When searching for a business line of credit, it's important to understand that acquiring business funding in a day must chose the right lender because traditional banks and credit unions will not typically turn around a line of credit in a day. The good news is there are alternative lenders who can provide a business line of credit in a day.
Let's first understand what is a business line of credit, what is the features, costs and fees are and when it is a good idea to chose a business line of credit.
What Is a Business Line of Credit?
A business line of credit is a revolving credit facility that allows business owners to draw funds from the line up to a pre-determined credit limit. You may also draw down on the line on demand at any time as well. Interest is calculated daily by the outstanding balance, so you are only responsible for paying simple interest as long as you have a balance on the line. There is no pre-pay penalty to payoff early, but some credit lines charge a draw fee that ranges from .05% to 2.95% of the draw amount every time you draw from line.
Business credit line payments are amortized based on 6, 12, 18, 24 and up to 36 months depending on the businesses qualifications and lender. Business lines of credit require the business owner to renew and provide additional information to have the credit line continuously be extended or they can expire. Renewals can occur quarterly, semi-annually, annually or be attached to the amortization period of the credit line.
What Are Features Of The Business Line Of Credit?
Unlike a business loan, a business line of credit has unique features not seen in other business finance products.
- Revolving credit line providing the ability to draw money on demand and also draw down up to a credit limit.
- Draws and draw downs are made via an app or online access portal.
- Interest is daily and only paid on current outstanding balance
- No early pay prepayment penalties
- Amortizations the range from 6, 12, 18, 24 and up to 36 months
- Monthly, bi-monthly or weekly Payments
- Renewal of line continuously either quarterly, semi-annually, annually or the renewal matches the amortization term.
- You can request for approval to increase credit limit based on financials
Business Line of Credit Costs and Fees
Business line of credit costs and fees can vary from lender to lender, but when your looking for same day business line of credit approval and use, expect to pay higher interest rates than what you would find at a bank or credit union who takes a deeper dive into your qualifications
- Interest rates start at 1% per month simple interest
- Interest is calculated daily based on the current balance
- Draw fees may apply that range from .05% up to 2.95% of draw amount
- There may be additional fees depending on qualifications and lender such as origination fees, renewal fees or penalty fees for violation of terms
When to Chose a Same-Day Business Line of Credit
Clearly, if your looking for funds for your business in 1 day that would be an urgent need for capital. A business line of credit has a unique feature to accommodate same day funding because of the draw feature. Unlike business loans, lines of credit can be used on demand without having to apply for funding.
Keep in mind that with speed to funding you may have to paying higher interest rates and costs so proper use of funds is critical. If the need for money for your business is not urgent, then you should always consider all options before moving forward.
Most common reasons for same day business line of credit
- Emergency - Something has come up within your business that must be addressed immediately whether it be a purchase or pay an expense.
- Cash Flow- There are many reasons why cash flow can get low such as clients not paying on time, business seasonality, a significant drop in revenue, or other business expense
- Equipment Repair- Equipment can breakdown and the need for capital may be urgent as the equipment is essential for business operations.
- Inventory- It's always important to meet customer demand to remain competitive and satisfy customer needs upon demand. Running out of inventory is not an option for most businesses.
- Supply- Some businesses require supply to complete jobs or work and the business does not have the time or willingness to ask clients for deposits for supply. To avoid any work delays, having a credit facility is essential for supply acquisition.
- Time Sensitive Business Opportunity- Business opportunities arise sometimes that are time sensitive and require funds quickly to take advantage of or you can lose out. Having a credit line to capitalize is essential.
Pros & Cons of a Same-Day Business Line of Credit
When considering getting a business line of credit on such short notice it's important to consider the pro's and con's and conduct a benefits and detractions analysis.
- Line of credit is simple interest and only have to pay interest on draw balance
- Flexible and fast business funding option
- No pre-payment penalties
- Same day application process to funding
- Builds business credit
- Interest rates are higher on same day business loans
- Amortization term may be less than a business loan
- Credit limits may be less money than what you could get with a business loan
- Same day business funding may lead to hasty decision without considering other options
- Can damage your credit if you have delinquency of default
How to Apply for a Business Line Of Credit In No Time?
With an online business line of credit, you can get it rather quickly even if your bank has turned you down. Most financial institutions have a minimal financing pool for small business credit. It means your banks may put in place the stringent regulations which might be making it challenging for you to avail it.
Banks may ask for a lot of paperwork which may pose challenges for your small business. It is where alternative lenders help you as they have simple eligibility requirements:
You can apply for a business line of credit online which asks you for details on your application such as:
- Business Information- (Corporate name, any "doing business as" (DBA) name(s), business address, time in business, Federal Employment Identification Number (FEIN), Registration date an formation from State, business website (if applicable), bank information.
- Ownership Information- Business owners names, home addresses, phone numbers, email, social security number and date of birth.
- Industry Description- Usually a business website will work to prove business activities and industry.
You can always speak to your business loan originator that are always there to help you, and if the loan application is approved, you will get the funds within a few hours.
You will have to furnish financial documentation such as
- Business bank statements
- Business Tax return (in some cases)
- Financial Statements (in some cases you may need to provide profit & loss, balance sheet, accounts receivable and/or accounts payable aging reports.
3. Credit Score/Rating
You will not need a super high credit score or ratings to get a credit line for your business. Keep in mind that better your credit, better your terms. It is recommended that your credit score be at least 625 and you have a signification credit history with multiple trade lines to potentially be able to get approved for a business line of credit.
Offers should be delivered by a term sheet and proper State disclosures (if applicable) showing rates, terms, features and conditions so the you can properly shop, compare and select the best offer for your need.
5.Selection and Business Funding
Once you select your business line of credit option you will need to provide closing conditions and sign agreement that will have to be cleared before finals
What Can You Use The Small Business Line Of Credit For?
A business line of credit is your ‘credit card’ regarding usage. You can use it to cover unexpected expenses or may use it at the time of ad-hoc need of funds. You will not be able to buy heavy equipment with it or use it for capital expenditure. Some critical uses for a business line of credit are:
- Use them as short-term working capital - It means you can use them for payrolls or cover as seasonal slow-down or when you are waiting for the customer to pay.
- To meet unexpected costs - If there are any unforeseen expenses that you have to meet; you can use the business line of credit. If your loader went down, you could use line-of-credit for repairs.
- Cash-on unique opportunities - Wholesalers who buy in bulk may hit upon unique opportunities which can be availed with the help of ready to use line-of-credit.
- Equipment Purchase- Equipment is vital for many businesses to operate and having a credit line available can come in handy for a quick purchase.
- Construction/Renovation- Unexpected construction costs are a given and having a credit facility readily available to solve problems is a must
How to chose the right Business Line of Credit
When your looking for same day business line of credit it's even more important to ask yourself what you need the money for and how urgent is it. Consider the following before choosing a same day business line of credit.
- Business Need- Consider the need for the business and whether business financing is the only option to consider to solve the problem.
- Who offers same day business line of credit- If you want a business line of credit in a day make sure you chose the right lender, because many business lines of credit application process will take longer than a day to acquire, just ask a bank and/or credit union and they will tell you it takes longer than a day. The good news is there are many lenders that do.
- Do your research- Choosing the lender not only is about who can turn around a business line of credit in a day, but also what is the reputation of the lender and there history with this type of business lending.
- Pre-Qualify and Apply- Interview and apply with multiple lenders so you can determine what is best for you and your business.
- Compare, Chose and Save- I can't emphasize enough how important it is to compare interest rates, line of credit features, fees, terms and conditions before making a selection.
Best Business Line of Credit Lenders
The best business line of credit lender is typically the one with the following characteristics;
- Reputation- A simple search of the business lender should show many review sites such as google reviews, Better Business Bureau, Trust pilot, Facebook, Linkedin, Twitter, Youtube to name a few.
- Experience- Not all business lenders have experience with business line of credit, or funding one in as little as a day.
- Rates- Interest rates and how they calculate can vary from lender to lender. Consider a lender not only what the interest rate is but how it is calculated.
- Terms and Conditions- Lines of credit can have varying amortization schedules from 3 to 36 months. Renewal reviews also vary and are very important to consider.
- Fees- Compare fees such as draw fees, renewal fees, early termination fees and penalty fees. Lenders will definitely vary and significantly impact the overall cost of funds of a business line of credit and it's use.
Alternatives to Business Line of Credit that you can get in a Day
Same Day Business Loan
Same day business loans are available which are considered short-term loans. Business loans offer fixed rates and terms with a lump sum offered over a fixed repayment period typically of 6 to 12 months, but can be as long as 24 months. Rates can be either interest rates starting at 9% or factor rates starting at 1.15% up to 1.48%.
This option does not have the same flexibility as a business line of credit but short-term business loans have lower credit standards making for a higher approval rate but be careful of the rates and costs compared to a business line of credit.
Merchant Cash Advance
A merchant cash advance is not a loan, but revenue-based business option also called a purchase of future receivables agreement. A business is offered to sell there future receivables at a discount to a funder for a lump sum now. The merchant cash advance is repaid by the funder taking a set percentage of future sales until the purchase price is paid back. The difference from the purchase price and the specified amount of payback is the discount to the funder and the cost to the business called the factor rate. The factor rate is a fixed cost that varies from 1.15% up to 1.48% of the the lump sum provided to the business
Know for high approval rates and low credit standards, merchant cash advance is very popular with same day business funding, but be aware that the costs and fees are high compared to business line of credit.
Invoice financing, also know as invoice factoring is when a funder purchases invoices from a business at time of issuance so they don't have to wait for terms of 15,30, 45, 60 or 90 days. Invoices can be purchase same day for a fee and helps businesses accelerate there cash flow, but it's not considered a business loan. A nominal factor rate from 1% to 5% of face value of invoice is charged. Additionally monthly processing fees can be charged depending on volume.
Although invoice financing funds invoices same day, if you don't already have an invoice factoring agreement in place, the application process and set up can take days to initiate.
Business Credit Cards
Business credit cards are similar to that of a business line of credit in that they are both revolving lines of credit although a credit card offers a plastic card with an account number for purchases and pay expenses. Interest rates range from 0% into rates up to 29%.
Business credit cards offer instant approval compare to business lines of credit will take a minimum of a day.
Frequently Asked Questions
What is defined as same day business financing?
Same day business financing is defined as an application process that takes less than one full business day (8 business hours) to apply and the fund money into the businesses bank account that a business can access. This type of financing does come with higher rates and fees due to speed and risk to lender.
Is and SBA loan available as a same day business loan option?
SBA does not offer a same day business loan option to businesses, but the SBA Express loan and the SBA Microloan offer approval and funds in days not weeks, like a typical SBA loan would take. Rates and fees are some of the best terms, but getting an SBA loan in a day is NOT realistic.
Where can I get Same Day Business Loans?
The most common places to get same day business loans are online business lenders, online business loan marketplaces ( Lendingtree, Merchant Maverick, Fitsmallbusiness, Nerdwallet/Fundera ) and business loan brokers.
Its important to consider that why you are searching for same day business line of credit, or any business loan for that matter, you consider the cost verse benefit analysis. Determine if the extra cost of acquiring financing so fast for your business is worth the cost and terms. If the answer is yes, then make sure your research the lender(s) you are considering working with and compare rates, terms and conditions so you can find the best business financing solution to solve your business need!