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Key takeaways
- Fast business loans can get funds into your account in as little as 24 hours but often come with higher interest rates and additional fees
- Interest rates for fast business loans vary, and some lenders may utilize a factor rate instead of an interest rate
- The cost of fast business loans will depend on the type of loan, repayment terms, interest rate and any additional fees
A fast loan approval process is appealing if your organization needs cash fast. Typically offered by online lenders, fast business loans can get funds into your account in as little as 24 hours. This quick timeline is often due to less stringent application requirements from online lenders, leading to a streamlined process.
But you may trade speed for a higher cost. Fast business loans often have higher interest rates and additional fees, making them more costly than traditional small business loans. Before agreeing to a fast business loan, it’s important to determine if the cost is worth it for your business.
Factors that affect your fast business loan costs
Several factors influence the cost of business loans. The cost of fast business loans often depends on the lender, the type of loan you’re applying for, the interest rate and any additional fees.
Lenders
Most lenders offering fast business loans are online lenders. They often specialize in fast turnaround times for applications and funding. You can get a fast business loan from an online lender without interacting with a lending rep — most applications are virtual and self-guided.
Bankrate insight
Some of the most popular lenders for fast business loans include:
For more lenders, check out our guide on the best fast business loans.
Loan type
Most fast-working online lenders offer loans similar to traditional lenders, like term loans and lines of credit, but also specialize in nontraditional loan types.
| Loan type | Purpose |
|---|---|
| Online term loan | A lump sum of cash that is paid back over a set period. Fast business loans often have shorter repayment periods than traditional term loans. |
| Business line of credit | Lines of credit operate much like a business credit card. You can take out as much cash as you need up to a predetermined limit, paying interest only on the amount you’re actively using. |
| Equipment financing | Designed to help purchase business-related equipment. Semi-truck loans are one common type of equipment loan. |
| Invoice factoring/financing | Leverages your unpaid accounts receivable invoices for cash. You can usually sell up to 85 percent of the total value of the outstanding invoices to a lender. |
| Merchant cash advance | Allows you to borrow a certain percentage of your average credit card revenue from a lender, usually paying it back with a factor rate instead of an interest rate. |
Interest
Interest rates will vary depending on how much you borrow, your personal and business credit scores and your chosen lender. Interest rates can also be variable or fixed. Here are some average interest rates for fast business loans:
| Type of loan | Average interest rate |
|---|---|
| Term loan | 8.00% to 75.00% |
| Business line of credit | 7.50% to 9.00% |
| Equipment financing | 6.00% to 22.00% |
| Merchant cash advance | 1.04 to 1.32 (factor rate) |
Bankrate insight
Some types of fast lending, including merchant cash advances, utilize a factor rate instead of an interest rate. Factor rates are expressed as decimals instead of percentages, typically ranging from 1.1 to 1.5. If a fast business loan uses a factor rate, first convert it to an interest rate to determine how much interest you’ll pay annually.
Collateral
Collateral is security for a lender if the business owner defaults on a loan. Most commonly, collateral is the asset you’re getting a loan for, real estate or cash. That said, it’s up to the lender to determine the appropriate collateral for the loan you’re applying for.
Fast business loans can be either secured or unsecured. Secured loans require collateral, while unsecured loans don’t.
Fast business loan fees
Apart from interest, fast business loans come with several fees and costs.
- Administration fee: A generic fee charged upfront, covering some of the paperwork and banking costs associated with processing your application.
- Application fee: A one-time, upfront fee paid when you submit your loan application. Not all lenders charge this fee.
- Credit check fee: A fee charged when lenders pull a hard credit check before approving a loan.
- Draw fee: If you have a business line of credit, you may be charged a fee when withdrawing funds from your account.
- Late fee: Usually a flat fee that’s charged when you miss a loan payment.
- Origination fee: Sometimes also known as an administration fee. Often, it’s assessed as a percentage of the money borrowed and deducted from the money disbursed at the start of a loan or added to the total loan amount.
- Prepayment penalty fee: When a loan is paid off early, you may be charged a prepayment penalty. Not every loan or lender charges prepayment penalties.
You can use our business loan calculator to understand potential monthly payments based on principal, interest and fees.
Repayment terms
Repayment terms outline how long you will pay back your fast business loan. Since a longer term means that you’ll be paying interest for an extended period, the exact term length affects the total cost of your fast business loan.
To save money on interest, you can often make extra monthly payments and pay off your loan early. Just be aware of any prepayment penalties or conditions in your repayment terms before doing so. In some cases, it may be more expensive to pay off your loan early.
Bottom line
Fast business loans can often come at a higher cost than getting a business loan with a standard approval process. The cost depends largely on the type of lender you use and how much interest that lender charges.
Typically, fast business loans are offered through online lenders, which are known for charging higher interest rates in exchange for their speedy and lenient approval process. Keep in mind that the cost will also depend on the length of time you’ll be repaying the loan and any additional loan fees the lender charges.
To keep costs low, you may want to research lenders with the lowest interest rates to see if you can balance the interest charged with a fast funding speed.
Frequently asked questions
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The easiest business loan to get will depend on your business and the type of funding you’re looking for. The best fast business loan for every business varies, but loans offered by online lenders are often easier to get than those from traditional lenders.
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The average small business loan is $663,000. If you’re taking out a fast business loan, the faster application process can mean the loan amount is smaller. Many fast loans are for $500,000 or less.
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An interest rate under 10 percent for a fast business loan is considered good. However, depending on your credit, lender and funding, you may find a good interest rate for your loan is higher or lower. Always shop around for a fast business loan to ensure you get the best rates and terms.
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