A good business operating plan should include some kind of provision for emergency cash flow situations. A line of credit is a very good method to deal with short time emergencies, and a cash reserve is even better. However, this is really much like telling someone that locking the barn door is a good idea after the horse has already escaped. Emergency situations, by definition, are just those times when preplanning has failed. So, what is the best source of emergency small business loans?
The place to start would be your normal lending institution. Banks are not unfamiliar with emergency situations regarding small business. The fact that you might be facing a cash flow problem is not going to make the bank loan officer really comfortable, but if your explanation and your overall business prospects are both good, he might be willing to take the risk. This is a time when a secured loan might be best, so if you have some collateral that can be offered that might ease the way to approval.
Government loans are usually not going to be much help for short term emergencies. The approval process is normally too drawn out to help quickly. There are also lenders such as the thriving pay day loan industry that seem to offer a quick out. These need to be approached with a great deal of caution. Some people compare coping with short term cash flow problems by taking on very high interest loans with a short repayment schedule to be not unlike treating brush fires by spraying them with gasoline.
It might not be a bad idea to make a review of family and friends for the purpose of short term emergency small business loans. They might be the ones with the most confidence in you and your business, and they might be the most willing to extend both generous terms and a longer repayment time.
There are many causes for short term cash flow problems in a small business. If these causes are not serious fundamental flaws in the business operation, but truly fixable emergency situations, an emergency loan should be considered. Still, the best way to deal with a cash flow situation is to improve operations and increase the cash flow. The second best way is to have a line of credit already established or a cash or asset reserve already earmarked for emergencies.
Aazdak Alisimo writes about business loan information for HowtoApplyforaBusinessLoan.com.