Instant Business Loans
In today's fast-paced business world, entrepreneurs may find themselves in need of immediate financial solutions to tackle obstacles.
Whether it's capitalising on a promising new opportunity, taking care of unexpected expenses, or fuelling growth in your marketing department, companies’ demand for quick access to cash is greater than ever.
Perhaps this is why instant business loans are growing in popularity.
They can offer you an innovative and efficient way of securing quick financial assistance when you most need it.
In this article, we’ll dive head-first into the world of instant business loans, exploring the various types which are on the market, the advantages they offer, and the key considerations entrepreneurs should keep in mind when on the hunt for this form of financing.
So, whether you’re an experienced entrepreneur or a burgeoning start-up owner, this guide aims to arm you with the knowledge and insights to make informed decisions when obtaining instant loans for your business!
What are instant business loans?
Gone are the days of lengthy application processes, piles of paperwork, and prolonged periods of waiting for business loan approval. Thank goodness!
With the arrival of new technology and the rise in availability of online lending platforms, entrepreneurs can now tap into a huge variety of instant business loan options which can offer your company convenience and speed.
These loans are specifically designed to cater to any urgent financial needs of your business, enabling you to seize opportunities and proliferate growth without any sense of delay.
These loans typically offer customers streamlined application processes. Think minimal documentation requirements, and faster approval times. Sounds good, right?
In this loan space, many lenders on the market make use of automated systems to analyse the creditworthiness of you as an applicant.
Overall, this enables quick decision-making and loan disbursement on the part of the lender.
How much can I borrow with an instant business loan?
Generally speaking, you can borrow up to £500k with an instant business loan.
But as is the case with most loans, the amount of funding which you’ll be able to get through an instant business loan can vary depending on which lender you go for, as well as your financial history and your general affordability.
Instant business loans can be highly flexible, and the specific form of funding you’ll be offered can be tailored to your needs.
Therefore, you might be offered an instalment loan which needs repaying in monthly increments, a line of credit which renews each time you pay the funds back to the lender, or even as a cash advance against any future revenue you generate.
What are instant loans used for?
In business, you’ll often come across many different costs throughout your time trading.
Some you may have expected, and others arrive out of nowhere.
Seizing business opportunities
Instant business loans allow entrepreneurs to make fast work of capitalising on time-sensitive opportunities.
You may be offered a great price for purchasing inventory, expanding your product range, or acquiring equipment.
A loan can help you take advantage of a one-time deal.
Managing cash flow
Naturally, businesses often experience fluctuations in cash flow.
One month, sales are through the roof, and the next, they’re barely picking up. This is a normal, albeit frustrating thing for firms to face but can lead to temporary gaps in your funds.
Instant business loans can work to bridge these gaps for you, ensuring consistently smooth operations and covering immediate expenses such as payroll, rent, or software subscriptions.
Covering unexpected expenses
Unforeseen circumstances or emergencies can arise in business, as in life.
Often, these emergencies are time-sensitive, requiring immediate financial attention.
Instant business loans can provide your company with a solution to address these unanticipated costs.
These can range from things like equipment repairs, to property damage, or unforeseen payroll needs.
Fuelling growth and expansion
Entrepreneurs who are looking to scale their businesses or enter new markets, look no further!
An instant business loan may be the answer to acquiring additional capital to get started. They can offer a quick infusion of funds to facilitate any growth initiatives you can dream up.
While instant business loans offer you the speed and convenience necessary in the business world, it's important to carefully evaluate your financial situation, the relevant interest rates, the length of repayment terms, and any associated fees before choosing this route of financing.
Am I eligible for a business loan if I've just started trading?
If your business venture is brand new, you can still be eligible for a business loan.
Many lenders take stock of the unique needs and challenges that face startups up and down the country.
Therefore, they offer financing options which can be specifically tailored for businesses in their embryonic stages.
While the specific requirements for getting approved for this type of loan may vary among lenders out there, there are a few factors to consider when determining your eligibility for the instant business loan you’re after.
One important factor in this equation is your personal credit history.
As a new trader on the block, lenders may evaluate your personal credit score to assess your business’ creditworthiness.
A great personal credit score can substantially increase your chances of qualifying for an instant business loan.
This is because lenders view a strong personal history of good credit use as an indicator of responsible financial management in your firm. Makes sense, right?
Business plan and financial projections
As well as your personal credit history, lenders might also take into account your business plan and any financial projections you can produce when you apply.
Having a well-structured and all-encompassing business plan can demonstrate the great understanding you have of your industry, the target market you’re hoping to reign in, and the overall growth potential.
It can outline your business objectives, any marketing strategies you’ve got in mind, and those all-important financial forecasts.
This information all works to aid lenders in assessing the viability and potential success which your business can generate. This can positively impact your eligibility for a loan as you’ll be a safe bet for the risk-adverse lender you’re working with.
Unfortunately, some lenders require a minimum trading period before considering your loan application. However, there are, of course, many others who are willing to be more flexible and provide financing to newly established ventures.
These lenders may focus on other factors at hand such as your industry experience, the potential market demand for your products or services, and the overall strength of your business in its conceptual stage.
Ultimately, whilst being a new trader does pose some unique challenges, with careful preparation, a bulletproof business plan, and a strong personal credit record, you can boost your chances of getting a business loan to support your firm’s exciting journey.
How do my personal finances impact my ability to get an instant business loan?
As we said earlier, many lenders consider your personal creditworthiness as a factor when evaluating loan applications, even if they’re in business.
For smaller ventures and startups where the personal and business finances may be somewhat intertwined, this is especially true.
Credit score
Lenders regularly review would-be borrowers personal credit score as an indicator of your financial responsibility and ability to repay debts, even if they’re related to your business.
As a rule of thumb, a loftier credit score indicates a strong history of credit use, which can improve your chances of securing that vital loan approval and potentially set you up to receive more favourable loan terms, like lower interest rates or higher loan amounts at your fingertips.
On the other hand, a credit score which is on the lower side may make it more challenging for you and your business to secure a loan, or indeed result in less favourable loan terms being offered to you.
Personal income and debt-to-income ratio
As well as your credit score, lenders might also look at your personal income and debt-to-income ratio when evaluating your business loan application.
As they are taking on risk by lending to you, they want to ensure that you have sufficient income to cover your personal financial obligations along with the additional loan repayment you’ll take on for your business.
A healthy debt-to-income ratio proves your ability to manage your personal finances responsibly, ultimately elevating your chances of loan approval.
Personal guarantees
In some cases, lenders might ask you for a personal guarantee when they’re determining your eligibility to take out an instant business loan, particularly if your company has a limited operating history, or lacks access to any substantial collateral to secure your loan.
Essentially, this means you’d be personally liable for making any necessary repayments on the loan if your business is unable to do so, for whatever reason.
In these situations, the health of your personal credit becomes even more essential to maintain. This is because lenders will use it to evaluate the risk which is attached to providing your business with a much-needed loan.
While the state of your personal finances and credit score are taken into consideration by lenders, it's important to bear in mind that lenders are also able to look into other factors when they are trying to figure out your loan eligibility.
These can include things like the overall financial health of your business at present, its overall revenue as well as its cash flow projections, the wider performance of the industry you’re in, and the purpose of the loan you’re trying to get over the line.
If you’ve got a limited or less-than-ideal personal credit history, you might still have a few options for obtaining the instant business loan you’re after.
In fact, some lenders even specialise in working with businesses that have lower credit scores or limited credit history. These niche lenders may well have alternative loan products at hand or more flexible eligibility requirements which they can put at your disposal.
What are the disadvantages of instant business loans?
With any financing product, there will be drawbacks.
While instant business loans can offer you quick access to funds and all the convenience you could possibly want, there are also certain disadvantages associated with these loans which it’s wise to be aware of.
It's sensible to consider these potential drawbacks before you decide to seriously pursue an instant business loan.
Higher interest rates
Ah, interest… With loans, you rarely escape paying it. Moreover, instant business loans often come with higher interest rates when they’re compared to traditional business loans.
Broadly, this is because lenders need to compensate for the speed and convenience they provide through this type of financing. There’s a lot of fancy technology involved in speeding up the process, and some costs do need to be passed onto the customer.
Before signing up for a shiny new loan, it's important to carefully look at the interest rate you’re likely to be charged.
This will help you to calculate the overall cost of the loan you’re about to take the plunge on, and ensure it closely aligns with your business's financial capacity, as well as the expected return on your investment.
Ultimately, it’s up to you to decide whether the benefits outweigh the disadvantages.
Shorter repayment periods
Any instant business loan you take out will typically have a shorter repayment period than its traditional counterpart.
This can be advantageous for businesses looking to repay the loan quickly.
However, it can also lead to vastly higher monthly payments.
This can potentially strain your company’s cash flow. Therefore, to stay on top of all your finances, it's crucial to ensure that your business is comfortably able to meet the repayment obligations which you’re bound to within the timeframe specified by the lender.
Limited loan amounts
Depending on the lender you go for and your business's financial state, the maximum loan amount available through an instant business loan might be lower than the amount you’d be eligible for with other types of business financing.
If you require a large infusion of cash to overcome your financial obstacles, an instant business loan might not be able to equip you with the necessary financial resources.
Potential predatory lending
As with any type of loan on the market, it's important to be cautious of predatory lending practices out there, especially with a general rise in loan applications in the UK, and further afield.
The Bank of England recorded that loans to businesses have increased year on year, with lending to larger businesses up 9.3% at one point in 2023. Meanwhile, CNN reported that interest rates on personal payday loans had shot up 664% in Texas alone last year.
It’s safe to say that businesses, as well as individuals, are taking on more debt as the cost-of-living crisis develops in the West.
Some lenders who have instant business loans on offer may take advantage of the urgency surrounding the situation and the perceived financial vulnerabilities of businesses seeking this form of financing.
Unfortunately, this can result in unfavourable loan terms being offered, hidden fees being charged disingenuously, or aggressive collection practices if you fall even slightly behind on your repayments.
To avoid falling into the trap of predatory lenders, be sure to carefully review the terms and conditions associated with any business loan you obtain, and only work with reputable firms. You can identify them by searching for positive google reviews, asking your friends and family for recommendations, or by visiting Trust Pilot.