When you’re running a small business, cash flow is probably on your mind every single day. Regular cash flow is a challenge for even very successful small businesses, and most of the time, owners are consumed with paying for regular operating expenses. For many business owners, investing in growth opportunities is a “someday” dream.
It’s no secret that cash shortages are a major problem for many small businesses. In fact, most small business owners worry about cash flow every month, with 64% of SMBs suffering from late payments. Cash flow is incredibly important for the longevity of your business.
Instead of letting money problems derail their companies, many small business owners are looking to outside sources of financing when they’re low on cash.
When cash gaps loom, small business owners simply don’t have the luxury of time. They need cash—and they need it quickly. Often, they don’t have a business line of credit readily available.
Unfortunately, many traditional small business financing options—like bank loans and most Small Business Administration (SBA) loans—take a seriously long time to come through.
The good news is that small business owners who need the fastest funds have a lot of options at their disposal. If you’re a business owner who needs financing and you don’t have any time to waste, one of these faster funding options may be right for you.
1. SBA Express loans
While traditional SBA loans can take as long as two or three months to finalize, the SBA designed their SBA Express loan program to provide much faster funding to small business owners in a pinch. Applications for these smaller loans are typically processed within three business days.
Like other SBA loans, however, SBA Express loans are notoriously difficult to obtain. What’s more, SBA Express loans are also more expensive than traditional loans. Generally speaking, they carry interest rates of prime + 4.5%–6.5%, with smaller loans typically costing more than bigger ones.
If everything works out, an SBA Express loan may be just what you’re looking for. Due to the relative difficulty in obtaining them, however, you may end up investing a good chunk of time only to find out you need to look elsewhere for financing.
2. Alternative lenders
Over the last several years, a number of alternative lenders have emerged to provide small businesses with funds that typically came from traditional banking institutions. Following the 2007–2008 financial collapse, many banks decided to stop funding companies that weren’t necessarily likely to be able to repay, creating the void these new nonbank lenders fill today.
Generally speaking, alternative lenders move much faster than their more traditional competitors. For this reason, small business owners are increasingly looking to these companies when cash gaps appear on the horizon.
Fundbox, for example, is an alternative financing firm that offers a number of financing services to small businesses. One such financing option is Direct Draw, which is a revolving line of credit up to $100,000 customers can use as needed.
According to a recent report, most small businesses need between $20,000–$40,000 worth of financing. Unfortunately, banks—which only sign off on 24% of small business loan applications to begin with—make considerably less profit from smaller loan amounts and are less likely to offer them.
Direct Draw was created to give the small business owners banks often ignore quick access to the cash they need to grow their companies.
Unlike the long, drawn-out process of applying for a credit line from a bank, the Direct Draw application process is quick and easy, with no paperwork required. If approved, you can draw funds and expect to see them in your bank account as soon as the next business day. You then have 12 weeks to repay the credit you’ve used, plus a flat fee. Repay before the 12 weeks is up and any remaining fees are waived, meaning you can potentially save a lot on fees, compared with many other funding options.
3. Merchant cash advances
Does your company process a large volume of credit card transactions? If so, you may be able to access some quick funding with merchant cash advances.
Here’s how it works: A lender might decide to give your small business $100,000 in exchange for 15% of your credit card receipts until the debt is repaid, plus fees. Since the lender is only taking a fraction of your sales, you don’t have to worry about being unable to pay a fixed amount each month.
Assuming your business meets the lender’s requirements, merchant cash advances can be one of the easiest and fastest forms of small business financing—even for applicants who have bad credit. But there’s a reason for that: They’re also one of the most expensive. According to one report, merchant cash advances can carry annual percentage rates in the range of 60%–200%.
While merchant cash advances may help you solve temporary cash flow problems, they are unlikely to fix any underlying business problems you may be facing. Mandatory daily repayments from your credit card sales can also make it even more difficult for business owners in debt to get out of survival mode and start investing in business growth.
If you’re a small business owner facing cash problems, all hope is not lost. Countless other entrepreneurs have found themselves in your exact position before—and they’ve successfully emerged on the other side.
Familiarize yourself with the fast financing options that are available to small businesses and don’t be ashamed to reach out and ask for help. Do your due diligence and find the financing solution that works best for you. With money in the bank, you can stop worrying about money and start focusing more of your energy on growing your business.
This guest post was written by Irene Malatesta of Fundbox.
Irene is a business content strategist with Fundbox, where she works with entrepreneurs and mission-driven businesses to bring their stories to life. Fundbox is dedicated to helping small businesses grow by democratizing access to credit.