The Best Ways to Finance Cash Flow Emergencies

As a small business owner, staying cash-flow positive can be a constant challenge. Despite an entrepreneur’s best-laid plans, many businesses are one equipment malfunction or slow-paying client away from a code red on the cash front.

Fortunately, today’s online lending marketplace has streamlined the application processes for many types of loans, making it easier to get money more quickly and efficiently than ever before. So if you face a moment in which you need to move fast to finance a cash flow emergency, check out these options.

Credit cards are one of the most simple and flexible financing tools around. In some cases, you can be approved within minutes and receive bonuses such as a stash of miles for purchases that meet certain thresholds. To select the right credit card for your needs, be sure to compare the APR, annual fee, and transfer or other penalty fees, as well as other criteria in the fine print.

If you are securing a card that offers a rewards program, make sure to choose rewards you will actually use. Read the full contract so that you know what terms you are getting into, and make sure you have a plan to pay off the card as soon as possible.

Short-term loans let you borrow funds ranging from $2,500 up to $250,000 in as little as two days. Similar to a traditional loan, taking out a short-term loan is straightforward—you receive an agreed amount of money upfront, and you sign a contract including a set of terms to pay it back. These terms include fees and interest, which you’ll pay off on an agreed schedule within a defined period.

Typically, your repayment period is a short one, and you will be on the hook to make payments in daily or weekly increments, as agreed in the details of your loan terms.

A line of credit is a good option for many small business owners because it gives you access to working capital when you need it, but you only pay interest on what you actually use. You can use it on a wide range of needs, including working capital, having an emergency or opportunity fund, or buying inventory or equipment.

Interest rates on a line of credit start at 7 percent and have loan terms that range from six months to as many as five years. With a line of credit, you can borrow anywhere from $10,000 to $5 million and generally get cash in hand in as little as two days. Using a line of credit helps you build up your business credit as well.

On the downside, borrowers are often required to show updated documents each time they draw from the line. Lenders might also ask for collateral, or if you have a lower credit score, you may only qualify for a higher interest rate.

Even so, the flexibility and affordability of a line of credit outweigh the negatives for most borrowers.

Borrowers with low or no credit, or those who have trouble qualifying for other loan programs, may find that merchant cash advances can be a worthwhile alternative.

In this scenario, a lender gives you a loan for a set amount that is calculated with a baseline of your monthly revenue. You pay back this amount, plus fees, via a percentage of your company’s daily debit and credit card sales.

Although qualifying for merchant cash advances is fast and easy, it’s also one of the most expensive programs out there. Suitable for companies that do a large volume of credit card business, merchant cash advances offer a way to get emergency cash where there’s enough volume to support the company’s cash flow.

If you’re facing an unexpected gap in cash flow, don’t panic. Managing tight financial quarters is par for the course in a small business, and there are many financing options to help you get back to where you need to be.

When you acquire emergency funding or any other kind of financing, just make sure to review the fine print. Financing that doesn’t suit your business or is too expensive will only complicate things down the line—but with due diligence, you can be sure to get the best terms for you.

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