Being a small business owner, having access to funds can make all the difference for your business. Whether you need money for unexpected expenses, growing your business, or taking advantage of a new opportunity, borrowing funds can be the best option. But with so many options to choose from, it becomes a bit difficult to decide what’s right for you. The biggest dilemma here is to opt for fast loans or traditional loans. Let’s take a closer look.
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What are Fast Loans?
Fast loans or quick loans are the types of funding options offered by online lenders. These are quick ones to get immediate cash. Quick loans offer fast approval times as you can get the funds you need in just a matter of hours or days. These are the best options for those urgent situations when you need money fast. However, the downside of these loans is that they often come with higher interest rates and fees while being quick and convenient.
Key Features of Fast Loans:
- Quick Approval: Quick loans are perfect for situations when you need cash urgently. These funds typically get approved within just a day or two.
- Minimal Paperwork: You don’t have to worry about drowning in a sea of documents. These loans require less paperwork for approval.
- Easy Eligibility: These options are often available to businesses with less-than-perfect credit. Those who may have been turned away by traditional lenders or businesses with limited credit history can get their hands on some extra cash with these quick loans.
What are Traditional Loans?
Traditional loans are typically the usual funding options of applying for a loan from a bank or credit union. These require more paperwork and take a bit longer to get approved. But the best part is, traditional loans come with lower interest rates and better terms when compared to other types of loans. For businesses with a solid financial history and good credit will find these loans a perfect match.
Key Features of Traditional Loans:
- Lower Interest Rates: Traditional loans typically come with lower interest rates when compared to quick loans. These can save a lot of money in the long haul.
- Longer Repayment Terms: These loans offer longer repayment terms, so businesses have the option to spread out their payments over a few years.
- Stricter Eligibility Criteria: Traditional loans may have stricter eligibility criteria such as the requirement of a solid credit score and financial track record. This can make qualifying a bit more challenging.
Comparing Fast Loans and Traditional Loans
Let’s figure out which type of loan for a small business, fast or traditional, would work best for you.
| Features | Fast Loans | Traditional Loans | ||
| Pros | Cons | Pros | Cons | |
| Speed and Interest Rates | With quick approval and funding, these loans are ideal for handling emergencies or seizing last-minute opportunities. | These loans come with higher interest rates and fees because they are processed quickly. | Traditional loans typically come with lower interest rates and favorable terms. | May take weeks to get approved. |
| Loan Amounts and Terms | Available in smaller amounts to cover immediate expenses. | Usually have shorter repayment terms due to smaller amounts which can result in higher monthly payments. | Offer high sum amounts that can be used to purchase equipment or tackle big investments. | Come with longer repayment terms, resulting in more accrued interest in the long run. |
| Eligibility Requirements | Fast Loan approval can be a great help for businesses with limited credit history or low credit scores. | They often come with stricter terms and higher fees. | Traditional loans require a strong credit history. | Might be a bit challenging for startups or individuals with low credit scores. |
What to Choose- Fast Loan or Traditional Loan?
Choosing between quick loans or traditional loans depends on the requirements of your business. How your finances look or how much time you have available are some of the questions that need to be dealt with before securing any kind of loan.
Fast Loans:
- These loans are the best option in case you need money right away.
- Consider a quick loan for smaller fundings, under $50,000.
- If your business has a low credit rating or is new, quick loans can provide the quick capital you need.
Traditional Loans:
- Go for traditional loans if you have time to wait for approval.
- Consider these loans when in need of a larger amount for important investments.
- These can be the ideal option if your business has a good credit score and a steady financial background.
Conclusion
Hence, choosing between fast loans and traditional loans comes down to knowing what your business needs now and in the future. Quick loans may be convenient but come with higher costs to pay. On the other hand, traditional loans offer better terms and rates but require more time and effort to secure. So, it doesn’t matter which path you choose, it’s essential to make sure it fits your financial situation and business goals. If you need further guidance or have questions, reach out to us today and find the best financing solution for your business.