Emergency business loan

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. Organizations 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 organizations. 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.

SBA disaster loans

Disaster loans are offered by the US Small Business Administration (SBA). Designed to help businesses, nonprofits and individuals gain emergency funding after a natural disaster or other emergency occurs, SBA disaster loans can bridge the gap between emergency needs and payments from other sources like FEMA or your business insurance. 

Use an SBA disaster loan to pay for repairs to your business premises, to replace damaged equipment, cover critical operating costs, upgrade your buildings to avoid future disasters, even cover the costs resulting from an employee being called away to active military duty. This type of financing can also be used to cover general operating expenses that otherwise would have been met, had the disaster not occurred.

The main types of SBA disaster loan:

• Physical damage loans – use a physical damage disaster loan to repair or replace physical business assets damaged by a disaster. Such assets can include land, buildings, equipment, vehicles, inventory and more. Borrow up to $2million over up to 30 years. Collateral is required for loans over $25,000.
• Economic Injury Disaster Loans (EIDL) – use an EIDL to cover essential operating costs until normal operations are resumed after a disaster. For example, an EIDL can be used to pay rent, utilities or to make required payments on pre-existing loans. Borrow up to $2million over up to 30 years. Collateral is required for loans over $25,000.
• Military reservist loans – designed to help businesses recover from financial hardships when their key employees are called away to active duty. Borrow up to $2million over up to 30 years. Collateral is required for loans over $50,000.