It’s long been a given that the faster your business needs a loan, the more you’ll pay in interest. And while that’s still largely true, it’s also starting to change. With the rise in popularity of online platform lenders, there’s now more competition to fund your loan than ever. Even if you need the money within the next seven days, you could get a lower APR than you might expect — potentially 19-21% as opposed to the 40% it might have cost you a couple of years ago.
My top pick OnDeck is one of those lenders and a good place to start for most businesses, though your specific interest rate will depend on your credit score and business history. That’s why it’s still worth quickly shopping around for any business loan, applying through multiple lenders to find your best rate — even if you need your loan fast. With each of my top picks, you’ll know if you’re approved within 24 to 48 hours, and should have the money in-hand within a week once you’re approved.
The Simple Dollar’s Top Picks for Best Fast Business Loans
For the purposes of this review, I’ll define a “fast business loan” as one where no more than seven days elapse between when you apply and when the funds are deposited in your bank account. Most borrowers would probably prefer 24-48 hours, but I don’t want to completely rule out loan options where a couple of extra days might get you a significantly better deal.
- Best for Most Businesses: OnDeck
- Best for Businesses Without Established Credit: Kabbage
- Best for Established Businesses: Fundation
How I Found the Best Fast Business Loans
I spent three days evaluating dozens of the most popular online lenders in the country to find the ones who could actually approve a loan and disburse the funds within our seven-day target criteria.
Why just online lenders? They’re generally significantly faster at approving loans and disbursing funds than a traditional lender (like a bank or a credit union), and are available nationwide. Your local bank will almost always be able to give you a lower APR if it approves you for a loan, but that approval probably won’t happen fast, if at all. In addition, alternative lenders are willing to make smaller loans than big banks would.
During my research, I considered the following criteria:
- Loan turnaround time. Banks, credit unions, and most other traditional lenders (a few are going online as I’ll discuss later) were quickly eliminated. Their loan-approval processes typically take several weeks or months — simply filling out the forms and gathering the required documents could easily exceed our 48-hour-to-7-day “fast” window.
- Fees, interest, and loan terms. Excessive or seemingly unnecessary fees, like an origination fee of 4% or more, also got the boot. A high interest rate alone wasn’t a disqualifying factor — unless the loan terms were so onerous (too high of payments over too short a term, for example) that the product had the feel of a consumer payday loan. One thing to look out for: Some term loans are repayable in weekly or even daily installments. The lender has access to your bank account to withdraw the payments. Typically, if you don’t have the funds available, you will be charged a fee, even if the lender makes the payment on your behalf and these fees can add up.
- Easy application process and transparency. Lenders got points for a simple application process and transparent websites. I appreciated sites like Velocifund’s that could calculate a potential loan based on non-identifying details. I would like to see more sites with clearer explanations of interest rates. Typically, I had to hunt around or contact the lenders to learn the actual interest rate I would be paying. But with the exception of a few like this one, downplaying high loan costs also seems to be an industry-wide practice. I also docked points for lenders who forced you to leave your contact information. While I understand why underwriters would like you to leave a phone number and email for the purposes of following up, it seemed to open me up to being hounded 24/7 by sales pitches.
- Soft credit checks. The best lenders will do a “soft pull” of your credit score, which doesn’t impact your credit rating. Unfortunately, some do “hard pull” credit checks, which can affect your score negatively. Many potential borrowers don’t find this out until the damage is done, so be sure to double-check with the lender before you submit your application. The ones that do “soft” inquiries tend to disclose this on their websites. Each of the top picks listed here do soft credit checks. You will be able to see these checks on your reports, but creditors won’t.
- Lender reputation. To measure lender reputation I looked at press reports, checked the Better Business Bureau for complaints, and read online reviews at sites like Trust Pilot and Best Company. If a company wasn’t rated by the BBB, I struck them from the list. Most lenders seem to have easily achieved an A or A+ rating after a few solid years in business — so the absence of a rating suggests, at best, an unwillingness to go the extra step.
- Customer service. I did my best to measure it throughout the process. But, I also pored over customer reviews and complaints, and it was easy enough to identify the ones who had little time for borrowers after the loan documents were signed.
OnDeck is an alternative lender that has provided $5 billion in loans to more than 50,000 businesses, many of which would never have been funded by a traditional bank. As with most alternative lenders, OnDeck does this by using an algorithm that considers a number of factors — bank records, credit card receipts, cash flow, as well as Yelp and other online reviews — to evaluate creditworthiness. Other companies use similar evaluation formulas, but for sheer volume of borrowers served and efficiency, none of them come close to OnDeck.
It requires companies to have been in business at least 1 year, have $100,000 in annual revenues and the owner to have a minimum credit score of 500. OnDeck loans tend to be the best fit for businesses that have a very specific plan for the money — if you need to make a large equipment purchase, for example, or expand your store. Both of these outlays can be expected to help produce more revenues for your business.
What I like: OnDeck offers both term loans (three to 12 months and 15 to 36 months), as well as a line of credit to borrowers with a minimum credit score of 500. The online application takes 10 minutes and funding can be in your account the same day if you’re approved. When I contacted a customer service representative to find out more information about loans and rates, they were both polite and knowledgeable.
What could be improved: OnDeck’s interest rates (approximately 30-50% for a term loan and 13.99%-39.99% for a line of credit) are high, even by alternative lending standards. The company’s website could be more transparent about spelling that out, too. Yes, many borrowers get approved who couldn’t elsewhere. But many end up struggling to make the frequent payments required by the terms — one reason OnDeck loans are better suited to businesses with daily cash sales versus an invoice-based operation. While the company’s customer service is good at the underwriting end, I saw several complaints to the BBB stating that the company is not as available to work with customers who run into trouble after they’ve received their funds.
Best for Businesses Without Established Credit
Kabbage offers lines of credit of up to $150,000 at rates similar to or slightly higher than OnDeck’s. However, payments are monthly, which can be less of a burden for companies with fluctuating cash flow (if you have a lot of invoices as opposed to cash sales, for example). Kabbage also has lower minimum revenue ($50,000) and your business does need to have been in operation for at least a year. While OnDeck’s larger loans are best for expansion, Kabbage’s product is better for meeting day-to-day expenses or working capital needs. Borrowers will also find they pay the bulk of the interest in the first two months, so you won’t save on interest if you pay your loan off early like a traditional bank loan. Kabbage doesn’t charge prepayment penalties, however, so where you can save is on loan fees if you pay your loan back early.
What I like: Like OnDeck, Kabbage’s application process, which uses a similar algorithm to evaluate borrowers, is a breeze. You can complete it online in minutes and get your funds as soon as the same day if you’re approved. You also only pay interest on the amount you actually draw down from the credit line.
What could be improved: Kabbage adjusts the amount of available credit based upon your revenues, which is a good way to prevent borrowers from overextending. But many companies complain that there is no notification, and they often go to use funds they think they have only to find their credit line reduced.
Another Good Option for Businesses Without Established Credit
Fundbox has no credit score, revenue, or “time in business” requirements. The only limitation is that you must have six months of online business transactions. Its loans are actually advances on your company’s accounts receivable (amounts outstanding from customers). So this would be a good option for businesses that have a lot of outstanding invoices, but uneven cash flow.
It works like this: After you set up an app to track your receivables, Fundbox will advance you the amounts you are owed on them (up to $30,000) as quickly as the next day. When your customers pay their accounts this money goes toward paying back Fundbox. In addition, you will pay fees that amount to 40% to 60% APR. So it’s not cheap, but it’s a decent option if money is tight and you have cash flow issues.
Best for Established Businesses
Fundation would have been my pick for best overall if more small businesses could meet its minimum requirements. Unfortunately, it favors companies with an established track record. In order to qualify for a loan, you have to have been in business at least two years, have at least $100,000 in annual sales, and have at least three full-time employees.
Founded in 2011 by former Wall Street investment bankers, Fundation offers the transparency and lower (read “fairer”) rates that I suspect are the future of online lending. The APRs on its term loans range between 7.99% to 29.99%. This is substantially less than popular lenders like Kabbage and OnDeck typically have to charge because they take on riskier borrowers.
In addition to your credit history, Fundation looks at a number of factors in determining these rates: how stable your business is, its revenues and profitability, prospects for future growth, cash flow, and debt.
Fundation offers two loans — a short-term working capital loan (up to $150,000 for one to two years) or an expansion loan (up to $500,000 for two to four years). What’s great for the borrower is that these are traditional installment loans, as opposed to the fee-based products, popularized by OnDeck and other alternative lenders. A typical loan from an online lender charges interest on the original loan amount each payment period, no matter how much of the balance has been paid. In essence, you’ll pay a fixed fee for the loan. The interest rate the lender lists in marketing materials is often much lower than the actual APR you’ll qualify for, so costs can appear lower than they actually are.
What I like: Fundation loans are more like traditional bank or mortgage loans. It only charges interest on the remaining principal. So as the loan amount goes down, so does what you pay. In other words, there’s an incentive to paying off the loan as quickly as possible. And unlike many alternative lenders, Fundation doesn’t penalize prepayments.
What could be improved: Fundation has only been accredited by the BBB since 2015, so there isn’t a lot of data for this lender. The application process is simple, but it will take a while to collect the required documents, so it’s not the 10-minute experience you’d get at some other platform lenders. At the same time, the approval process is speedy, and you’ll likely have your funds within 48 hours.
Do You Really Need a Fast Business Loan?
You need cash to keep your business running, and quick. You may have expected some payments to come in and when they didn’t, you were left scrambling. Or you have the opportunity to finally expand your store, but you have to act now or risk losing the lease. Chances are you’ve already exhausted business credit cards, emptied your retirement account, or borrowed from your family. But what you need to understand with fast business loans is that you’re generally not afforded the protections you would be at a bank, says Gerri Detwelier, who heads Market Education at NAV, a business financing platform.
Online lending is largely unregulated and while there are some protections for personal loans, the business side is still the Wild West. You may have signed a personal guarantee that could put your own assets in jeopardy. “My concern with fast loans is that people get in and don’t realize what they’re getting into,” Detwelier says. “Quick can be good if it translates into opportunity to make more money, but if it’s to meet current expenses, it can trap you in a cycle of debt.”
Quick can be good if it translates into opportunity to make more money, but if it’s to meet current expenses, it can trap you in a cycle of debt.
Her advice: Talk to your accountant, advisor, or a small-business development professional. Or use other calculators to help you double-check your loan terms to understand the true cost of the money you’re getting. If you have a free NAV account, you can use its MatchFactor service to see what type of loans you might qualify for and what would make the most sense for your business.
The Best Business Loan If You Can Wait a Month
SmartBiz is a technology platform that offers Small Business Administration (SBA) loans from $30,000 to $350,000 through one of its three traditional lending partners. SBA loans can be more difficult to get, but they’re great for small businesses since they’re government-backed and charge much lower interest rates. SmartBiz has streamlined the approval to make a notoriously complicated SBA loan process much simpler. As one reviewer noted, SmartBiz representatives are like “Sherpas who help you climb a mountain of paperwork.”
Although SmartBiz has gone from approval to funding in as little as seven days, the customer service representative I talked with insisted that this is the rare exception. The application process for SBA loans is notoriously complicated and requires multiple documents, so three to four weeks is a more realistic scenario, with some loans taking longer. That’s still fast, though, compared with the months it usually takes to apply for an SBA loan the old-fashioned way. For the service, SmartBiz charges a 4% loan fee, but this is similar to the fees you’ll encounter at most any platform lender.
The bonus: If you have good credit and solid business performance, you can still get a relatively fast loan at a fraction of the price.
Why promote a lender that takes a month in an article about fast business loans? Two reasons:
- We want to review the best deals. SmartBiz is online lending’s answer to getting a Small Business Administration loan, which typically has interest rates of 6% to 7%. It could be worth waiting for if you don’t need the money now. Granted, you’ll need good credit, and you’ll have a more complicated application, but in terms of value with a slightly longer lead time, SmartBiz is worth looking into.
- Sometimes a fast loan isn’t what you need. All you have to do is take a look at online reviews or complaints with the BBB to see how quickly someone who took out a loan got underwater, or found that repaying the loan in daily or weekly payments destroyed their company’s cash flow. Having to go through a longer approval process gives you time to double-check the wisdom of taking on debt, too.
Don’t Forget About Your Bank
As online lending has caught on, borrowers haven’t been the only ones paying attention. Traditional bankers may be slow to approve loans, but they’re quick to sense an opportunity to make money. As alternative lenders have streamlined the screening process using data from financial and other public records (Yelp reviews and social media posts included) to measure creditworthiness, bankers have taken note.
Some, like JPMorgan Chase, have sought to reclaim some of that business for themselves. In December, when Chase Bank was looking to develop an online small business loan, the bank partnered with none other than OnDeck to provide the technology platform. Chase began offering the service to existing business customers in April and expects to open up the Quick Capital service to the public by next year. The approval process takes a few minutes and funds can be deposited into customers’ accounts the same or very next business day, according to JPMorgan Chase spokeswoman Mary Jane Rogers. Expect interest rates to be competitive or less than those offered by alternative lenders.
Other banks are taking similar steps. In February, Life Oak Bankshares launched an online lending platform, which promises loan approvals within 48 hours. Rohit Arora, CEO of Biz2credit (an online financing platform that matches businesses with lenders), has seen more banks working on digitization and expediting loan requests — a trend he expects to pick up steam. While in the past it’s been too expensive for banks to issue small loans, technology is allowing them to do it in a cost-effective way.
“I think by next year there will be a lot of action in that direction,” he said. “You’ll also see more partnerships like OnDeck and Chase.”
On the plus side, more competition for alternative lenders is already pushing rates down. In the last two years, Arora notes, APRs for online loans have decreased on average to 40-44% from 60-65% two years ago.
If current trends continue, there are likely to be better rates and more options ahead for small-business borrowers through traditional lenders. So shop around, and don’t forget about inquiring with your bank, even if you need a loan relatively fast.
Don’t Get Scammed
I expected the big concern with fast business loans would be the unscrupulous scammers out there trying to defraud people. In fact, there has been a rise in advanced fee loan scams, where you’re asked to pay a fee to guarantee a loan that never materializes.
If someone calls you with that kind of a deal, please pass.
Where borrowers seem to run into more trouble with fast cash, however, is in not understanding what they’ve signed up for. Even lenders with tons of satisfied customers had more complaints from borrowers than I’d expected. The two biggest gripes? Those who felt they were tricked into accepting a loan with too high of an interest rate, and those who signed a contract to make payments they couldn’t afford.
Unfortunately, it usually turns out that all these terms were spelled out in the loan contract the borrower signed.
The Moral: Be sure you know what you signed up for.
Online lenders typically aren’t accommodating about rescheduling payments, changing terms, or refinancing existing loans.
Look out for frequent (often daily) payments required on short-term loans and even penalties for paying the loan off early — both tend to be standard in a business as lightly regulated as this one. While there is nothing wrong with these terms, they can make a loan more expensive to pay back.
Also, be sure you understand how much you’re paying in interest and fees. Detwelier says the biggest challenge in comparing different loan products is that there’s no standardization, and it’s “virtually impossible to compare apples to apples.” Try NAV, which provides a number of calculators to assist in this process.
Although you may pay a bit more for them, fast loans can be a great way to finance a growing business. As banks and others enter the industry, the market is growing and rates may start coming down, but for now, any of the lenders listed here should be able to get you the loan your business needs at a competitive rate — and fast.