Pros and Cons of Fast Business Loans For Small Businesses

Maskot/ Getty Images; Illustration by Austin Courregé/Bankrate

Sometimes, all it takes is one unexpected hit to throw your business off track, like a broken freezer, a surprise tax bill or a late-paying client. According to the 2024 Small Business Credit Survey, 75 percent of small businesses cited rising costs of goods, services or wages as their top financial challenge, with many also struggling to cover operating expenses (56 percent) or manage uneven cash flows (51 percent).

When you need quick funding to address challenges, fast business loans may offer a solution. These loans can provide funds in as little as one to three days, and some lenders offer approval within minutes. Speedy funds can come at a price, so it’s a good idea to weigh the pros and cons of fast business loans first.

Pros

• Accessible to subprime borrowers
• Can cover emergency costs
• Fast application process
• Fast funding

Cons

• Can get expensive
• Liability
• Low borrowing limits
• Shorter repayment terms

Pros of fast business loans

Fast business loans offer several benefits to keep in mind.

Can cover emergency costs

When an emergency hits, it rarely comes when your business is financially prepared. Whether it’s storm damage, a critical equipment failure, a supply chain disruption or a sudden drop in revenue, unexpected costs can derail even the most well-run operation.

One of the biggest pros of fast business loans is speed, delivering working capital funds within one to three days, allowing you to cover urgent expenses like repairs, payroll and inventory to keep your business on track.

Accessible to subprime borrowers

Many online lenders offer fast bad credit business loans to borrowers with lower credit scores. On top of the potential to provide funds within several days, these types of business loans have lower eligibility requirements.

Those requirements typically include:

• A minimum time in business of six months to a year

• Annual revenue requirements from $50,000 to $150,000

• Personal credit score around 600 or higher.

Fast application process

Many fast business loans feature a streamlined application process to help you get funded quickly. Most applications can be completed online. You typically won’t need extensive documentation like you would with a traditional bank, although you’ll still need some. The application process varies by lender and loan type, but many online lender applications can be completed within minutes.

Traditional lenders often have more detailed applications, which can take an hour or longer to complete. If you’re looking for a simplified application process, consider nontraditional lenders.

Fast funding

Where you apply for a fast business loan impacts funding time. When you apply with a traditional bank or credit union, receiving a lending decision could take several days or weeks. If you’re approved, you’ll likely have to wait even longer to receive the loan proceeds.

A fast business loan with an online lender can approve your loan in minutes and provide funds within one to three business days. Many even advertise sending funds to your account within 24 hours.

Cons of fast business loans

Consider the cons of fast business loans before you apply.

Can get expensive

The cost of the fast business loan ultimately depends on the lender. With alternative lenders who offer fast business loans, the luxury of receiving fast funding for your business often means higher interest rates and fees. Some lenders also charge steep origination fees to take out a fast business loan.You could also be assessed a prepayment penalty if you pay the loan off early.

Select forms of high-risk business financing offer fast funds to most borrowers, but they can come with high fees and borrowing costs. For example, bad credit business loans may charge a factor rate like 1.1 or 1.5 rather than an interest rate. These rates often convert into high interest rates, such as 30 percent to 90 percent.

Low borrowing amounts

Some fast business loans offer smaller maximum loan amounts than traditional bank loans. Depending on the lender, you may find lines of credit that only go up to $250,000 or term loans of $500,000 or less. Unfortunately, this can be a problem if you need to make a sizable purchase or investment for your company to grow.

Short repayment terms

Some fast business loans need to be repaid quickly. Online lenders like Credibly specialize in providing fast and accessible loans to people with credit scores over 500. But the repayment terms can be short, often as little as three to 24 months. These terms are far shorter than bank loans, which can give you five years or longer to repay loans.

Lenders may require short terms to ensure that they get repaid quickly rather than extending the risk of lending to your business over a long term.

Bottom line

Fast business loans can work for your business if you’re in a financial bind or need working capital to take advantage of a limited-time investment opportunity.

There are pros and cons to fast business loans. Carefully weigh the costs since fast business loans often come with higher interest rates and fees and shorter repayment terms. If you decide a fast business loan is right, read the fine print and loan agreement carefully to understand what you’re committing to. Otherwise, other options are available to help you find the best small business loan for your business.

Frequently asked questions

• Are fast business loans a good idea?
  

  Fast business loans can be a good idea if you’re in a financial pinch and need the money to cover an unexpected expense or opportunity. But you may pay more in interest and fees in exchange for the convenience. If you can spare a week or two before receiving the funds, you could score a lower-cost business loan with a lender that takes more time to approve business loans, such as a bank or credit union.

   

• How long does it take to get an SBA loan?
  

  SBA loans are known for their slow processing times. Expect to wait 30 to 90 days to receive the loan proceeds. The timeline could be sooner if you apply through an SBA Preferred Lender or request an SBA Express loan.

   

• Where can I get a fast business loan?
  

  Many online lenders offer fast business loans that can approve you in minutes and may even provide same-day funding. You may also have luck with a bank or credit union, though they typically tend to have slower approval and funding times.