Government emergency business loans
The federal government offers emergency business loans to small business owners who have been affected by disasters, including the pandemic:
Advantages of online loans
Online lenders can be a great option for an emergency business loan. They offer the speed and convenience that the big banks and credit unions often don’t.
Other factors to compare include origination fees, annual percentage rates (the interest rate plus any fees associated with the loan), and the loan repayment term.
Types of emergency business loans
Here are the main types of emergency business loans and how to choose the one that’s right for you.
Term loans: A term loan provides a lump sum of cash, repayable weekly or monthly with interest over a predetermined period. This is an option when you need to fund a large one-time emergency expense, like replacing a broken piece of equipment or broken pipes.
Business lines of credit: This type of financing provides 24/7 access to capital, so it may be a good idea to cover costs in a crisis. You get a borrowing limit (up to $ 250,000) that you can continue to reuse and pay off, as long as you make timely payments and don’t go over your credit limit.
Invoice factoring: If you have customers who owe you money but have not yet paid, these unpaid invoices can be sold to a factoring company for a fee. However, this type of financing can be expensive, and the factoring company can deal directly with your customers to collect unpaid invoices.
Avoid predatory loans
Small businesses can be the target of abusive lending practices, such as not listing fees and interest rates as annual percentage rates, imposing prepayment penalties, and offering loans with payment terms that are not fixed.
MCAs typically carry three-digit APRs. High costs and frequent payments can strain your cash flow and lead to a debt trap, where you have to withdraw more money just to stay afloat.