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A Guide to Same Day Business Loan Eligibility

Ezra Cabrera | December 13, 2022

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    Running a business can be rewarding, but it's no walk in the park. On top of your managerial responsibilities, you need adequate working capital to sustain your business and take advantage of growth opportunities. Most of the time, business owners turn to same day business loans to get the additional cash injection they need ASAP. 

    Taking out a business loan isn’t exactly something that business owners look forward to. In fact, it can be the most daunting process a business owner goes through, especially for first-time borrowers. However, a business loan application doesn’t necessarily have to be challenging (or scary!). With thorough research and planning, you'll be able to borrow enough capital to take your business to the next level.

    In this post, we’ll outline everything you need to know about how to get same day business loans.  

    Key Takeaways

    • Getting a same day business loan doesn’t have to be daunting. Preparation plays a crucial role in making the whole process easier and more bearable. 

    • Knowing why you need the funds and how much you need is important when getting a business loan. You also have to be familiar with the different types of business loans available for SMEs. 

    • Securing a business loan with excellent terms will depend on your qualifications. Specifically, lenders will look at your credit score, cash flow, time in business, and collateral.

    How to Get a Same Day Business Loan in 7 Steps

    Lenders who offer same day funding are usually more lenient when it comes to documentation and eligibility. But preparation is key to a successful loan application, whether it’s a traditional or same-day loan.

    Here are seven steps to get a same day business loan:

    Determine Why You Need the Funds

    Before starting the loan application process, you need to determine why you need the loan in the first place. The lenders aren’t just handing out credit without knowing where the proceeds will go. You need a clear vision of how you’ll use the funds to convince lenders that it’s worth the investment.  

    Lenders would want to know whether your idea would be profitable enough. After all, the repayments would ultimately depend on the result of their investment. 

    Businesses apply for a loan for several reasons, such as:

    • Constructions and renovations
    • Commercial real estate acquisition
    • Equipment purchases
    • Stocking up on inventory
    • Bridging cash flow gaps
    • Product expansions
    • Building an emergency or contingency fund
    • Startup costs

    Lenders might also ask you how the funding will impact your business. You must be prepared to back up your claim and demonstrate how you'll achieve growth using the lender's resources. 

    Know How Much You Need

    Business loan options have different maximum loan amounts. Some are tailored to address short-term needs, while others are intended for long-term investments. When applying for a loan, lenders want to know how much you need and whether it will be enough to cover the costs. 

    For example, suppose you run a restaurant and want to renovate and expand the kitchen to accommodate more orders coming in each day. You estimate an average cost of $50,000 for construction and another $30,000 for equipment, bringing your estimated loan total up to $80,000. But remember that there are other expenses to consider beyond your initial investments. Equipment maintenance, repair, and insurance could add up. That said, you might want to get a loan amount higher than your initial estimation. 

    As much as possible, ask for a reasonable loan amount. Asking way more will make the lenders suspicious and hurt your chances of approval. If you ask for too little, you may end up bleeding your bank account dry. It might be worth consulting with an accountant to determine a better number.  

    Same Day Business Loans Eligibility Requirements

    Lenders use different factors in determining the business’ eligibility for a loan. For small business loans, they usually look at four different factors, including:

    • Credit score

    • Revenue

    • Business history

    • Collateral

     Here’s why each of the factors matters:

    Credit Score

    Your credit score is usually the first factor that lenders consider in a loan application. Credit scores are a summary of your behavior as a debtor. Just by looking at your score, the lenders will have an idea of your repayment behaviors.

    Credit scores range from 300 to 850, with 850 considered an excellent credit score. Having a credit score of 650 or higher improves your chances of qualifying for traditional business loans. Credit scores lower than that may have lesser chances of qualifying for loans. If they get approved, they might have to pay a higher interest rate. 

    Cash Flow

    Your cash flow allows the lenders to evaluate your capability to pay the loan back and how you handle your finances. In other words, it lets them know whether or not you’d be able to afford the required repayments. Essentially, the higher the cash that goes into the business, the better fit they are as borrowers. 

    Business History

    If you’ve been in business for quite some time now, you must be doing something right. This makes the lenders trust you more. Other than that, the longer you’ve been in business, the more financial statements lenders can review and evaluate. From there, they can determine how you weather through the bad times and how you used the good days to your advantage. 

    This doesn’t mean that startups are automatically disqualified for business loans.  Although they lack time to prove their success, having a thorough plan on how they can use the resources to their advantage can make up for the lack of time in business.  

    Collateral

    By definition, collateral is an asset you pledge to secure your funding. Using your collateral significantly boosts your chances of qualifying for same day funding. Once the asset is tied to the funding, the lenders will have the right to seize it if the business cannot repay the loan. 

    Note: Not all lenders will require a personal guarantee for some financing products. For instance, business credit cards or lines of credit can be unsecured. However, the absence of collateral increases the risk that lenders face. To mitigate the risk, the financing companies are less likely to offer businesses flexible loan terms.

    Research Possible Online Lenders

    After figuring out what loan you need, the next step is to find the lender that can offer the best interest rates and repayment terms based on your borrowing situation. Traditional lenders often have a long application and funding process, so if you're looking for same day business loans, alternative lenders are your best bet.

    Online or alternative lenders are a great option if you can’t qualify for a traditional loan or you’re looking for a same day business financing. Their loan options are also easier to qualify for compared to traditional loans. They don’t require extensive documentation; in most cases, funding can be as quick as 24 hours after approval. Many online lenders may also work with businesses with less-than-stellar credit scores and short business histories.

    The downside of working with online lenders is that although their loan options are easier to qualify for, their rates are usually higher than what traditional lenders charge. That being said, it might be worth considering the cost of borrowing and making sure you can afford the repayments before moving forward with your application. 

    Know and Understand the Different Loan Options

    Small business lenders offer multiple loan programs for small businesses. Each loan option is tailored to address a specific need and will vary in length, and repayment structure, among other terms. Some banks also offer these options, but online lenders can fund your business within the day.

     Here are the most common small business loan options to consider:

    Business Lines of Credit

    Business lines of credit (LOC) offer businesses access to a fixed amount of working capital. They can draw from their credit line as needed, as long as they don’t exceed the predetermined credit limit. The financing can come in handy, especially when businesses need to address an unanticipated expense (i.e., broken equipment or property damages).

     One thing that makes a business line of credit unique from other business loans is that you only have to pay for what you owe, plus the interest on that amount. Once you’ve paid off what you’ve drawn, your available credit will go up, and you can access the funds again in the future. A business line of credit is a great option for businesses that need flexibility with their loans.

    Inventory Financing

    Inventory financing is a type of asset-based financing where businesses use their unsold inventory as collateral in exchange for funding. Once approved, the financing company can fund at least 60% of the total inventory value, depending on the type of inventory they carry. The proceeds can be used towards any business initiatives, such as bridging cash flow gaps, paying utilities and rent, or reordering more inventory. 

    Business Term Loans

    A business term loan is a traditional financing option where businesses get a lump sum upfront, which they can repay in fixed installments over a pre-established period or term. Business term loans are further classified into three types based on their repayment terms:

    • Short term loans (3 to 18 months)

    • Medium-term loans (up to 24 months)

    • Long-term loans (10 to 25 years)

     The rates for business term loans will also vary based on the repayment length and the borrower’s qualifications. Essentially, the better business’ credentials are, the higher their chances of getting approved for lower interest rates. However, keep in mind that some lenders may require weekly payments rather than monthly.

    Equipment Financing

    Equipment financing provides the funds needed to obtain an essential business equipment. Since the equipment itself secures the loan, financing companies can offer funding amounts up to 100% of the equipment’s total value. The repayment period for the financing may vary depending on the equipment’s estimated lifespan. In most cases, the repayment terms for equipment financing usually does not exceed five years. 

    Invoice Factoring

    Invoice factoring allows you to free up cash tied up on your customers’ outstanding invoices. Instead of waiting a few weeks for the customers to pay and risking cash flow issues, you can sell your invoices to a third-party company and get your customers' payments in advance. 

     One of the advantages of invoice factoring is that the financing company takes care of the payment collection. This is especially useful for companies that lack the resources to chase and collect the payment themselves. With this same day business loan option, customers will pay the financing company directly. Once the customers settle their dues, the financing company deducts the cash they advanced (plus fees) and wires the remaining amount back to you. 

    Merchant Cash Advances

    A merchant cash advance provides small business owners a lump sum of working capital. However, a merchant cash advance is not a loan. Here's how it's structured: lenders will assess your business to determine how much you need to borrow and how much you can repay. The lender will purchase your future sales, and you use those sales to pay back the cash advance, plus fees. The merchant cash advance rates and fees vary depending on your industry, years in business, financial documents, personal and business credit score, and your card transactions.

    While a merchant cash advance is a fast business loan, it often carries high annual percentage rates and could potentially create a cycle of debt for small businesses. It's best to consider other same day business funding options before applying for merchant cash advances.

    Prepare the Necessary Documents

    Once you’ve narrowed down your choices to one lender, find out what documents they need to process your application. Preparing these beforehand can help expedite the loan application and approval process. 

     In general, lenders will usually ask for the following documents:

    • Business license and registration

    • Personal and business bank account and bank statements

    • Balance sheets

    • Personal and business tax reports

    • Personal and business credit report

    • Cash flow reports

    • Business plan

    • Debt schedule

     Lenders might also ask you to submit additional documents to the ones listed above. For instance, they might ask for articles of incorporation, manager resumés, property or equipment titles (for collateral), and others. 

     The best way to know what documents you need to prepare is to ask the lender directly. Not only will they give you a comprehensive list of the documents, but they can also walk you through the entire process and orient you with the usual approval and funding times. 

    Submit the Application and Wait for Approval

    After completing the application form and getting all the documents, the final step is to submit your application and wait for the decision. Most lenders will have to go through a series of steps to evaluate your application, especially if you’re applying for a higher loan amount. 

     It’s also important to know how lenders handle applications. Online lenders may offer online services where you can fill out the application form and submit your documents electronically. However, note that some online lenders might require you to make a personal appearance before the loan gets approved. 

     Once you’re approved of the financing, go over the contract before signing. If you can, consult with a business lawyer or your accountant. Make sure that the contract terms align with your business’ current needs and situation. 

    Final Thoughts on Same Day Business Loan Eligibility

    At some point, businesses will need an urgent business loan to weather uncertain times or to fuel growth and revenue. When you need a same day funding, you’ll want to keep these key steps in mind. 

     A combination of excellent credit score, revenue, and longer time in business definitely increases your chances of loan approval (and great terms!).  However, that doesn’t mean those who fall short of these requirements can’t qualify for same day loans. Some lenders may be willing to work with small businesses with poor credit scores and low-income businesses – at a cost.

     Adequate preparation and research can go a long way in improving your chances of approval. Before committing to a specific business loan, always do your due diligence to make sure that you’re making the best financial decision for your company. 

    About the Author

    Ezra Neiel Cabrera has a bachelor’s degree in Business Administration with a major in Entrepreneurial Marketing. Over the last 3 years, she has been writing business-centric articles to help small business owners grow and expand. Ezra mainly writes for SMB Compass, but you can find some of her work in All Business, Small Biz Daily, LaunchHouse, Marketing2Business, and Clutch, among others. When she’s not writing, you’ll find her in bed eating cookies and binge-watching Netflix.