Covering extra shipping costs, promotional expenses or inventory is all part of running a business. If you have not come to a point where you need extra funding, then your business is not making any room for growth. For startups, money is not always available for expansion or for any unexpected projects. That is why getting fast cash for business is essential.
Access to extra cash can be obtained by taking a business loan. However, you have to assess your financial standing, before you decide to apply. There are three factors that can affect your chance of getting approved.
●Credit History
●Collateral
●Interest Rates
Your credit score and interest rates go hand in hand. The higher your score, the lower the interest rate you will get. If you choose traditional lenders that require collaterals, keep in mind that you will still need to have a good credit history and complete documentation to get an approval.
How Are Credit Scores Calculated
There are many ways to calculate a credit score but the most common is based on FICO Scores or Fair Isaac Corporations. The rating ranges from 300 to 850.
Here’s what each credit score rating stands for:
●300 – 579 Poor
●580 – 669 Fair
●670 – 739 Good
●740 – 799 Great
●800 – 850 Exceptional
Credit scores matter because lenders use them as basis in determining your ability to repay loans as a business owner. These scores also help them to evaluate the risk involved if they were to approve your loan application. Your credit rating is also used as a factor to know your interest rate.
Types Of Loans That Offer Fast Cash For Business
● Line of Credit: You can apply for this financing option through a financial institution. Banks, for instance, will set a credit limit and decide on the maximum amount you are allowed to borrow. The money’s availability will depend on your line of credit.
● Bank Term Loans: This is the common type of loan taken out from a commercial bank. It is important that you have a good credit rating to qualify for bank term loans.
● Merchant Cash Advances: An outside lender grants you a cash advance in exchange for a percentage or portion of your future debit or credit card sales. It is easier to qualify for merchant cash advances than other types of loans.
● Online Invoice Financing: This loan is also referred to as Invoice Factoring. It involves selling accounts receivables that are due within 90 days for instant cash. Technically, this is not considered a loan but an invoice advance.
● Small Business Administration Loans: This long-term loan benefits SMEs. However, you have to maintain a good credit rating to qualify.
Business Loan Requirements
● Credit Report: Be sure to have your credit report ready because lenders always check your credit score as part of reviewing your application.
● Income and Cash Flow: Lenders will assess your risk through debt-to-income-ratio and they determine this factor based on the cash flow and income you present them.
● Age of Business: You have higher chances of getting an approval if you have an existing business of at least two years.
● Debts: Apart from debt-to-income ratio, lenders are also particular with your amount of debt. If you have too much debt, you will have difficulty taking out new loans.
● Assets: If you apply for a collateral-based loan, you need to prove that you have valuable assets because lenders will use it to recover from loss if you default on payment.
● Industry: Lenders also include the type of business you have in evaluating your application.
Small Business Loans vs Credit Cards
Both of these options can offer fast cash for business, but which is quicker and more convenient? Like personal cards, business credit cards also have their own advantages. For one, they can give business owners instant cash to fund small business projects. However, credit cards have shorter repayment terms and higher interest rates.
You can use a business credit card as a way of building your credit score so you will have access to better payment terms and lower interest rates in the future. Like personal credit cards, business cards have their own drawbacks if you cannot control your spending habit. Be sure to use it for building your business credit and financing small projects only.
When trying to get fast cash for business, there is no such thing as a one-size-fits-all credit solution. Even with a nearly perfect credit score, you still need to take time to weigh your options. Obtain information about all types of business loans so you can make smart financial decisions.
