Emergency Loans and Funding for Business: How to Secure Funds?

February 2019

Thinking about how to prepare your business for an emergency isn’t an enjoyable activity, which is probably why many owners of smaller businesses don’t have business continuity plans. The temptation is to cross your fingers and assume you’ll be able to deal with whatever comes, when it comes - but statistics show that without a detailed plan, you will probably go out of business.

Roughly 25% of all businesses do not reopen after disasters, according to the Federal Emergency Management Agency (FEMA). Smaller businesses statistics are even worse – 40-60% of small businesses do not survive a disaster. In general, says FEMA, if you aren’t open within five days after the disaster, there’s a 90% chance that your business will shut down in a year.

Natural disasters aren’t the only crises that small business owners face – serious illnesses, accidents and financial issues also qualify as emergency situations. And typically, you will need fast access to funding to keep your business open. You’ll need to cover basic operating expenses, adding staff or asking existing staff to work more hours, replenishing stock, getting your computers and network operating again, and more. It’s an excellent idea to create a business continuity plan that addresses all of these issues – what could happen, and what you can do to either prevent or mitigate the damage.

Part of your business plan should include having enough working capital to cover your business expenses for 3-6 months, as well as knowing how you can quickly access funding if you need it.

Fast Funding for Small Business Emergencies

Bank Loans: Unless you have an existing line of credit, you may not want to rely on banks as a source of fast funding. The application process is lengthy, and you may not even be able to access the paperwork and documentation that’s required to apply. If you belong to a credit union, you may find it easier to secure a loan – or not, it depends on the credit union.

SBA Disaster Loans: If your business is located in an area that has been affected by a natural disaster, you may qualify for a loan from the Small Business Administration. There are two types of SBA Disaster Loans; Physical Disaster Loans which must be used to repair or replace damaged property, and Working Capital Loans which you can use to address economic issues caused by the disaster. You must provide collateral “to the extent possible” for all loans over $25,000 and it can take three weeks (or occasionally longer) to know if you’ve been approved.

Peer-to-peer: connects small businesses with funders that include individual investors and institutional investment groups. If you have a solid business credit score (650+ range) peer-to-peer lending may be worth exploring. Rates tend to be competitive, and there will be fees too. But, assuming you’re approved, it may take a few weeks to actually have access to the funds.

Invoice Financing/Factoring: if you have unpaid invoices that are current (within 90 days) you may be able to get an advance on what you’re owed. Look for reputable companies that provide “factoring,” - the lender funds the borrower with a portion of the amount due on invoices. The lender then collects the full invoice amount, plus fees and interest. You can typically access funding within 72 hours, making this a good option for businesses that need funds quickly.

Merchant Cash Advances (MCA): these are advances, not loans, and are paid back via a percentage of the merchant’s daily or weekly sales. Lenders look at a business’ receipts to determine whether to approve the advance, so small business owners with low credit ratings are often able to get approved for an MCA. For smaller businesses that see daily transactions, such as restaurants or shops, this can provide an easy way to access funds quickly.

How to Apply Chances are that if you’re dealing with an emergency, you don’t want to devote a lot of time to figuring out what funding option is right for you, what documentation you need to provide, and exactly how to apply for funding. It’s complex, and can be especially difficult to manage if you’re dealing with a crisis situation.

You can devote a little time now to figuring out what sorts of funding options you have the best chance of qualifying for and how quickly those sources process funding applications. Check carefully, don’t assume anything. For example, you may think an SBA Disaster Loan approval should be based on need, but the SBA does a credit check – if you have a low credit score but a good current history of paying your bills you may still qualify, but not everyone is approved.

One way to remove the waiting and hassles from the funding process is to let One Park Financial do the work. One Park Financial helps owners of small and mid-sized businesses to access funds fast. Once you’re pre-approved , you can discuss your needs and options with funding expert who can help you determine what funding types best meet your needs and facilitate the process of applying and getting you funding offers. When you accept an offer, the funds are typically in your account within 72 hours.

Visit One Park Financial or call 855.218.8819 to find out more today.