Ben Larkins and Jon Maloney explain emergency business loans.

What is an emergency business loan?

It’s pretty much as it sounds: when a business has reached a cash flow situation where the need for cash is urgent, they will seek an emergency business loan to get same day funds or or next day funds.

It could be an unexpected bill, or that the bank has called in a loan or overdraft. Perhaps a customer has gone bust and the company needs an immediate cash injection.

A cash flow loan is an alternative solution, if you can wait four or five days for the money, but an emergency loan is often needed the same day.

One thing to stress is not to confuse an emergency business loan, where maybe somebody needs a quick immediate cash injection, with lifeboat finance where a company is going bust and takes out finance to keep them afloat for another seven days. They are different.

Will my bank or lender give me an emergency loan?

Banks at the moment are on four to six week lead times for things like that. Plus, your bank manager really doesn’t want to hear that you have a problem and you need money urgently.

That’s when they get a little bit nervous – they’ll probably look at pulling an overdraft if they think you’re in trouble. It’s probably not something to approach your bank about.

If it’s just a short-term fix of a week to two weeks, the bank may look at extending an overdraft – there’s an opportunity there. But in terms of a specific emergency loan product, the banks don’t cater for that as such.

Why would an SME seek an emergency business loan?

Perhaps an invoice has not been paid by a customer that has gone bust. Maybe an overdraft has been pulled, or a factoring facility.

They may have had a competitor go bust and they’ve got to act quickly to secure stock and be able to grow. Those are the sort of things they are used for. But nine times out of 10, a business has reached a pinch point that needs to be resolved – and they need money quickly to do it.

Could emergency business loans help your immediate cash flow problems?

Yes – that’s what they’re for. If you’ve got an immediate cash flow problem and you need to sort it out, this is the product for you.

If you’ve got a problem coming up in two or three months, you’ve got time to react so an emergency business loan probably isn’t the one for you. Naturally, an emergency business loan has more risk attached to it – and with more risk comes a higher rate.

Should I choose a secured or unsecured emergency business loan?

By the very nature of the fact that it’s an emergency, 9 times out of 10 it would be unsecured. A secured loan would usually take weeks to arrange.

Emergency business loans and secured borrowing don’t really go hand-in-hand. If you’ve got a lot of short-term debt and you want to consolidate all that, then by all means look at a secured business loan. But it can’t be an emergency business loan – for the simple reason of time.

Can you get an emergency business loan straight away?

Yes, you can get an emergency business loan straight away. You will need your last three months’ business bank statements, a full set of company accounts and to complete the application form on our website.

Some of our funders will do an auto approval, so we don’t need any financials. If you’re looking for under £25,000 on the same day, a couple of our funders will just input your information. There are various algorithms and AI on their systems that can predetermine a decision – and the money can be released pretty much straight away.

Does the UK government offer emergency loans for businesses in crisis?

They did during Covid, that was what the bounceback loan was for, but we all know how successful or unsuccessful that was…let’s not get too political, but that was the only time there was support of that kind.

Can I get an emergency business loan with bad credit?

The short answer is yes, but it depends. Everybody has a different definition of bad credit – from missing a credit card payment or loan payment over the course of 12 months to what we consider to be bad credit – which is really people with CCJs. They may have been taken to court and lost, or their business is in liquidation or not far from it.

If someone is six months down on their mortgage, that’s really our definition of bad credit. A precursor to bad credit is to look at a business’ bank statements and check how they are conducting business.

If there are various missed payments, reversing payments, bouncing payments or missing insurance…then you know that there is a bit of a problem there.

What are the benefits and drawbacks of an emergency business loan?

The key benefit is you can get the money quickly and it fills that gap. It extinguishes that fire as such.

But it’s going to be more expensive than a conventional unsecured business loan, by virtue of the fact that you need it quickly. You’ve got a problem and you’ve probably accrued a bit of bad debt as a result of it.

How can I apply for an emergency business loan?

Fill out the application form on our website and one of our account managers will give you a call. They’ll get all the information that we need and then hopefully by the end of the day we’ll be able to help you out.