EMERGENCY BUSINESS LOANS
There could have been a situation in your business when you have no money in your bank account, right? You might be worried about getting in the eyes of the International Debt Collection Agency. You might be on the verge of bankruptcy, but you do not know how to get out of it? But why does this thing happen to a business?
The reasons that businesses do not have money for operations can be many. Some of the reasons may be like they gave long credit terms which made them sell more, thus reducing the profits. The business did not calculate the cost of operations hence did not earn money to cover the cost. Or the competitors went for a deep pocket competition, which resulted in huge price cuts and left you with no money in the bank. These reasons can cause money issues for a business.
But wait this article is not about telling the reasons for a business going bankrupt. You can also need money in an emergency to acquire an opportunity that can benefit your business. You could need to buy equipment that can make your business grow twice in speed as compared to your current situation. You can make an urgent payment which your supplier requested because they are in trouble at the moment. But the bottom line is, when you are in the business, you will face situations like this where you will need cash in an emergency just to let those clouds go away. So is there any solution like a same day instant cash loans available for this kind of situation in the financial industry?
There is a product offered by the financial industry called Emergency Business Funding. This can help you as a business owner to get out of the problem of emergency cash requirements. But what is it? And how you can get emergency business funding? Let us discuss this in detail.
EMERGENCY BUSINESS FUNDING/LOAN
Emergency funding or loan is a product offered by the financial industry, which allows business owners to cover the unexpected cost that occurred during their operations. The best part of these loans is that you can get access to cash with 24 hours’ window. The most common running emergency loan in the market is a short term loan, and the repayment time does not exceed 18 months. So keep this thing in mind before applying.
But you need emergency funding for your business that is established. So how you can get this funding? Let us see this now in detail so that next time if you need funding in an emergency, you do not have to run here and there.
WAYS TO GET EMERGENCY BUSINESS FUNDING
The following are some of the ways by which you can get instant access to cash and solve your short term business problem. So just have a look but remember everything has some cost involved. Hence make your decision wisely.
Method # 1: Apply for a short term loan
The first and the most common way to get emergency funding for a business is short-term business loans. These are the type of loans where you can get access to cash in 24 hours, and you have to pay the money back within a year or not more than 18 months mostly. The lender does not ask for many regulatory papers in this case which makes the loan process quick and fast. But the lender does look at your credit score. But what is the catch? The catch is simple. Most of the times, you have to pay a fixed fee over the borrowed amount. If you want $10,000/-, your lender will say that you will have to pay 20% fees over the borrowed money when you are paying the loan back. This means that $10,000 + $2,000 = $12,000/-. So, on the one hand, you will get $10,000 within 24 hours, but you have to pay $12,000 at the end of the loan term.
Method # 2: Merchant Cash Advance
If you are getting short of cash, you can take an advance for your sales. Confusing? We were talking about loans and suddenly advanced. Well, the MCA and short-term business loans are almost the same as they possess similar characteristics. You predict your sales and take the money based on those sales for a lender. He will give you the money with not more than a 72-hour window. However, he will be collecting your receivables from the day you got the loan until you get his whole money plus the fees back. The fees are the same as of short-term loan but with the difference that the payback time is not fixed. If your sales are good, you can pay him back quickly. However, if your sales are slow, it will take time. But remember, this is one of the most expensive ways of raising an emergency loan, so think before applying.
Method # 3: Invoice Factoring
If you are short of cash, this means that you might have sold on huge credit terms. So now what? You need to get the money for smooth operations, but all you have are those unpaid invoices. You can sell them to a lender who will give you the invoice face value. Yes! This is also one of the quick ways of raising emergency business funding. All you have to do is give the invoices to a lender upon which he will pay you 80% of the invoice face value right away. However, he will give you the remaining 20% of the invoice when he gets the invoice cashed from your customers and have collected some fees over it. So, in this way, a company can run business operations smoothly.
Method # 4: Set a line of credit
The most proactive and cheaper way of getting emergency funding for a business is setting up a line of credit. What is a line of credit? A line of credit is made among a business and a bank. Here a bank allocates a certain amount of money for the business and allows the business to use that money although they might not have any cash in their account. A borrower is charged interest just upon the money they have withdrawn. Here some are revolving, and some are static. Revolving means that when you pay off the borrowed money, you can again use it. However, in static, you cannot. Plus, some lenders might charge withdraw fees too, so you have to keep your eyes open before signing the papers of terms and conditions.
WHAT IS THE CATCH OF THIS WHOLE ARTICLE?
A business cannot sustain if it does not have any money to work with. This situation could arise due to any factor. Either the business had some internal issues, or they got a strike from an unpredicted external issue. No matter what, if a company does not have money in the bank, they cannot run and be part of the game.
So what a business owner can do to raise some emergency funding for his company? Well, he can go for many options like short-term business loans where he can get the money within 24 hours’ window. But have to pay the money back within a set agreed period. Then you have an option for getting the advance before making sales called Merchant Cash Advance (MCA). MCA and short-term loans are similar as they both operate on a fixed fee which you have a payback. Then you have invoice factoring which allows you to get your invoice cashed up to 80% instantly. And finally, business line credit which is the proactive method. Here you have a set amount locked by the bank for you so that you can use it and pay interest just on the used amount.
But remember no matter what method you choose, analyze your need and the term and conditions offered to you by the lender because you do not want to end up paying higher as compared to someone paying lower for the same problem. Getting a loan is not child’s play. So borrow wisely.