How to get emergency business loan

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.

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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.