The most highly-prepared entrepreneurs also seldom run into financial setbacks. Whether it’s a pipe bursting scenario in a retail store or a payment pending since long from your largest client, there are many unpredictable issues that come suddenly and need small business owners to seek options for emergency financing.
With cases of about 82% of failed businesses facing the problem of failed cash flow, these cash flow emergencies could be a sink or swim scenario for small business owners. Let’s understand the six best kinds of financing such as emergency cash loans and others to make sure you’re capable to recover fast from any unpleasant cash flow situations.
1. Short-Term Loans
Short-term loans work as a small business loan or fast cash loans in traditional terms. However, the good news is that the approval process is very fast and certain lenders can approve on the same day of application. The repayment schedule is short, starting from some months to a couple of years. However, these loans can get really expensive, thus they are the best for dealing with certain one-off problems one might run into such as a broken hot water heater in the store or a vehicle in the delivery fleet which are important working assets.
2. Long-Term Online Loans
Another type of emergency cash loans, long term cash loans are another emergency situation saviour and allows for few days or weeks delay prior to securing cash in hand because of its long term nature. Applying for a long-term loan online can be very advantageous for small business loan and could have some major benefits. Traditional bank loans could take several months, but a medium-term loan from some online lender could be approved just in a few days or weeks time. Not only that but also, if one qualifies, it can have benefits such as lower interest rates as compared to some other types of fast cash loans options.
3. Invoice Financing
If you are falling behind on individual financial responsibilities since you’re expecting clients to pay their invoices, invoice financing could be the best alternative for you. Invoice financing companies will lend you an advance amount or a portion of the outstanding invoices. They will hold the remaining proportion in reserve. Once your customers will clear off or pay their pending invoices, you’ll receive the reserve funds after minusing the fees. The approval process is usually very swift for invoice financing. Thus, this can be the best and smart alternative if you end up in need of cash very quickly.
4. Business Credit Cards
Business credit cards are importantly a short-term loan. Fortunately, nowadays, plastic is as good as cash just about anywhere and everywhere, whether for shopping or lending. Therefore, business credit cards are the best alternative for handling unexpected costs. If you’re an independent proprietor, all you require to apply for a business card loan is your social security number. Big businesses need to also apply using a Federal Tax ID. Credit cards could be really a very appealing option to other kinds of loans.
5. Short-Term Line of Credit
Several lenders offer short-term lines of credit which comes with fast and very easy application process option. Such Lenders allow you to apply online and provide the approval very quickly. They also tend to be more far more lenient than traditional lenders especially when it comes to an applicant’s credit score. Short-term lines of credit are very useful because one gets the guarantee to access cash whenever you need it. But you do not begin the payment of interest on the funds till you actually will not draw the money.
6. Merchant Cash Advances
Merchant Cash Advances (MCAs) could give immediate money; a merchant capital company gives you an advance of a lump sum of capital. But this is done in exchange of the condition kept of repaying the company by giving an offer of a daily cut of the company’s credit card sales. But this alternative is at the bottom of the list for a reason. The reason behind this is that it is very costly. It has fees ranging from 70% to even a whopping amount of 350%. MCAs could lead to even more cash flow issues than your company had in the very first place when you started. While MCAs could certainly qualify as a very good option for emergency funding, you must think of it as more of an absolutely last-resort and not as your go-to option.
It’s very nice to know that even if the small business comes across any kind of unexpected cash flow problems, you will have the alternatives to let your company stay securely afloat. Weighing the various pros and cons of every type of financing options available to small businesses for emergency cash flow and also considering your company’s individual financial status into account, it will surely allow you to chose the small business loan product that will ensure the utmost sense for you and your business’ financial status.