Emergency business loan

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Page written by Chris Godfrey. Last reviewed on October 22, 2024. Next review due January 1, 2025.

What do you do when you need money in a hurry and don’t have time to wait for standard business financing? Emergency business loans may be your answer. Often available within days or hours, this type of business loan can plug the financial gap when disaster strikes, or sudden costs put your business on the spot.

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What is an emergency business loan?

An emergency business loan (also known as a ‘fast business loan’) can provide immediate funding when your business hits a bump in the road. Use the money to pay for unexpected costs, a sudden shortfall in cash flow, larger-than-anticipated tax bills, recovery from a disaster, or for almost any other type of economic need.

Emergency business loans are typically available from online lenders as they can usually provide the fastest access to capital.

When should I get an emergency business loan?

Because they’re provided at short notice, emergency business loans typically cost more than other types of commercial financing. This means you should only seek an emergency loan when it’s a real emergency. If you can afford to wait, you may pay less in interest and fees and have more loans to choose from.

Consider an emergency business loan when:

You need to pay for unplanned repairs or maintenance.
You have to cover the cost of replacing equipment outside of your normal business cycle.
You’ve suffered loss in a disaster, such as a warehouse fire or flood.
A financial issue, such as an insolvent customer, creates problems with your cash flow.
You can take advantage of a sudden business opportunity but lack the cash to do so.

Types of emergency business loans

There are many types of emergency business loan. Some will fund faster than others and the maximum sum you may borrow will vary according to the type of loan you choose. Note that emergency loans where you can provide collateral usually come with the lowest interest rates and fees.

Here’s a rundown of the most popular types of emergency financing:

Business term loans

A term loan is the most common type of emergency business loan. You receive a single, lump-sum cash injection and then pay it back in regular instalments over a fixed period of up to 25 years. Collateral may be required.

Business line of credit

This business loan functions like a high-value credit card but comes with lower interest rates and fees. Organisations can withdraw as much as they want when they want from a loan facility up to the limit of their borrowing. The best thing about a line of credit is that you only pay interest on the sum you withdraw, not the whole line. This can significantly reduce your borrowing costs. Collateral may be required.

Invoice financing

Also known as account receivables financing, this type of loan allows you to borrow against the value of your unpaid invoices and is best for B2B organisations. Stop waiting 30, 60, 90 days to get paid. The lender will usually provide up to 95% of the invoice value within a few days or even hours of the bill being raised. Your invoices act as security for the loan, no added collateral is required.

Merchant cash advances, or MCAs

Available for businesses that accept customer payments by credit and debit card. You borrow against the value of your card sales. As your card sales increase, your borrowing limit goes up. Pay the loan back with a fixed percentage of your card sales on a daily, weekly or monthly basis. Your sales act as security for the loan, no added collateral is required.

Can I get an emergency business loan with bad credit?

Probably. Even if you have bad credit or have been turned down elsewhere it may be possible to get the emergency business loan you need. Loans that collateralise the items they finance, such as invoice financing and merchant cash advances, can often be obtained with scores as low as 500 and with no need for added collateral. Additionally, some online lenders specialise in emergency business loans for borrowers with less than stellar credit.

How to apply for an emergency business loan

Applying for an emergency business loan is similar to applying for most other types of business funding. However, because this is an emergency and you need the money quickly, you should be even more diligent with your application. Follow these steps to improve your chances of speedy loan approval:

1. Evaluate your financing needs

Why do you need the money? How much do you need to borrow to meet your emergency needs? You don’t want to borrow less than you require as that won’t solve your financial problem. You also don’t want to borrow more than you need because that will be more expensive. Keep in mind that your cash flow should be able to support the repayments and lenders will look at that. Feasibility is key. Your application must support your need, indicating how the loan will deliver your plan – and critically, how you will pay the loan back.

2. Check your qualifications

Make sure you have all your ducks in a row before you apply:

Check your personal and business credit scores. It is common for mistakes to occur on credit reports and incorrect information could have an adverse impact on your loan application. Even though you are applying for a business loan, lenders will usually scrutinise both your personal and business credit reports. Ensure they are correct. If there are information errors, get them fixed before applying for your loan.
Get your paperwork in order. Lenders may need to see bank statements, balance sheet, profit and loss statements, cashflow projections, list of debts, list of assets, customer database, documents that reveal the structure of your business (corporation, LLC, etc.), certificates of good standing, tax returns and more.
Prepare a good business plan and pitch. This goes back to your need for the loan. Depending on how much you are asking for, lenders will expect a detailed and insightful business plan that explains why you need the funds and what they will do for your business once you have them. Business plans should do more than paint a rosy picture – explain the risks involved, what the downsides could be – and how you intend to overcome them. If you cannot produce a business plan yourself, it may be worth paying an external service to do this for you.

3. Research and compare lenders

Interest rates and terms and conditions for emergency business loans can vary significantly, so it makes sense to shop around before settling on a lender. You can do this by approaching banks, credit unions and online lenders one by one, or you can use the services of a loan marketplace that will immediately introduce you to a choice of business loans from different lenders. Some marketplace platforms can also give you advice and help you with the application process. This can be especially useful for borrowers who have never taken out an emergency business loan before.

4. Complete and submit your application

The application process with online lenders is usually fast and simple, often requiring nothing more than the completion of a single form and providing necessary paperwork. Depending on the type of loan you apply for, an approval decision may take anywhere from a few days to just a few minutes.

What are the alternatives to an emergency business loan?

Emergency business loans may not work for everyone, but there may be other ways to get the funds you need:

Business credit cards

If you have good credit, it may be possible to secure a business credit card with a high limit to quickly fund your organisation. Business credit cards are also great for building a good credit history if you pay off the balance every month. You may even get free travel and shopping rewards with the points you accrue. Collateral may be required.

Personal loan

Personal loans work like business term loans, providing a lump sum of cash that you pay back over time. Note that personal loans usually have lower borrowing limits and higher interest rates and fees than business financing. Collateral may be required.

Get started with Swoop

No matter if you’re seeking your first emergency business loan or you’re a seasoned borrower, working with business finance experts can make all the difference when applying for funding. Contact Swoop to discuss your borrowing needs, get help with your application and to compare high-quality business loans from a choice of lenders. Find the funds your organisation needs without wasting time. Register with Swoop today.

Written by

Chris Godfrey

Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.

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