA loan processing company SmartBiz:
1. First, start using an online bookkeeping service for your financial records if you aren't already.
One key to getting a loan quickly is for financial institutions to be able to easily review your revenues and expenses online. So you can speed up the approval process dramatically with many online lenders and services if you use a service such as QuickBooks Online or Xero. Or if neither of those appeals, here are a few more options. Look for one that allows you to share information with a financial institution for borrowing purposes.
2. Get a quick (yes, quick!) SBA loan.
If you don't have time for a bank loan approval, how could you possibly have time to go through the time it takes to get an answer from the federal government?
You can because Internet-based companies such as SmartBiz have arisen to dramatically speed the process of SBA loans. Now you can get a decision in minutes and a loan in as little as week, depending on such factors as how much you're borrowing.
3. Consider peer-to-peer borrowing.
Peer-to-peer lending in which an online company matches lender and borrower has been disrupting the traditional banking market of late. The advantage is that you can get a loan fast, the disadvantage is that you may wind up paying more for that loan than you would have at a bank.
Interest rates can be as high as 30 percent for borrowers without great credit, although admittedly someone paying a rate this high likely wouldn't get a bank loan at all. For those with better credit, available rates are lower and may be competitive with banks. Either way, it's a much quicker way to get financing. Peer-to-peer borrowers have reported getting funds in as little as four to five days.
4. Check out non-traditional lenders.
If peer-to-peer borrowing doesn't appeal, you may be able to get a quick loan from some non-bank lenders that specialize in quick loans. Kabbage and OnDeck provide fast business loans. FundBox and BlueVine provide advances against expected payments.
5. Consider a personal loan--if you must.
It's usually not the smartest option, but if you need 30,000 or less and have good credit, taking out a personal loan can be one way to get funds quickly when you absolutely need them. Probably the quickest and simplest option is to get a home equity loan or line of credit. (The difference is that in home equity loan, the bank provides a lump sum, often for a specific purpose, whereas a line of credit is much like a credit card--available credit for you to use when you need it.)
The financial site BankRate is one good place to start shopping for a home equity loan or line of credit (HELOC). But be very, very sure you'll have the revenues to repay this loan. Otherwise, you could wind up with no place to live.
6. Run up your credit cards.
This is another approach that could get you into real trouble. Your credit card is, of course, simply another form of personal loan, and whether your business thrives or dies, you'll be stuck paying it back, perhaps for many years to come. That said, there are plenty of successful businesses that depended on their founders' personal credit cards during their early days. The choice is yours.
If you decide to go this route, take the time to shop around as credit card offerings can vary widely. Credit Sesame, CreditCards.com and Credit.com are three sites that will help you compare credit card rates, terms, and rewards, as well as provide a lot of useful information on how to deal wisely with credit card debt.