7 Ways for Businesses to Get Emergency Loans
As much as no-one wants to think about it, the realities of the ups and downs of the business world can sometimes leave companies strapped for cash. It can be frightening for small businesses to realize they need emergency loans, but the good news is that there are funding sources available. Here are some of the most common.
Lines of Credit
If your company has an existing relationship with a financial institution, you may be able to apply for a line of credit. Lines of credit are appealing types of emergency loans because you will be approved for a certain dollar amount, but you can draw out whatever you need up to that amount. You are only required to pay back what you use.
Business Credit Cards
Because of their high-interest rates, business credit cards may not be an ideal financial solution, but in situations where you need emergency loans, they may help you bridge the gap. If you already have credit cards for your company, you can use them with most vendors, and apply for credit increases if you can show decent revenue and cash flow.
Merchant Credit Advances
Merchant Credit Advances (or MCAs) can be helpful as they involve selling a portion of future credit card sales, rather than accumulating additional debt. They work like this: once you apply, you are approved for a certain dollar amount based on revenue. That cash is sent to you very quickly, and you pay it back through a pre-determined percentage of the value of your business’ credit card sales over a set term. Many companies like this because it is automatic, and they don’t see the money going out.
Short-term loans are fair solutions for businesses in need of emergency loans because lenders are willing to provide companies with good track records higher amounts of money in exchange for higher interest rates and shorter repayment periods. These terms are not ideal, but they will help through a desperate time.
Alternative Lenders’ Installment Loans
Alternative lenders can also be a good source of funding. They are usually private investors, and not beholden to the rigorous approval process of banks or credit unions. They are also not subject to as many regulations, so short term lengths and higher interest rates are the tradeoffs.
Selling Invoices (Factoring)
Finally, invoice factoring is like MCAs in that you are selling a percentage of your profits. A factoring company just takes on billing and collections of invoices with vendors.