What is a Fast Business Loan And How Does It Work?

When your business is facing a money crunch or requires cash quickly for a time-sensitive issue, a traditional business loan may not necessarily be your best bet. Three-in-four banks take five business days to approve a loan and many other banks take as long as 10 business days, according to the 2024 Small Business Lending Survey published by the FDIC.

The good news is there’s an alternative: Fast business loans. These loans can often provide funding much more quickly, sometimes in one business day. Before signing on for this type of loan, however, it’s important to understand how they work and where you can find the best options.

What is a fast business loan?

A fast business loan is a type of funding for business owners who want fast access to capital. Many fast business lenders can provide funding within 24 to 48 hours, much faster than the week or longer that most lenders take.

Lenders may use technology to determine if you’re eligible, sometimes providing you with a loan decision in minutes. These loans also tend to offer quick online applications and minimal documentation requirements, helping you get through the application process quickly.

How does a fast business loan work?

You typically need to apply for fast business funding through an online lender specializing in quick applications as well as fast approvals and funding. The lender will usually advertise its quick approval process on its website. These lenders often have relaxed eligibility requirements and even offer fast business loans for business owners with bad credit.

Once approved, the lender will provide you with a loan agreement that you will want to read thoroughly. To offset the convenience of quick funding, the lender may charge higher interest rates and fees than other lenders. You will want to fully understand the loan costs that you’re responsible for before signing.

Then, once you sign the agreement, you’ll repay the loan with interest and fees over the specified term. Many fast small business loans will have short repayment terms, such as 24 months or less. These short terms mean that you will have higher monthly payments. You may also see higher interest rates than you’d find with other business loans.

Fast business loans may be worth the extra cost if you have an emergency or need to capitalize on an opportunity. However, if cost is a factor, you’ll want to compare multiple loans for their interest rates, fees and terms required for the loan before you sign.

What are fast business loans used for?

Fast business funding can serve various purposes, including:

• Cash shortfalls: Covering temporary cash shortages ensures bills are paid on time and avoids disruptions or negative impacts on credit.
• Debt consolidation: Debt consolidation loans can help you streamline your debt repayments into one loan. It potentially lowers your loan costs if the new loan offers faster repayment or lower rates than the previous loans.
• Disaster recovery: Aid in quickly rebuilding a business after a disaster.
• Emergencies: A fast small business loan can help address an unexpected financial crisis, such as equipment breakdowns or inventory losses, to avoid business closure.
• Seasonal / short-term borrowing: Loans can support businesses with seasonal fluctuations, aiding during slower periods.
• Time-sensitive opportunities: Capitalize on growth opportunities quickly with access to immediate funds. For example, you may have an influx of product orders but not enough capital to buy inventory to fill the orders.
• Unplanned expenses: Fast business funding provides a buffer for unforeseen costs that may impact cash flow.

Are you eligible for a fast business loan?

Fast business lenders tend to have lenient eligibility requirements, which can work in your favor if you’re a startup or have bad credit. Requirements include:

• Credit score: Most fast small business loans accept fair personal credit of 600 or higher, though you can find loans accepting scores as low as 500.
• Current debt: Lenders will consider your current debt load to determine if you have a healthy level of debt and can take on new debt. They may use your debt-to-income ratio or debt service coverage ratio to assess your debt load.
• Revenue: Lenders want to see ample revenue usually at least $100,000 to qualify for a loan. You can find fast business lenders like Fundbox accepting revenue as low as $30,000.
• Time in business: Fast business lenders typically want to see at least six months in business. Some lenders require more, such as one to two years.

Where can you get a fast business loan?

If time is of the essence, online lenders typically provide the best route to fast business funding. Many online lenders can disburse funds in as little as 1 to 2 days.

In some cases, banks may also be able to provide funds quick, depending on the bank. According to the 2024 Small Business Lending Survey, three-in-ten banks are able to approve a straightforward loan for a small business within one business day. That figure includes both large and small banks. However, many more banks take anywhere from five to 10 days for processing and approval, which is important to bear in mind if you need cash more quickly.

If you’re ready to apply for a fast business loan, the first step is finding a lender you’d like to work with. Once you’ve done that, you’ll likely need to complete an online application that includes providing information about how long you’ve been in business, annual gross sales, debt and business formation documents. You may also be asked to provide a balance sheet, profit and loss statement or financial forecasts. Typically, you’ll need to provide both business and personal information in order to be considered for a fast business loan.

Should you get a fast small business loan?

Fast business loans work well if you need funding in 24 hours to 48 hours for emergencies or another pressing reason. Since these loans typically come from online lenders, you’re more likely to be eligible for fast business funding even with subprime credit or little business experience.

You’re also more likely to pay higher interest rates than a traditional business loan in exchange for the convenience of fast loan approval. You can also expect short terms, like 24 months or less, and an aggressive repayment schedule. For example, repayments could be on a daily or weekly basis.

Because of this, you’ll need to know how to manage a tight repayment schedule and high loan costs — and be sure that the benefits of getting a fast business loan are worth it. If you can wait a week or two for funding, you may be able to get a lower-cost loan from a lender that doesn’t fund business loans as quickly.

Bottom line

The best fast business loans can help your company overcome financial setbacks or expand operations. But before applying, carefully review the pros and cons of fast business funding to decide if it’s worthwhile or if you should explore other options.

If you decide to apply, use a business loan calculator to figure out how much of a business loan you can afford. Consider prequalifying with multiple lenders to see which one offers you the best interest rates and terms.

Frequently asked questions

• How fast can you get a business loan?
  

  Many fast small business loans can be in your business checking account in as little as 24 to 48 hours, as long as you’re approved.

• Can you get a fast business loan with bad credit?
  

  You can get a fast bad credit business loan. Many lenders are willing to work with business owners with personal credit scores of 600 and above. Some like Fundible are even willing to help people with even lower scores. Expect hefty borrowing costs, and collateral may be required to secure funding. You’ll also generally have limited funding options than you would with a higher credit score.

• What is the fastest SBA loan?
  

  The SBA Export Express and Express loans are known to have faster turnaround times compared to other SBA loans; however, the lender determines the processing and funding for these loans. You can also work with an SBA Preferred Lender to receive other SBA loans with faster funding timelines than the usual 30 to 90 days.

• How do fast business loans affect your personal credit score?
  

  As a business owner, it is possible for a fast business loan to affect your personal credit score if you personally guarantee the loan. If you’re late making loan payments or default on the loan altogether, your personal credit score will decline.

• What are alternatives to fast business loans?
  

  If a fast business loan isn’t right for you there are many other options. Some of the common alternatives included a business credit card, business line of credit, crowdfunding and peer-to-peer funding. Invoice factoring and microloans are still other options to consider.