Just as there are many forms of business financing, there are several types of fast business loans to choose from. Here are some of the most common options:
Online Commercial Term Loans
Term loans are what most people think of in the context of commercial borrowing. With online business term loans, business owners complete an online application process and can receive an approval decision within minutes. Funding times ultimately depend on the borrower’s bank, but cash is often available in as little as two days after approval.
Loan funds are disbursed in a lump sum and interest begins to accrue on the entire loan balance. Payments are then made over a fixed period of time, usually between three and 18 months for short-term loans. Term loans with fast funding are generally available up to $250,000, with annual percentage rates (APR) starting at around 10%.
Commercial lines of credit
Unlike a commercial term loan, commercial lines of credit are accessible as needed and are revolving, meaning a borrower can repay the line and access the funds multiple times during the drawdown period. Interest only accrues on the portion of the line of credit used, making it a good option for business owners who need access to capital over time. Borrowing limits typically range from $2,000 to $250,000 and APRs start at around 7%.
Borrowers who need quick access to cash may benefit the most from short-term lines of credit. Although this type of financing comes with short repayment terms, usually less than one year, financing times can be faster than for traditional lines of credit. In fact, borrowers can access their line of credit within hours of approval.
Business owners who need to purchase equipment such as vehicles or machinery may qualify for equipment financing. Equipment financing is a form of asset-based lending, which means the loan is secured by the equipment purchased. If the borrower defaults on the loan, the lender can seize or repossess the collateral to recover the outstanding loan balance. Loan amounts depend on the cost of the equipment, but can exceed $1 million, with repayment terms of up to 25 years. Interest rates generally range from 8% to 30%.
Since equipment financing is used to purchase specific items, this form of lending is not suitable for all businesses. However, business owners who need equipment to start or expand their business can benefit from this option.
Invoice factoring and financing
Factoring and invoice financing vary slightly in their mechanics, but generally involve borrowing against the value of a company’s unpaid invoices. With invoice factoring, the company sells unpaid invoices to a factoring company, which becomes responsible for collecting payment.
Invoice financing, on the other hand, involves borrowing money that is secured by the company’s unpaid invoices. In this case, the business must still collect the payment and then use those funds to repay the loan. Factoring companies typically purchase invoices for 70% to 95% of the total invoice amount and charge factoring fees of 0.5% to 5% per month until the invoice is paid.
Cash Advances to Merchants
A merchant cash advance (MCA) allows a business owner to borrow money against future sales receipts. This form of business financing is often available through payment processing companies and merchant services, and allows business owners to access cash without applying for a traditional loan.
Business owners receive a cash lump sum which is then reimbursed through credit card sales or Automated Clearing House (ACH) payments on a daily or weekly basis. Factor ratios typically range from 1.2 to 1.5, which can be equivalent to APRs of 40% to 350%.