Even the most prepared small business owner can get blindsided by a sudden financial emergency. Luckily, there are financing options that can help when you’re in need of immediate capital. By understanding what emergency cash loans are available, you can apply for the one that best fits your needs and quickly recover from any unpleasant cash flow surprises.
Here are a few of the best small business loans for an emergency. And valuable financial management strategies that can come through for you when you need them most:
Business Bridge Loans
Business bridge loans serve as a stopgap between today’s immediate needs and tomorrow’s incoming payments. Bridge loans are short-term funds that can help pay outstanding invoices or serve as additional working capital when you can’t afford to redirect other parts of your budget. Bridge loans help keep your daily business operations running in the event of an emergency. Unlike traditional long-term business loans, bridge loans are easy for small business owners to apply for, obtain, and pay off.
Business Tax Debt Loans
Tight financial circumstances developed during an emergency can affect a business’s ability to pay income tax. Making late or partial tax payments can lead to fines and have detrimental effects on your credit. This situation presents small business owners with a conundrum: pay their debt and avoid delinquency, or risk a federal tax lien applied by the IRS.
Short-term business tax debt loans can help you avoid high-interest rates charged by the IRS for missing a filing deadline. They can also help prevent more severe consequences if the debt goes unpaid for an extended time. These may include the pursuit of criminal prosecution, substantial fines, and the potential for a jail sentence. The future success of your business shouldn’t be put at risk because of tax issues. These harsh consequences are avoidable through business tax debt loan products.
Daily Payment Loans
Daily payment financing can be a helpful tool for business owners who need to quickly handle obstacles that come their way. Paying for a small business loan every 24 hours may seem unorthodox. However, there are many advantages to daily payment loans over weekly or monthly options. In addition to being short-term, daily payment loans are ACH-based, meaning they’re transferred from a small business’s bank account automatically. Automatic daily payments are a desirable alternative to making one large payment at the end of the month when other bills are flooding in.
Because of the added security that comes with daily payments, the approval rates tend to be higher and funds are deposited into your account quicker. Furthermore, daily payment loans enable new business owners to establish a credit track record. Which lenders can then draw from to determine creditworthiness.
Business owners who work in a seasonal industry, like the construction business, may find daily payment loans ideal. Knowing exactly how much they will owe each day makes it easier to plan for the future. Plus, given the 24-hour payment cycles, business owners can pay off their loan quickly and move onto the next project faster.
Windows of opportunity rapidly close in the aftermath of an emergency. Daily payment loans serve as ideal small business loans for an emergency that help business owners capitalize on opportunities when time is of the essence.
Merchant Cash Advances
A merchant cash advance loan can help when you need a sizable amount of money in a short period of time. A merchant cash advance is an agreement between your business and a lender to forfeit a percentage of your future revenue or sales in exchange for upfront capital. After an emergency, sales activity can suffer a setback. But a merchant cash advance loan allows business owners to get back on their feet so sales can resume. Merchant cash advances are ideal for business owners who operate in an industry that experiences seasonal lulls, as repayment is tied to annual income. In this scenario, business owners don’t have to worry about strict repayment deadlines. Businesses whose customers frequently pay with credit or debit, such as auto repair shops or healthcare businesses, may also benefit from these small business loans for an emergency. Instead of repaying the loan on a revenue basis, the lump sum loan is repaid based on a percentage of daily transactions.
How Insurance Can Help You
Insurance serves as a preventative measure that helps businesses avoid the need for a short-term loan in the event of an emergency. From hurricanes to major flooding, the forces of nature can be economically crippling for business owners. According to the Federal Emergency Management Agency and the Labor Department, 40 percent of small businesses that close for repairs after a natural disaster never reopen. One year removed from the natural disaster, the failure rate jumps to 65 percent.
Business interruption insurance, which is an add-on to a property insurance policy, protects the insured business for losses of income it sustains because of damage or destruction to their insured property. According to the Insurance Information Institute, business interruption insurance coverage usually goes into effect 48 hours after policyholders sign up.
You may also consider professional liability insurance or commercial property insurance to reduce risk. The former can provide compensation for mistakes or errors caused by an employee or experienced by a client or customer. Commercial property insurance covers business assets that aren’t protected by a standard general liability insurance policy.
Other Less-Timely Options
These are just a few of the small business loans for an emergency available when you have a cash flow crisis and need a fast infusion of working capital. There are several alternative options, like peer funding, selling what equity you’ve built, or applying for an emergency loan with the Small Business Administration (SBA).
But tread carefully: The SBA and traditional bank loan processes are not built for quick turnarounds. You need a loan that can meet your emergency financing needs – now. These loans have strict requirements, lengthy approval times, and could take weeks for you to receive funds. In an emergency – when money is short and time is even shorter – every second matters.