In an unstable and unpredictable environment, business cash flow can be variable. In a classic catch-22 scenario, the unpredictable business environment also makes it crucial to take advantage of commercial opportunities. Still, to do this, you may need funds on hand at short notice. If an opportunity has arisen for your business, but you don’t have the cash flow available to take advantage of it, you may need to investigate short-term lending options.
Table of Contents
4 Quick & Safe Lending Options for Short Term Business Needs
A fast business loan is a loan that can be funded quickly with minimal documentation, the fast funds or quick business loan allows businesses to take advantage of opportunities and cover unexpected expenses. Unfortunately, many small businesses face working cash flow issues. In this article, we will discuss the 4 quickest and safe lending options of fast funds for businesses.
Asset financing allows you to borrow money for new assets for your business, using the current business assets as security for the loan. These assets may include inventory, short-term investments, or accounts receivable.
The beauty of asset financing is that it is typically quicker to arrange with an asset finance company than a traditional loan, so it works well for short-term business needs. Companies often use asset financing to purchase machines, vehicles, and equipment like trucks, forklifts, drilling machines, telehandlers, or excavators. They can borrow as much as 100% of the value of the asset.
Line of Credit
Another option you may wish to consider is negotiating a line of credit with your financial institution. In many ways, a line of credit works like a credit card. You have a certain quantity of funds available to you at any given time, and you can access them immediately. There is a set limit on how much you have available to you, and you only pay interest on the quantity you have borrowed.
Lots of businesses that have unpredictable cash flow will negotiate a line of credit to bridge the gap when required. This loan option is also commonly used for large-scale projects where the end cost is unknown. The one key difference between a credit card and a line of credit is that interest is charged on the sum borrowed as soon as you borrow it.
Unsecured Business Loans
Don’t be put off by the precarious-sounding name. An unsecured business loan is simply a financing option that allows you to borrow money without using any assets as collateral. The financial institution will assess your loan request against your business credit rating and cash flow to determine whether you are a risky prospect. Because the loan doesn’t require collateral, banks generally charge a higher interest rate to cover the increased lending risk.
Unsecured business loans are typically short-term solutions, with repayment periods varying from around three months to three years. You can generally access the funds quite quickly, and as long as you meet the repayment obligations, it will help you build a robust relationship with your financial institution.
Business Overdraft Facility
The fourth short-term loan option that many businesses take advantage of is a business overdraft. This is attached to your trading business account and allows you to access additional working capital if you fall short on cash with day-to-day bills that need to be paid. Interest is calculated daily and paid monthly for a business overdraft facility, and there is generally an annual fee associated with setting it up.
Making the right choice for your business when it comes to short-term loan options can dramatically impact the amount of interest you pay, your relationship with your financial institution, and your credit rating. It is best to consider how regularly you will need to draw on additional credit for the business, and always read the fine print to ensure you understand what liability you are taking on.