How Do Quick Business Loans Work?

The unpredictable nature of running a business means that a fresh injection of funds can sometimes be needed at very short notice. If you find yourself in this position, then you might consider a quick business loan. Below we take a look at how quick business loans work, and their pros and cons.

Jeff Salway, Connor Campbell Last updated on 28 April 2022.
How Do Quick Business Loans Work?

There are numerous reasons why a business may need to secure new finance sooner rather than later, from having to plug a gap in cashflow or cover unexpected outgoings to recruiting staff or being able to take advantage of short-term opportunities.

The main sources of business finance can be time-consuming to apply for and this is where quick business loans come in.

Read on for more information on what quick business loans are, which forms of finance are available on short notice, and what to be aware of when applying.

What are quick business loans?

As it stands, it can take several days for loan applications with the main banks and building societies to be approved, particularly when your credit record isn’t great or you are applying for a secured loan where the collateral needs to be valued. This isn’t much use if you are facing an immediate cash shortage or want to move quickly on an opportunity.

A quick business loan is a form of borrowing where the (usually online) application process can take just a few minutes and a decision is made within minutes or hours, rather than days.

The trade-off for the speed of the loan could be a higher cost of borrowing and a shorter repayment period of months rather than years.

What types of quick business loans are available?

There are a few forms of business financing that could be classed as a ‘quick business loan’.

Short-term business loans

The main type of quick business loan is a short-term loan with a fixed repayment period, with the amounts repaid in fixed, regular instalments.

The loans tend to range from around £5,000 to £250,000.

» COMPARE: Short-term business loans

Merchant cash advance

Another form of quick business loan is a merchant cash advance. This is where the repayment is a pre-agreed percentage of future customer card transactions.

As with quick business loans, these are usually approved within 24 hours or so, and are potentially available if you don’t have a strong business credit history.

These are typically available only to businesses that have been running for at least six months, and most will only advance cash to firms with monthly average card sales of around £5,000 or more.

» COMPARE: Merchant cash advance

Invoice finance

If you need capital to cover unpaid invoices, you might want to explore the world of invoice financing.

This is where a lender will give you a lump sum, borrowed against the value of your business’s unpaid invoices. You can either opt for invoice factoring, where the lender is in charge of chasing payments from your clients, or invoice discounting, where that responsibility remains with you.

» COMPARE: Invoice financing

What are the pros and cons of quick business loans?

Quick business loans do what they say on the tin – they provide almost instant access to capital. But there are several advantages and disadvantages to weigh up before applying for one.

Advantages of quick business loans

  • You’ll benefit from near instant access to funds.
  • They will give you the freedom to choose what you spend the funds on, whether that’s day-to-day costs or business expansion.
  • Certain forms of funding may be available for businesses without a strong credit history.

Disadvantages of quick business loans

  • They are only suitable as a short-term solution to any cash flow issues – you should reconsider getting a quick business loan if your business has longer-term financial problems.
  • Interest rates will be higher than traditional business loans.
  • The repayment period will be shorter than with other forms of business lending.
  • You may need to provide a personal guarantee – so if your business defaults on the loan, you will be personally responsible for repaying the outstanding debt.

» MORE: How to get a business loan with a bad credit rating

What other business finance could I consider?

If you’re looking to borrow a relatively small amount for a short period of time, it can be worth exploring options including bank overdrafts and credit cards.

Another possible avenue is a revolving credit facility, where you set a total funding limit with the lender and you withdraw and repay as and when you need the capital.

You may also be able to secure capital quickly through peer-to-peer lenders. These are online platforms connecting businesses that want to borrow money with those that want to lend it, with lenders receiving returns in the form of the interest paid by borrowers.

But don’t overlook traditional business loans, even if they’re not advertised as having quick turnaround times. If you have a good credit record and don’t need to provide security, small business loans from mainstream lenders can sometimes be approved quickly.

» COMPARE: Business loans with NerdWallet

Image source: Getty Images

About the authors:

Jeff is a freelance journalist who writes across finance & business. He was the personal finance editor at The Scotsman & Scotland on Sunday & a member of the Financial Services Consumer Panel. Read more

Connor is a writer and spokesperson for NerdWallet. Previously at Spreadex, his market commentary has been quoted in the likes of the BBC, The Guardian, Evening Standard, Reuters and The Independent. Read more

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