If you need an influx of cash to help you manage a disruption such as bumpy seasonal sales, or you want to take advantage of an inventory discount, you might need abond short-term funding fix to get you through.
On the flip side, if you have a strong, steady flow of cash and want to borrow money to go after a business opportunity or open a second location, you may qualify for a business loan with a cheaper interest rate and longer term.
We’ve outlined some online loan options for filling a cash flow gap or finding financing based on your cash flow — and ways to figure out which type of cash flow loan is best for you and your business.
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Cash flow loans: What to consider
Would a cash flow loan help you take advantage of inventory discounts? Imagine you have an opportunity to buy bulk inventory at a discount. A cash flow loan can help if you don’t have the money right now to make the purchase.
Would financing help you say yes to a job? Say you own a restaurant and are asked to cater a big event. To jump on the opportunity, you need to hire a few more servers, but you don’t have the cash. A line of credit or short-term loan could allow you to say yes.
Are you entering a slow period? Another example: You own an ice cream shop and winters are slow. Ideally, you’d budget for this by saving more in the summer, but a cash flow loan could get you through in a pinch.
Do you have a lot of outstanding invoices? Many small businesses experience uneven cash flow because their customers pay invoices weeks or months after receiving their product or service. If you’re in this situation, a short-term small-business loan could bridge the gap, but consider invoice financing instead.
Are you struggling to stay afloat? Using a small-business loan to keep the lights on or finance other basic business needs could cause you to spiral into debt. Instead, talk with a business consultant, like those available at your local Small Business Development Center, and get to the root of your business’s financial problems.
Short-term business loans for cash flow gaps
Even if your company is flourishing, a cash flow hiccup can have a big impact on your ability to run it effectively. The Federal Reserve Bank of Cleveland cites uneven cash flow as a top challenge for small businesses. Online lenders offer an alternative to traditional bank loans, which are hard to qualify for if your business is newer or you have poor credit. But online lenders’ short-term cash-flow loans— which typically fall between three and 36 months — have a higher borrowing cost, so they’re best used to finance projects that help your business grow.
Kabbage: If you have bad credit and your business makes at least $50,000 annually, Kabbage’s policy of looking beyond credit score in the underwriting process may help you secure financing. Kabbage offers a line of credit for six or 12 months. But with annual percentage rates between 24% and 99%, Kabbage has some of the highest APR ranges among competitors. You’ll need to have been in business at least a year to qualify, and you’ll have to connect an accounting or payment platform to your Kabbage account.
OnDeck: If your credit score is at least 500, you may qualify for a term loan from OnDeck; you’ll need a score of at least 600 to qualify for its line of credit. Although OnDeck’s APRs starts at 9% for term loans, you could face a rate of up to 99%, depending on your credit score and business finances.
Bond Street: If you have strong credit and you’re looking for low rates, Bond Street offers short-term financing to help you cover gaps. Term loans range from $10,000 to $1 million. Bond Street’s APRs range from 8% to 25%, lower than Kabbage and OnDeck. To qualify, you’ll need at least a 640 personal credit score, at least two years of history and more than $200,000 in annual revenue.
Loans for businesses with strong cash flow
So you have strong cash flow (congrats!) but you’re still looking for a loan? Because many lenders view strong cash flow as an indicator of a strong business, you may qualify for loans with low rates.
SmartBiz: If your credit and cash flow are strong, turn to SmartBiz for access to Small Business Administration loans, which offer APRs of 8% to 8.7%, the lowest on the market. You’ll need to have been in business at least two years and make at least $50,000 in annual revenue to qualify. The loans come with a 10-year term, which provides plenty of financing flexibility, and because SmartBiz doesn’t charge a prepayment fee, you can repay early to save on interest.
StreetShares: If you’re looking for working capital and have been in business for at least a year, you may qualify for a line of credit or term loan from StreetShares; both options carry a term of 3-36 months. Neither comes with a prepayment penalty, meaning you can pay off the loan early to save on interest. You need $25,000 in annual revenue to qualify and must have a credit score of 600. Keep in mind that you can only qualify for up to 20% of your annual revenue.
Find and compare small-business loans
NerdWallet has come up with a comparison tool for the best small-business loans to meet your needs and goals. We gauged lender trustworthiness, market scope and user experience, among other factors, and filtered them by categories that include your revenue and how long you’ve been in business.
This article was updated March 2, 2017.
NerdWallet staff writer Teddy Nykiel contributed to this article.