How to get emergency business loan

Running a small business is rarely a smooth road – that’s why emergency business funding can be a life saver.
In this article, we explore the types of emergency business loan available, how to choose the best emergency financing options and the steps you need to qualify.

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SMEs are uniquely vulnerable to fluctuations in the wider economy, while issues such as late payments, unexpected expenses and utility price changes can cause cash flow shortfalls. With recent research suggesting that 36% of SMEs are facing cash flow issues, access to the right emergency financing options can make the difference between survival and bankruptcy.

What is emergency business funding?

Emergency business funding, be it a loan, an overdraft or another form of financing, is cash you can access quickly when you need it. With alternative lenders such as iwoca, it’s now possible to get an emergency business loan into your bank account within 24 hours, provided you can meet the lending conditions.

What are the types of emergency business funding?

Emergency business funding refers broadly to any financial product that used to cover an urgent expense. For that reason, they tend to have certain necessary components in common – they’re fast to procure, they can be used for multiple purposes and they’re designed for a short-period. 

Different options will suit different scenarios, depending on the amount of capital required, the time frame and your repayment period.

Emergency business loans

Similarly to normal business loans, short term loans are set sums of cash to be repaid with interest over a set period, normally by regular monthly payments. 

  • Can be secure or unsecured – but the key detail for emergency business funding is that they tend to be faster to process. 
  • This means less documentation and collateral and faster money in your account – however this can also mean you face a higher interest rate.

Alternative lenders such as iwoca can even automate the majority of the process, connecting directly to your online bank account to give you a decision within a day. 

Invoice finance

In instances where you’re running low on cash due to unpaid client invoices, invoice finance can help you turn those outstanding debts into ready funds. Invoice financing works by selling your unpaid invoices to a finance company, who will then pay you around 85% of the value upfront. Once those invoices are paid by your customers, you receive the remaining balance, minus the factor's fees and interest.

Business overdrafts

Provided by your bank account, a business overdraft  operates like a short term loan, up to an agreed amount, when your account is no longer in credit. Overdrafts are often a default method of emergency business funding when your cash outflows exceed your cash reserves and your account is overdrawn. 

However, there’s a difference between an arranged overdraft, where you have an agreed upon credit facility, and an unarranged overdraft – where you run out of money without warning your bank. The latter can bring extra fees and higher interest rates, so it’s always better to plan for the possibility before you need to use it.

Bridging loans

A bridging loan is a short-term finance option to provide a sum of money for a short period, up to a year usually, to support a business while it waits for other funding. These are often used to fund particular purchases such as property. 

Bridging loans can either be open - with no fixed repayment date - or closed, where there’s a clear deadline. Given their short term nature, these usually come with higher interest rates and less flexibility than other forms of emergency business loan.

Merchant cash advances

A merchant cash advance is a form of unsecured borrowing where the principal is repaid as a percentage of the merchant’s future revenue, with interest. This usually means paying an agreed percentage of future invoices on a monthly basis until the debt is settled – these are often useful for online businesses or those with seasonal variation. 

The advantage is that you don’t need to worry about fixed repayments, but the longer you take to repay the loan, the more interest will accrue.

We keep our prices simple

We’ll only charge interest on your outstanding balance for the days you’re using your business loan – no early repayment fees, no long-term commitments. Our business loan rates start at 2% a month for a Flexi-Loan, depending on your business.

6 monthly repayments of £1,120

Total repayment of £31,685(3.33% interest rate per 30 days)

Borrow up to £500,000
For up to 24 months

This loan calculator is only an example, your actual rate for your business loan will vary based on your circumstances. Here’s another example: if you borrowed £10,000 for 12 months at 49% representative APR, with an interest rate of 40% p.a. (variable), then, all in all, the total amount you’d repay would be £12,294.

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When do I need emergency business financing?

One of the first things to remember about emergency business funding is that it’s a normal part of running a company. That’s why these products exist – people use emergency loans for a range of scenarios including:

  • Covering unexpected expenses
  • Period where fixed outgoings, such as payroll, fall short of revenue
  • Investing in machinery or equipment when it breaks
  • Paying suppliers 
  • Maintaining operational expenses

To be approved for this type of finance, you need to meet certain conditions designed to help lenders determine whether you can stick to the agreed repayment schedule. 

For example, you may need to have been trading for at least three months – often longer – and to have a monthly turnover of a certain amount, say £5,000.

Some lenders also require a company director to provide a personal guarantee that they will personally cover the repayments should the business be unable to do so. The ability to offer a guarantee of this kind will depend on your personal financial situation and credit score.

How to choose the best emergency business funding

With a range of options available, choosing the right emergency financing option will depend on your individual circumstances. For example, if you have a lot of unpaid client bills, invoice financing can be a great option, but for larger investments a short term  loan might be preferable. 

Key factors to consider include:

  • Loan Amount: How much do you need to cover the immediate crisis? Some lenders may only lend so much for an unsecured loan, for example.
  • Speed of Funding: How quickly do you need the funds in your account? Generally, the larger the amount, the longer the process.
  • Repayment Terms: What repayment schedule works best for your cash flow? Do you want fixed repayments or a revenue-based solution?
  • Interest Rates and Fees: What are the total costs associated with the funding? While overdrafts can be the simplest route, they can also bring high rates.

Alternative lenders now offer fast, data-driven underwriting to get cash into your account faster, with iwoca able to make decisions on small business loans from £1,000 to £500,000 in less than a day, with repayments periods of up to 24 months.

How to Qualify for Emergency Business Funding 

With iwoca, we consider a wide range of businesses ranging from new startups to established companies. Key factors include:

  • You must have a UK-based business 
  • Operate as a limited company or a limited liability partnership
  • Startup businesses with no trading history are limited to a maximum credit limit of £10,000.

When you apply, we’ll review your business data and give you an offer and rate tailored to your unique circumstances, with no obligation to accept.

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How to apply for iwoca's emergency business funding

  1. Apply in minutes

    Our short term business loan is designed with small businesses in mind, so we'll just need the basics about your business to make a decision.

  2. Use your funds

    We'll approve you based on your business performance. Typically, the funds can be in your account in hours, just transfer as much as you need to your bank account.

  3. Repay or top up

    We don't charge early repayment fees: we only charge interest for the days you have the money (only when the agreed repayment period is less than 24 months). If you need more funds, applying for a top up is easy.

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Emergency Funding FAQs

What documents do I need for emergency business finance?

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When applying, the documents we need vary with the amount of funds you need and your business. You'll be able to provide this information through your online application and your dedicated Account Manager will be on hand to assist. We might ask you for:

  • Bank statements
  • VAT returns
  • Company accounts

Can you get an emergency business loan straight away?

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Our short term business loans generally offer a fast, streamlined application processes designed to release funds within 24 to 48 hours.

What are the interest rates for emergency financing?

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Rates will vary from provider to provider, but iwoca’s Flexi-Loan has a representative APR of 49%, which equates to a monthly interest rate of 3.33%. If you borrowed £10,000 at that rate, you’d make 12 monthly repayments of £1,025, or could repay early to save on interest.

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The iwoca story

Over the past eleven years iwoca has grown from an ambitious fintech start-up to one of the fastest-growing and biggest business lenders in Europe. Now we're a team of around 400 in London, Leeds and Frankfurt working towards the goal of funding one million small businesses.

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Questions? We're here to help

Call us at 020 3397 3375 from Monday to Friday (9am - 6pm). We can take your business loan application over the phone, or answer your questions about applying online.

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