How to access emergency business loans and funding

Whether you’re running a start-up or an established company, unforeseen circumstances such as your van breaking down or your main customer going bust can leave you needing urgent finance.

Here’s everything you need to know about taking out emergency business funding.

Key takeaways

• You can access emergency business funding quickly, but faster options often come with higher costs

• Lenders still assess affordability and risk, so having up-to-date financial information can improve your chances of approval

• Only borrow what you need and have a clear plan to repay it to avoid a short-term funding solution creating long-term pressure

What is emergency business funding?

Emergency business funding is money you can access quickly when your business needs a short-term cash injection.

This type of finance can often be in your business bank account within 24 hours – provided your paperwork is in order and you can meet the lending conditions. 

What different types of emergency business finance are available?

Emergency business finance can take various forms, including business loans, overdrafts, and lines of credit. 

The right one for you will depend on why you need the money, how long you need to pay it back, and your business type. 

Emergency business loans

Emergency business loans, also known as working capital loans, are short-term loans designed to offer financial relief for businesses that need money fast, often due to cash flow problems. 

As such, lenders often fast-track applications, enabling you to access the cash within 24 hours in some cases. 

That’s much faster than standard small business loans, which usually take several weeks to approve.

However, this speed often comes at a cost – the interest rates charged on emergency business loans are generally higher than those charged for standard business borrowing. 

Small business loans, including secured loans, can also provide emergency business finance if you can wait longer for the money to arrive.  

Overdrafts

Many business bank accounts have overdraft facilities, with some allowing you to borrow up to £50,000 or more. 

These overdrafts serve as short-term safety nets, and you can set them up in advance so that they are readily available for emergency business funding if needed. 

However, SME overdrafts generally come with high interest rates on top of annual charges and possible arrangement fees. This makes them a poor choice for longer-term borrowing.

As with other emergency business finance types, you must also meet certain criteria to qualify. 

Lines of credit

A business line of credit is a flexible borrowing option that allows companies to access funds up to a predetermined limit, much like a credit card.

Providers charge interest on the amount borrowed rather than the credit available. 

However, the interest rates on borrowing of this kind tend to be higher than on standard business loans – although you may get a lower interest rate if you secure the line of credit against an asset, such as a property.

Once again, they are better suited to short-term borrowing.

Merchant cash advances

If you often receive credit card payments, you can apply for a merchant cash advance on future credit card sales. However, the fees involved can be high. 

Since you make repayments based on a percentage of your card sales, this form of financing is most suitable for businesses, such as shops and restaurants, that generate a significant portion of their revenue through card transactions.

Invoice finance

With invoice financing, you can borrow up to 90% of the amount owed to your business on outstanding invoices, making it a useful way to get a short-term cash injection.

There are two main types of invoice finance:

• Invoice factoring – the lender essentially buys your invoices and collects payment directly from your customers

• Invoice discounting – you remain responsible for collecting payment from your customers so you can refund the amount borrowed plus fees and interest (or the discount charge)

Some companies will also allow you to borrow against a specific invoice while continuing to take payment from your other customers as normal.

When can I get an emergency business loan?

Cash flow problems are commonplace in the SME world. Reasons you might need emergency business funding include:

• Covering unexpected costs

• Paying a sudden tax bill

• Managing operating expenses such as payroll

• Covering unpaid client invoices

To be approved for this type of finance, you need to meet certain conditions designed to help lenders determine whether you can stick to the agreed repayment schedule. 

For example, you need to have been trading for at least three months – often longer – and to have a monthly turnover of a certain amount, say £5,000.

Some lenders also require a company director to provide a personal guarantee that they will personally cover the repayments should the business be unable to do so. The ability to offer a guarantee of this kind will depend on your personal financial situation and credit score.

Can you get a business loan straight away?

Yes, lenders offering emergency business loans generally have streamlined application processes designed to release funds within 24 to 48 hours. 

If there are no delays, some lenders can even have the money in your business account on the same day you apply for the funding.

Read more: Can I get a business loan without a credit check?

How can I borrow money in an emergency?

To access emergency business finance, you will need to:

• Determine the type of emergency business funding that best suits your needs

• Research the options available and choose the best deal

• Apply for the finance deal of your choice and supply the necessary paperwork

• Wait for the response. If your application is successful, you should generally receive the funds within a day or two

What documents do I need for emergency business finance?

The quicker you can provide the documents lenders need to make a decision about your emergency business finance application, the quicker you can get a decision and potentially access funds. 

Most lenders require three to six months’ worth of bank statements – you can usually download these as PDF files via online banking. Depending on your business and the type of finance you want, you may also need to supply:

• Cash flow forecast

• Profit and loss statement 

• Recent balance sheet

• Tax returns

• Details of any other debt

💡 Editor insight: Is your business 'loan ready'? How lenders really assess SMEs