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Emergency Business Loans

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What Is an Emergency Business Loan?

Emergency business loans are just that – advances for emergencies or a crisis. There are always specific issues in running a company that can either be predicted or not predicted. Still, the reality is when there is a crisis, it’s a priority that the business gets capital fast.

Emergencies require a business bank loan product that can process and fund your firm quickly from application to funds in your bank account fast, period. Businesses with knowledge about financing options make your decision easier when time is of the essence. Banks are not the source if you need funds fast and in a crisis. Banks are cautious and have to protect depositors, so banks will not be an option if speed is what you need.

Online lenders like AdvancePoint Capital offer a great alternative to banks when searching for emergency bank loans. Check out our Google reviews!

So what are considered emergencies in the eyes of small businesses or a lender for that matter? Below is a list of the common needs and uses for small businesses:

  • Capital to stabilize bank account
  • Working capital for firm shortfalls
  • Advertising and marketing
  • Repairs of existing facilities
  • Equipment breakdowns
  • Inventory, supplies, and other assets
  • Emergency payroll issues
  • Emergency cash infusions due to extenuating circumstances
  • Crisis relief for accounts receivable issues

The 5 Best Types of Emergency Loans: How to Get Funding Fast

Emergency financing can come in many forms. So let’s dive right into the many options and details of what resources are available for companies in a crisis. It’s an emergency, after all!

Emergency Line of Credit

A line of credit is the most flexible financing product for small companies. Lines of credit operate a lot like a credit card in that it is an open revolving line of credit that allows for draws at any time up to a specific credit limit. Keep in mind; online lenders work faster and are more automated than going into a bank for a line of credit, so we recommend applicants use online lenders unless you have a special relationship with your bank.

Program Overview

Rates: Starting at 4.5% and up depending on many factors
Repayment Term: Revolving with renewals quarterly; 6 months or 12 months
Draw Fee: 1% to 3%
Remittance: Monthly
Special Features: You can draw as little or as much money up to a credit limit at any time
Credit Standards: Must have excellent credit and deep credit history
Application Timeline: Same day to 48 hours
Earning Requirements: $250,000 per year or more

Benefits and Best Uses

An emergency business line of credit has excellent rates, good terms, and low fees, but one word can explain why business owners choose this product, flexibility. The ability to draw cash at any time and use it when you need it is a must for any business owner’s financial toolbox. It is not uncommon for small companies to have this funding product and other products like term loans and charge cards. Funds can be used for various purposes, but the most common is general working capital and finance needs.

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Emergency Lines of Credit

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Emergency Small Business Loan

An emergency term loan amount is a fixed lump sum offered upfront, with a set payback amount over a fixed term, typically 6 to 18 months. When you cannot qualify for bank financing, this option can be a great alternative. Rates are based on factor costs, not principal and interest. There is a higher cost difference when compared to more traditional financing options. The good news is these products require very little paperwork for the application loan process and credit requirements are much more forgiving than conventional funding. Many online lenders offer this product.

Program Overview

Credit Amount: Up to $500,000
Rates: Factor rates starting at 1.10 up to 1.45
Repayment Term: Typically 6 to 18 months
Fees: 1% to 5%
Remittance: Weekly, bi-weekly, monthly, and in some cases daily Monday-Friday
Credit Score: All credit accepted from poor to excellent
Application Process: Fast process; funds can be available same day to 24 hours
Revenue Requirements: $180,000 per year or more

Benefits and Best Uses

Short-term business financing has higher rates, shorter terms, and fees but can come to the firm’s rescue that needs the capital now and can’t get approved for more traditional products. Funds can be used for a variety of different purposes but most commonly used for working capital problems.

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Merchant Cash Advances (MCA)

Merchant Cash Advances or Purchase of Future Sales Agreements provide a fixed sum of money upfront to a small business with a discounted purchase price or specified amount to pay back that is a more significant amount than the lump sum upfront provided to the merchant. The difference is repaid by taking a fixed percentage of future credit card sales batches until the payback amount is paid back in total. There is no term limit with advances as the fixed back percentage never changes. The time frame to pay back depends on the volumes of future credit card sales. It’s estimated that MCAs are set up with expectations of being repaid in 6 to 18 months, but again, it may be longer or shorter depending on future credit card sales. Funds can be used for various purposes, but the most common are general working capital and finances.

Program Overview

Rates: Factor rates between 1.09% up to 1.45%
Repayment Guidelines: No term limits estimated payback periods are 6 to 18 months
Draw Fee: 1% to 5%
Remittance: Fixed percentage splits from future credit card batches
Credit Score: All credit types considered from poor to excellent
Turnaround Time: 24 to 48 hours
Revenue Requirements: $180,000 per year or more

Benefits and Best Uses

MCAs cost more than traditional bank financing with higher rates and fees. Still, the flexibility of repayment, which is attached to the fixed percentage of future sales, really helps companies that fluctuate in sales or are a seasonal operation. Remember, not all small companies are equal, and sometimes traditional products are not an option for some. Funds can be used for various purposes, but a majority of money is cash flow needed.

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Business Cash Advances (BCA)

Business cash advances, also known as a Purchase of Future Sales Agreements, provide a fixed lump sum of money upfront to a small firm with a set payback which is higher, called a discounted purchase price, also known as a specified amount. This payback amount is a more significant amount than the lump sum upfront provided to the borrower. The amount is repaid by taking a fixed percentage of future overall sales, which is different from an MCA, which takes a percentage of future credit card sales. Payments are collected by a fixed daily or weekly payment deducted from a business bank account based on the fixed percentage of future sales.

Every month, if the fixed payments take more than the set future percentage of sales, then a refund back to the merchant can occur. This repayment continues until the payback amount is paid back in full. Therefore, there is no term limit with advances as the fixed payback percentage ever changes. The time frame to pay back depends on the volumes of future overall sales. It’s estimated that business cash advances are set up with expectations of being repaid in 6 to 18 months. Still, again, it may be longer or shorter depending on future credit card sales.

Program Overview

Rates: Factor rates between 1.09% up to 1.45%
Repayment Guidelines: No term limits estimated payback periods are 6 to 18 months
Fees: 1% to 5%
Remittance: Fixed ACH payments weekly or daily Monday-Friday
Credit Score: All credit types considered from poor to excellent
Turnaround Time: Same day to 24 hours
Revenue Requirements: $180,000 per year or more

Benefits and Best Uses

Business cash advances can provide money in a pinch that traditional loans can’t process in the same time frame. There is no doubt that the costs are higher than conventional financing, but the reality is if speed is the requirement, crisis funding is what it is.

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Business Credit Card

Business credit cards function as a revolving credit line in which a card is issued to be used for both purchases and payments. This is not comparable to a term loan but instead a line of credit. Most companies use charge cards in conjunction with other financing products. The borrower must have good to excellent credit for this product.

Program Overview

Rates: Start at 0% up to 28.99%
Repayment Guidelines: Revolving; no term limits
Fees: 1% to 3%
Remittance: Low flexible monthly billing
Credit Score: Must have good to excellent credit and deep credit history
Revenue Requirements: $100,000 per year or more

Benefits and Best Uses

The flexibility and access to funds that credit cards offer are second to none. The ability to purchase items and use them to pay for bills or invoices can also free up short-term cash flow problems and is very convenient to business owners.

 

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U.S. Small Business Administration Emergency Loans

The Small Business Administration (SBA) is a federal government agency whose office is headquartered in Washington DC that provides resources, programs, guidelines, and financing guarantees to approved SBA lenders to issue business loans to small companies. The administration’s mission is to help American enterprises start, build, and grow their companies successfully. The administration is not a lender but provides a guarantee that gives approved lenders the ability to take on the risk of lending and decisions under the terms that they would not ordinarily do so independently and have rights reserved for any recourse need.

These loans are highly sought after by small companies, and there are many government agency-approved lenders to choose from. The application processes can be lengthy, but with the help of experienced SBA-approved lenders, the application package can be a smooth and efficient experience. Keep in mind; some loans due require a business model or business plan from the firm.

The coronavirus pandemic is undoubtedly considered a crisis, and congress enacted the CARES Act to provide disaster loans and other funding options to address the crisis. Below are the U.S. Small Business Administration COVID-19 relief programs, resources, and updates.

Economic Injury Disaster Loan (EIDL)

Economic Injury Disaster Loans (EIDL) are financing options that provide emergency business funding to companies after natural disasters like tornadoes, wildfires, or floods. However, when President Trump declared a nationwide health emergency based on the recommendation of the CDC on March 13th, U.S. Congress provided small companies access by way of the CARES Act or emergency funding through the EIDL.

This relief option was designed for small business owners and nonprofit organizations to retain employees and other expenses like health care costs to remain stable during the pandemic. If small business owners urgently need cash while waiting for decision and disbursement on relief EIDLs, they may qualify for an Express Disaster Bridge Loan. Express Bridge Loans enable small companies that currently have a business relationship with an approved lender to quickly access financing up to $25,000 to respond to COVID-19 related business issues.

Updates: EIDL $10,000 advance on the EIDL is no longer available.

EIDL Frequently Asked Questions

Paycheck Protection Program (PPP) Loans

The Small Business Administration has established the Paycheck Protection Program. This program provides loans to small companies across the United States affected by the pandemic who need financial help to cover company expenses. Under the right conditions, this type of funding offers forgiveness. This financing option was designed for companies to retain employees, cover health care costs and protect jobs during the COVID-19 pandemic. The second round of Paycheck Protection Program (PPP) loan applications were accepted from small establishments for Second Draw Coronavirus loans on January 13th, 2021.

Your company should seek more details for the second draw coronavirus relief from online lenders and financial institutions via email address. It is now available for independent contractors as well. For two weeks, only companies with fewer than 20 employees and sole proprietors can apply for PPP funds. The PPP update began Wednesday, February 24th, and will last until Wednesday, March 10th, with an application deadline of March 31st. PPP offers companies quick and simple applications to receive funds in a timely fashion.

SBA Express Loans

The Small Business Administration partially guarantees express loans with expedited credit decisions. Express loans offer credit decisions in 24 to 36 hours. Like all SBA loans, the administration doesn’t do any direct lending for express loans. Instead, the administration works with a network of approved business lenders who underwrite and issue the loans. However, the administration does guarantee a portion of the credit amount, meaning if the borrower defaults on the monetary amount, the lender won’t lose all of their money.

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Invoice Factoring

Invoice factoring advances the outstanding balance to a company to increase the speed of cash flow to the business. This solution provides funds quickly, and there is no need to wait for outstanding invoices to be collected and received by the client with invoice financing in place. Invoice financing has affordable costs ranging from 1% to 2.5% fee off of the face value of the invoice advanced. This product is exclusively for small companies that issue invoices to their customers with repayment guidelines up to a net of 60 days. This is not a loan but an advance of an invoice.

Invoice Factoring Overview

Interest Rate: None
Repayment Guidelines: Not traditional financing
Fees: 1% to 3% fee based on the invoice. Monthly service fees may apply depending on the volume of invoices factored
Borrower Credit Requirements: The credit score of the business owner does not matter
Application Process: A couple of days for approval and set up

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Invoice Factoring

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Frequently Asked Questions

Frequently Asked Questions (FAQ) About Emergency Business Loans

The short answer is no. As of 2021, there are more ways than ever to get lending for your company to use for a crisis. The key is to evaluate all products you qualify for and find out which is best for your establishment. Compare, shop, and save!

Most of the small business loans suggested for emergency loans can be obtained either the same day or within 24 hours. Check with your specific lender at the time of application for turnaround times from application to funding.

There is a wide variance in either rate, which is principal and interest or short-term business lending. These rates are based on factor costs depending on products and your credit qualifications. Typical long-term rates start at prime or treasury index plus 2.00% and up. Standard interest rates as of 2020 are 6.50% up to 28.99% for medium to short-term business loans, and factor rates vary from 1.09 to 1.45 of the funding amount. That is an extensive range, and you need to compare offers carefully.

The short answer is yes. If you have bad credit, there are options such as short-term business loans, MCA, and BCA that can offer fast turnaround times for emergency cash flow issues with your company. Remember, the worse your credit, the higher the rates and fees, as well as an effect on terms of any business financing product, will be.

You will sacrifice the length of the term to get emergency financing fast. Short-term business lending and MCA durations are 6 to 18 months. Business lines of credit are six months to 12 months, and credit cards have no term limit. Processing to funding times for these products can be the same day to 24 hours.

When you need funds fast due to a crisis, you sometimes have to sacrifice costs, so the fast business loan products tend to cost more, so expect fees to be higher than traditional financing. Origination fees should range from 1% to 5% of the amount you are borrowing. Credit cards have no premium charges but due have annual fees you may want to be aware of.

Final Thoughts About Emergency Business Loans

Although you may be faced with an emergency/crisis, take the time to consider who you are looking to get funds from. Have you checked the company’s reviews? Do you feel that you were offered every program available? Will the loan program work for the funds you need to get a return on the investment?

How to Apply for Emergency Business Loans:

AdvancePoint Capital offers a straightforward business loan experience. Our customers love the fast, streamlined process and high approval rates that come from working with us. Let us help you decide what program is best suited for your unique situation. All credit scores are considered. Applying for a loan with AdvancePoint Capital is as simple as a 1, 2, 3, 4 process. Start with this online form, fill out the short application page, wait a few hours for your approval, and then get your offer!

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