The 11 Best Small Business Loans to Help You Grow

 

Starting and running a business is tough, especially when you do not have the cash you need to make moves. This article is going to guide you through the types of small business loans you can apply for as well as 11 of the top loans and lenders you can consider.

11 of the Best Small Business Loans and Lenders

It is always important to compare small business cash loans to make the best choice. There are plenty of small business loans and lenders out available, but here are 11 of the best options for you to consider in your small business loan shopping:

#1 OnDeck

Good For: Those who need cash fast and often, and those who have trouble being approved for small business loans elsewhere.

OnDeck is a pretty popular option that is known for both term loans and lines of credit. The term loans are available in amounts from $5,000 to $500,000. You can pay them off in three to 36 months, depending on the amount you borrow. Interest rates for term loans start as low as 11.89 percent, though your rate will depend on credit scores or credit history.

You can also apply for a line of credit from $6,000 to $100,000 that you can repay in 12 months. Interest rates for lines of credit start as low as 10.09 percent.

OnDeck is also an approved lender for PPP loans through the SBA. PPP loans are federal loans that are intended to help cover the cost of payroll and certain other things. These tend to be low-interest loans, and you can borrow up to two and a half months worth of payroll.

That time frame gives you the chance to get on your feet or make the decisions necessary to cut your payroll costs.

Loan Amounts: $5,000 up to $500,000
Interest Rates: 1% for some, others 10.09% and up
Repayment Terms: 3 – 36 months

OnDeck requires that you be in business for at least one year. This is because they factor in your business’s performance as well as your credit for approval. That can be helpful as a profitable business has the chance to get approved even if the owner’s credit score is low or the business does not have a good credit history.

On the other hand, it can be risky. Part of the reason they take your performance into account is that they are using your business for collateral. If you are late or fail to make payments, you might lose your business.

Repeat customers get incentives, such as lower interest rates
Factors in the business’s performance instead of just credit

Requirements are often too stringent for new businesses
Those with good credit scores or history will probably find better rates elsewhere
Origination fees up to 4 percent
Your business is collateral

Bottom line: OnDeck can be incredibly helpful for those who cannot get approved through other lenders. However, if you choose to apply through them, be sure you have a backup plan in place so you do not lose your business. Think it through before making moves.

#2 Kabbage

Good For: Small business loans for those with not so great credit and those looking for convenience.

One of the best things about Kabbage is that there is no credit check. Instead, you link your bank account and basically they approve or reject you according to the money you have coming in- and you need at least $50,000. This is great for those whose credit just cannot score them a loan elsewhere but makes a decent income. However, it also means higher interest than many other lenders.

Loan Amounts: Up to $250,000
Interest Rates: 1.5% up to 10%

Kabbage does not have many loan products. In fact, it usually only offers lines of credit. At times, they will open up other loan products, but not always. While lines of credit can be convenient, the interest rates often fluctuate and there are usually maintenance fees.

Fortunately, they offer several ways to access your line of credit. You can choose a physical card, which they will send through the mail, but you have to wait until the card arrives to use it. Or you can also use a bank account or a PayPal account. You are expected to repay what you borrow in either six months or 12 months, depending on how much you borrow.

Easy application
No credit check
Generally quick approvals
Several ways to receive cash

Only lines of credit
High interest
Have to be in business at least a year and earn $50,000 annually

Bottom line: Kabbage is great for those who need money pretty quick without a credit check, but be prepared to repay the loan within a year tops.

#3 Wells Fargo

Good For: Those with good credit who want a well-known lender.

Wells Fargo has been in business since 1852, making them a well-established and well-known lender. They offer several types of small business loans including term loans, lines of credit, and more. The lines of credit start as low as $5,000 and go up to $100,000. The rates are as low as 1.75 percent.

Loan Amounts: $5,000 to $100,000
Interest Rates: As low as 1.75% up to 22.99%

The unsecured small business loans start as low as $10,000 and can go up to $100,000 with interest as low as 8 percent and go as high 22.99 percent. There is usually a $150 opening fee, but it is sometimes waived. Repayment terms can go from one to five years. They even offer SBA backed loans.

Unsecured loans, lines of credit, SBA loans, and more
Repayment terms up to five years
Loans up to $100,000
Well-established lender

Annual and opening fees for some
Must have good credit
Need annual sales of between $2 million and $5 million

Bottom Line: If you have good credit and your business does between $2 million and $5 million in annual sales, Wells Fargo can be a really good option for you as they can loan high amounts with low interest. Those with bad or fair credit should look for other small business loans.

#4 SBA Small Business Loans

Good For: Those who cannot get an approval through other lenders.

The SBA, or Small Business Administration, was founded to support the small businesses in our country. There are many small business owners who simply cannot get funding through traditional avenues due to credit or other lender requirements. This is where the SBA comes in. It is not a lender itself but rather guarantees business loans making lenders more apt to approve you.

Loan Amounts: $500 to $5.5 million
Interest Rates: As low as 2%

In order to qualify for SBA small business loans, you must meet some requirements, such as your business must be operated in the U.S., it must be a for-profit business (non-profits have other funding avenues), time and/or money must already be invested in the company by the owner, and the owner must not be able to qualify for alternative loans.

Backed by the SBA
Several loan types
Competitive rates and repayment terms

Approval typically takes longer than with other lenders
Some loans require personal collateral

Bottom line: The SBA works with business owners to get loans with competitive rates and repayment terms- all the way up to 25 years depending on the loan. It is a great option for businesses that simply need a hand but cannot get it elsewhere.

#5 Lending Club

Good For: Businesses that are somewhat established but not completely.

Lending Club is a peer to peer lending service that provides term loans of up to $300,000. The requirements are pretty fair in comparison with other lenders. You must have been in business for at least a year and make at least $50,000 in annual sales to qualify. You must also own at least 20 percent and have decent credit.

Loan Amounts: $5,000 to $300,000
Interest Rates: 5.99% to 29.9%

Lending Club is a peer to peer lending service that provides term loans of up to $300,000. The requirements are pretty fair in comparison with other lenders. You must have been in business for at least a year and make at least $50,000 in annual sales to qualify. You must also own at least 20 percent and have decent credit.

The biggest downside is that there have been accusations of hidden fees and double payments. This is being disputed and it still has a decent rating on the BBB’s website. Still, it is something to keep in mind. Also, loans of more than $100,000 usually require a lien on your business for collateral, which can always be a bit risky.

Great interest rates for many
Requirements are not too stringent
Wide range of amounts to borrow
Repayment terms up to 5 years

Only offers term loans
Origination fees of 1.99 – 8.99%

Bottom line: Lending Club seems like a great option for many, but- as always- go into it with your eyes wide open so you are not blindsided later.

#6 BlueVine

Good For: Businesses with inconsistent cash flow and startups.

BlueVine is an online lending service that aims to help businesses that have issues with cash flow. It is one of the lending services that offer small business loans with what is known as invoice financing. If you have unpaid invoices, you can sell them to BlueVine- you get a lump sum and BlueVine collects the payments from your customer.

Loan Amounts: $5,000 to $5 million
Interest Rates: As low as 4.8%

This type of lending through BlueVine requires that your business have $10,000 or more in monthly revenue, have been in business for at least three months, and that you have a credit score of at least 530.

BlueVine also offers term loans and lines of credit. The requirements for these are a little more stringent but not as stringent as other loans and lenders. BlueVine opens doors for many that are not normally able to qualify for small business loans through alternative avenues.

Offer invoice factoring, lines of credit, and term loans
No origination fees or maintenance fees
Low credit scores

All loans not available in all states
Some high interest rates
Short repayment terms

Bottom line: BlueVine is definitely worth considering for new businesses that need cash. However, watch out for high interest rates if you have a low credit score. Also, make sure you can repay loans quickly- sometimes in as little as six months.

#7 Fundbox

Good For: Those with little or no time in business.

Fundbox is an interesting lender. It does not have many requirements at all. Small businesses and even freelancers are welcome to apply. There is no minimum amount of time you have to be in business and you can have a credit score as low as 500. Also, there are a few different loan types Fundbox offers that go all the way up to $100,000 and have repayment terms up to two years.

Loan Amounts: $1,000 up to $100,000
Interest Rates: As low as 4.66%

There are really only two specific requirements. Fundbox goes by bank activity and income. Therefore, all you need to do is meet the requirement that you are using a compatible bank that they can look into for at least three months. For other credit, you must have been using certain types of accounting or invoicing programs for at least two months. The bank and the programs are what Fundbox uses to evaluate your business, depending on the type of loan you get from them.

Accept scores as low as 500
Invoice financing and other loans
Low requirements

Potentially high interest
Must use accounting software and a compatible bank

Bottom line: Fundbox is one of the most relaxed lenders you can find at this time as far as requirements go. As with most credit, though, lower credit scores will lead to higher interest rates.

#8 Crest Capital

Good For: Businesses wanting to purchase instead of rent equipment.

Crest Capital offers small business loans that focus on financing equipment for those who hope to purchase instead of rent. It offers several ways to purchase this equipment, with loans going up to $1 million. Repayment terms extend all the way to 84 months depending on the loan.

On the downside, Crest Capital requires more than many of the other options we have mentioned here. For one thing, they want a credit score of at least 700. They also want you to have been in business for at least two years among other things.

Loan Amounts: Up to $1 million
Interest Rates: As low as 5%

Up to $1 million
Potential approval in as little as 4 hours
Several loan options and lease terms- up to 84 months

A minimum credit score of 700 required
Have to be in business at least 2 years
Pretty stringent qualifications

Bottom line: If you want to purchase your equipment, have really good credit, and your business is pretty established, Crest Capital might be your best option. If you do not meet these requirements, apply elsewhere.

#9 Accion

Good For: Startups and small business without much history

Accion is a nonprofit company that started as an organization that supplied microloans and financial education to low-income communities. Over time, they began offering more products and bigger loans but are still dedicated to helping businesses in need.

Accion does a case by case approval basis, so they have very little set qualifications listed. They usually only ask for credit scores of 575 and has no specific requirements in terms of how long you need to have been in business.

Loan Amounts: $300 to $250,000, sometimes up to $1 million
Interest Rates: 7% up to 34%

Relaxed requirements
Nonprofit that educates borrowers

Possibly high interest
May charge extra fees

Bottom line: Accion is a good choice for any startup or small business, but especially those that do not meet the stringent requirements of other lenders.

#10 Rapid Finance

Good For: Businesses that need quick cash.

Rapid Finance offers cash advances as opposed to outright loans and repayment terms up to 60 months. The requirements to qualify are pretty attainable. You only need a credit score of 500 and you need to have been in business for at least 12 months. They do not have a specific amount of revenue they require to apply as it goes by the amount you need to borrow.

$5,000 to $1 million in some cases
Interest Rates: 9% to 31%

Rapid Finance lives up to the name by generally offering an answer within 24 hours and quick disbursement of the money. You will likely end up paying high monthly payments and have to use your business as collateral.

Quick approval and loan disbursement
Great rating
As little as 12 months in business but no set revenue requirements
Credit scores of 500 accepted

Requires a lien on your business as collateral Monthly payments can be high

Bottom line: Rapid Finance offers cash advances to those who need quick cash and meet few requirements. However, these advances can be costly and risky. If you are unsure of whether you can repay the cash advance or not, look for alternative loans that come with less risk and lower payments.

#11 SBG Funding

Good For: Startups and other small businesses.

SBG Funding is great for newer businesses that cannot attain other financing due to their age. They have loans all the way up to $5,000,000 and offer repayment terms of up to five years. They even accept credit scores as low as 500 and only require that your business be at least six months old.

Unfortunately, they do require you to make at least $150,000 in annual revenue, which may be an issue for some startups. Fees and any additional requirements are typically not disclosed until you are in the application process. Additionally, you may end up paying weekly instead of monthly payments.

Loan Amounts: $5,000 to $5,000,000
Interest Rates: 5% to 35%

Credit scores as low as 500
Only requires 6 months in business

May require weekly payments
Need $150,000 in annual revenue

Bottom line: SBG Funding does give many newer businesses a chance at financing, but not all. While some requirements are very relaxed, others are not.

Conclusion

For many people- especially freelancers, entrepreneurs, and startup companies- getting the financing necessary to grow a business can seem like an insurmountable task. Fortunately, that does not have to be the case. There are small business loans out there for almost everyone and every business. With planning, research, and some time, you should be able to find a loan to suit your needs and your situation.

Should I Use A Business Loan Brokers or a Direct Lender?

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Should I Use A Business Loan Brokers or a Direct Lender?

Starting or running a business can be tough. Every step of the process can be a challenge, but perhaps none more so than getting the money you need to move up your business. The saying, “It takes money to make money” is true with all businesses. Even the simplest of businesses need things, so what do you do if you do not have the money to do what you need? Fortunately, there are lenders who are willing to loan you the money for your business. Unfortunately, finding the lender to do so can take some work.

Business Loan Brokers or a Direct Lender?

If you are trying to figure out how to finance a business, your head may be spinning with the available options, but we are going to try to help slow the spin. The first step you should take is choosing to work with a direct lender or going through business loan brokers. By the end of this guide, you should be able to make that decision much easier.

What Are Direct Lenders?

For the most part, direct lenders tend to be banks or credit unions. However, some direct lenders are not affiliated with banks at all. Direct lenders are lenders that loan you money directly from their own resources.

Let’s simplify. Let’s say that you need to borrow $1,000. You know Uncle Bob has it, so you go directly to ask him for the money. If you meet his requirements and agree to his terms, he loans you the money directly from his own pocket or bank account. This is a direct line between you and your lender.

Sometimes direct lenders have a small group of associates that they pool the money from or they even have avenues of crowdsourcing that they use, but they are not separate lenders. They are simply resources that your lender can tap into. The direct lender just uses them to gather the funds they offer to loan you.

Let’s take a look at the pros and cons of going through a direct lender:

Advantages

  • There are no additional fees besides those that the lender charges. Unlike business loan brokers who charge an additional fee for their services, with a direct lender, you will only pay costs directly associated with your loan. Direct lenders can provide more favorable terms, lower interest rates, and even higher loan amounts to certain businesses.
  • If you have an existing relationship with a direct lender, you just might have a leg up, so to speak. This is not always the case, of course. Some banks care not if four generations of your family have been banking with them. If you do not meet the requirements, you do not get approved. Others, though, take your existing relationship into account. Credit unions and lenders that do not belong to a big chain are more likely to work with you.

Disadvantages

  • Direct lenders are usually not helpful for newer businesses, have a lack of credit history, or have no detailed plans to show. They are more apt to work with established businesses or those that can show profitability.
  • They tend to require more paperwork and records. Between this and the need for a detailed business plan, preparing to apply for a loan with a direct lender can take a great deal of time- and give you quite a headache.
  • You have to do your own research for each direct lender you decide to apply through. It can take a while to figure out what a lender requires and then get it together.
  • Direct lenders usually do not have as many products as business loan brokers have access to. Direct lenders typically have one or a few loan types while brokers have connections with several products each.

What Are Business Loan Brokers?

Business loan brokers are more like a middleman. They do not loan money directly but rather cultivate relationships with and build a network of lenders. Going back to our previous example of Uncle Bob, let’s make this easier to understand.

We will say you still need to borrow that $1,000. The difference this time is that Uncle Bob does not have the money himself. However, you know that he is friends with a handful of guys that do. In this case, Uncle Bob would consider your situation- how much you need to borrow, how quickly you could repay, and so on- and determine which of his buddies will loan you the money. His buddy then becomes your lender while Uncle Bob is merely the avenue between you and the lender.

There is a good chance that Uncle Bob is going to want a little something for helping you out. He might just ask you to help clean out his garage. A business loan broker, on the other hand, will add a fee according to what you borrow.

While fees make some people run in the other direction, take some time to think about it first. Remember, the broker is handling pretty much the entire process for you, so of course, it is fair that they ask for a fee. The question is whether or not paying someone is worth it to you. If saving the time and preventing the headache is your priority, the fee should be worth it. Just be sure you ask how much that fee will be prior to signing any paperwork.

Advantages

  • You do not have to research and find a lender for your business– the broker does it for you. Sometimes the hardest part of getting a loan is finding a lender because they tend to have their own requirements and application process. Business loan brokers know the lenders that are in their networks, so they know which lenders to apply for. They can also look at your financial situation from the get-go and determine who will and will not consider your application, saving you a load of time.
  • Business loan brokers can prevent you from being scammed. Business loan brokers know the ins and outs of business loans, so they can spot a scam. Unless you are experienced in business loans, you may not.
  • Business loan brokers do the work and the applying for you. You skip the headache and worry about other important matters while you let the broker handle his or her specialty.

Disadvantages

  • Business loan brokers charge fees for their work. This is in addition to any fees and interest you already owe on the loan. The fee may be anywhere from one percent to 20 percent of the loan amount. On the positive side, they want to be sure they get their fees. This motivates them to find a loan with a lower interest rate so you can afford to pay all you owe.
  • It could take longer than a direct lender, or it could be a lot faster. It really is hard to say and depends on the particular lenders involved. As mentioned earlier, your best bet is to ask all lenders or brokers you are considering how long the process typically takes.

Deciding Between Business Loan Brokers and Direct Lenders

If you are still trying to decide between business loan brokers and direct lenders, here are some questions to ask and some indicators to ask:

  • Is your business new or still very young? Business loan brokers are usually a better option.
  • Is your business more established with a decent financial industry? Do you at least have a business plan with financial projections? A direct lender may have better options.
  • Do you need the money quickly or can you take a little more time with the application process? This can lean in both directions. Some say business loan brokers are faster since they have several lenders that they can work with. Others say that business loan brokers take longer since they have to choose between those lenders. The best way to know is to ask the business loan brokers you are considering and check any reviews you can find about that company.
  • Is this your first business loan? Business loan brokers are worth a try.
  • Do you have a relationship with a specific lender, such as your bank or credit union? You should consider trying them first. If they do not work out, you can always try other sources later.
  • Do you understand loans and all of the jargon that goes with them? Business loan brokers can help you through the process while educating you.

Choosing Between Available Business Loan Brokers

If you feel that working with a business loan broker is the right option for you, here are some things to consider when choosing between them:

Number of Lenders

Ask how many lenders the broker works with. The higher that number, the better chance you have of being approved. If they only want to apply with one lender, you might want to back away. Only applying at one kind of cancels out the benefits of hiring a broker. The point of the broker is to look for the best loan product with the best rates and terms. How can they know which lender will offer you the best if they do not send your information to them?

If the broker insists on applying to just one lender, there is a good chance that the lender or loan they are pushing will provide them with the best benefits. And, we can be honest here, this is about you- not them. If they are not looking out for your best interest, you do not need to do business with them.

Privacy

You need to find out just what happens to your contact information. If there are no privacy agreements, run the other way. You do not want your information sold to others. It is no fun having random calls from salespeople during dinner.

That is all not including the fact that selling your information to third parties makes you vulnerable to identity theft and hacking. If the broker does not protect your information, find one that does.

Fees

How much do they charge in fees? Are they transparent with those fees? If they are not upfront with you about the fees and the loan details, look for someone else. Most of the time, the fee will be a percentage of the loan amount. Therefore, they may not be able to give you an exact amount before hearing from lenders. However, they should be able to tell you upfront exactly what percentage they charge.

And sometimes the percentage changes depending on the amount of the loan. For instance, they might charge 10 percent for loans of $1,000 to $5,000 and 15 percent for loans between $5,001 and $10,000. That is no cause for concern. As long as they can tell you these percentages and the fee scale upfront, you are probably okay. It is when they try to evade your question that you should watch out.

Guarantees

If a broker guarantees that he or she can get you approved for a loan, it is a red flag. Think about it: How can they guarantee something they are really not in charge of? They are not the lender- they just help you find a lender. There is a chance that none of the lenders in their network will approve you for one reason or another. Legitimate brokers will not guarantee anything more than they will do their best for you because that is really all they can guarantee.

Credit Checks

Almost- if not all- lenders require credit checks to approve you for a loan. If the lender does not, that is usually because they are secured with something like the title to your car or a check. If a broker says that they do not run your credit, it might be a scam.

I have known brokers that do not run credit checks at the beginning of the process. When clients first go in to speak to the broker, if the borrower can give the broker their credit score, the broker will get a pre-approval according to that instead of putting a hit on your credit too early in the process. Later, when it is time to actually apply, they run an actual credit check. They might not do it up front, but they do run a credit check at some point through the process. If they say they will not run your credit at all, it is probably too good to be true. Watch out.

Reviews

Check any reviews you can find for the broker. The best references are those from prior customers. If you cannot find any references, you should probably stay away. You have to protect yourself.

Consider SBA Loans

SBA loan requirementsOne very reputable way to find a business loan happens to be the SBA business loan broker. These are loans that are guaranteed through the Small Business Administration, and they can often help many small businesses that cannot get funding through alternate means.

Bad credit does not automatically disqualify you. The Small Business Administration is specifically intended for helping small businesses, and the organization is aware that not everyone has the qualifications to meet the stringent requirements of most lenders.

Again, specific loans may have additional requirements, but these are most of what the SBA requires for you to qualify for its help.

These loans can range anywhere from a few hundred to millions. The SBA can also often find you loans with low-interest rates and some with education to help you through growing your business. Be sure to check out the Small Business Administration for more information.

Conclusion

When you are trying to figure out how to finance a business, you can easily find yourself drowning in a sea of information. That is why it is good to start with deciding which avenue to go through- direct lenders or business loan brokers. Making this decision first can help minimize the amount of research you need to sift through and make a plan of action. There are also and online lenders for your business loan, where you can apply for a loan from your office or home. But about them, another time.

If you have a partner in your business, be sure to discuss this decision with them. And, as always, consider seeking professional advice if you feel it necessary. Your business’s future is too important to leave to chance.

The 9 Best Business Lines of Credit to Consider

Having a line of credit available for your business is important for numerous reasons. As a business owner, you need to understand the business lines of credit. You also need to find the best available credit line for your growing company. Establishing business credit is important for acquiring capital when you need it.

For success as a business owner, your business needs to grow over time. Growth requires capital. Business loan companies work with business owners to help them take advantage of growth opportunities requiring capital. When you first start your company, you won’t have a business credit history. The sooner you start establishing your business credit, the better off you’ll be.

A line of credit for your business helps you do numerous things that increase revenues and grow your company. For example, a credit line for your company could allow you to purchase equipment. In many industries, expensive equipment is needed for everyday operations. A business credit line can also allow a company to hire new employees or invest in advertising.

While business credit lines are important, you need to put research into them. You need to understand how to evaluate available credit lines. You also need to know about the best available business credit lines.

Lines of Credit to Consider For Your Business

We have compiled a list of different options for those looking for a business line of credit loan. You can consider all the lines of credit mentioned below when looking for the best option for your company.

Of course, you first want to figure out what you need. Before you search available lines of credit, know what your company is looking for. This means figuring out what your credit rating is like. It also means calculating how much you want to borrow. Crunch the numbers and plan carefully. Have an idea of what interest rates your company should qualify for before you get started.

Here are the nine best business lines of credit to consider.

US Bank’s Cash Flow Manager Line of Credit

If your company is relatively established, you might want to look into the US Bank’s Cash Flow Manager Line of Credit. This line of credit has relatively strict approval requirements. However, it also offers great terms to those who are approved.

In order to be approved for this line of credit, your company needs to be at least two years old. Those who are approved can borrow as much as $250,000. Companies can have a minimum credit line of $2,000. They can take out the loan for a maximum period of 80 months. The lowest available interest rate is 3.49 percent. In addition to the interest rate, this credit line also typically involves an origination fee of $75.

This credit line is best suited to small or medium businesses. You have a lot of options to choose from with US Bank’s Cash Flow Manager Line of Credit. There are numerous fixed-rate options to consider for those who qualify.


Fundbox

Fundbox is a business line of credit that offers a great deal of convenience. Business owners can enjoy numerous advantages with this credit line. One of the primary advantages is that the application process is automated. Also, the Fundbox line of credit is fairly easy to qualify for. The requirements for approval with Fundbox are quite easy to achieve. Also, it’s worth noting that funding comes very quickly with this credit line.

However, there are a few disadvantages to be aware of. For one thing, the interest rate for this business line of credit tends to be relatively high. Those who work with Fundbox are not able to borrow as much as they might be able to with other business lines of credit providers. The maximum loan amounts are not generally very high.

You don’t have to be in business very long to qualify with Fundbox. In fact, your company may qualify despite only being three months old. The maximum credit limit with Fundbox is $100,000.


Bank of America Business Credit Lines

Bank of America logoAnother possible line of credit option is a Bank of America Business Credit Line. One of the biggest advantages of these credit lines is that the interest rates tend to be low. Also, you can use a credit line from Bank of America over the long term for your business. With Bank of America, you can use multiple business financing products from the same lender. In addition to lines of credit, Bank of America also provides SBA loans, business term loans, and other commercial loans.

One possible disadvantage is that these credit lines are not always easy to qualify for. You will need to have fairly decent credit. Your business will also need to be well established. You also have to meet some revenue requirements. If you want to take out an unsecured loan, your company’s revenue must be at least $250,000 annually. You’ll also need to have been in business for at least two years.


OnDeck

OnDeck logoIf you are a small business owner, you should consider business lines of credit from OnDeck. There are numerous advantages to OnDeck credit lines. For one thing, you can get the funds you need quickly if you are approved. In fact, you can get funds on the same day that you are approved in some cases. Credit score requirements are not particularly stringent. You need a credit score of only 600 to qualify using your personal credit. Another advantage is that there is not a great deal of paperwork involved. The process of applying and taking out the loan is streamlined and simplified.

Some disadvantages to OnDeck credit lines include the fixed-fee structure. This means that you won’t save any money if you pay off the loan early. Another thing to keep in mind is that you have to make payments back on the line of credit on a daily or weekly basis. Also, you need to provide a personal guarantee in order to use a line of credit from OnDeck.


Wells Fargo BusinessLine

Wells Fargo logoRegardless of the size of your company, Wells Faro BusinessLine could suit you as a line of credit. This credit line is appropriate for startup companies. It can also be appropriate for large, established companies. Many business owners choose Wells Fargo BusinessLine because the interest rates tend to be low. Also, this credit line does not include a great deal of additional fees.

You will need to meet some fairly demanding requirements to be approved for BusinessLine from Wells Fargo.


Fundera

Fundera logoFundera is a business line of credit provider with a great reputation. This is a newer lender. The company was founded in 2013. When you do business with Fundera, you’ll know exactly what you’re getting into. Fundera is devoted to providing transport financial products to business owners. However, you may have to deal with high- interest rates and relatively expensive fees with Fundera.

Fundera isn’t only a great source of credit lines for business owners. The company also offers financial products like cash advances, short-term loans, and SBA loans. You can also take out a loan with Fundera to finance a commercial equipment purchase.

Working with Fundera is ideal if you’re feeling overwhelmed in your search for a business line of credit. With exceptional customer service, Fundera will provide you with the advice and answers you need to optimize business finances.


Kabbage

Kabbage online lender logoOne huge advantage of business lines of credit from Kabbage is that they tend to be easy to qualify for. You only need a minimum credit score of 560 to qualify for a line of credit for your business with Kabbage. Another advantage is that the application and qualification process is so quick. In fact, you can qualify in only 10 minutes. You can also borrow as much as $250,000. Once you are approved, you get the funds quickly. You also have easy access to your credit line funds any time and anywhere that you want it.

A Kabbage line of credit is generally designed for shorter terms ranging from six to 18 months. One possible drawback that business owners have to be aware of is that the interest rate can be high. The APR for these loans will typically range between 24 and 99 percent. However, this could be a good option if you absolutely must borrow capital and your company doesn’t yet have strong credit established.


PNC Bank Secured Business Line of Credit

PNC logoYou have a lot of options with business lines of credit from PNC Bank. You can take out either a secured or unsecured credit line with PNC Bank. Secured credit lines are a great idea if you are looking to establish your company’s business credit. These credit lines are especially recommended over the short term to cover revenue gaps. Credit lines are secured by any business assets other than real estate assets.

Because these credit lines are secured, they typically feature lower interest rates. There is a lot of convenience in a PNC line of credit. It’s easy to access the funds. They can be accessed via checks and online. They can also be linked to a company’s business checking account. This makes it quick and convenient to make payments.

The lines of credit offered by PNC Bank range from $100,001 to $3 million. This line of credit will entail a yearly fee of 0.25 percent of the credit line amount.


BlueVine

Bluevine online lender logoBlueVine is another good line of credit provider for companies without strong, established credit. Perhaps the biggest advantage of a line of credit with BlueVine is that the requirements for approval are low. However, this is not the only advantage. BlueVine also has the advantage of offering fairly low-interest rates for those who qualify. The lowest possible interest rate available is only 4.8 percent. Also, BlueVine gets funds out to companies fast. Those who are approved can get their funds on the same day.

Unfortunately, BlueVine lines of credit are not available everywhere. BlueVine cannot offer funds to companies located in certain states. Also, those who cannot qualify for lower rates may have to pay high fees with BlueVine. Business owners typically need to bring in at least $10,000 monthly in revenue for a BlueVine credit line. Usually, business owners need to have credit scores of at least 600 to borrow with BlueVine.

Considerations in Evaluating Business Credit LinesThings to consider

There are key considerations to take into account when evaluating various lines of credit. You need to know how to evaluate options to find the credit line that will optimize your company finances.

The first step to evaluating credit lines is to identify the most important considerations. Make a list of what you need in your company’s line of credit. The following are the many factors to think about.

Requirements for Approval

One of the biggest limiting factors regarding business lines of credit is approval requirements. You can only take out lines of credit that you can be approved for. If your company is new, its credit may not yet be established. This could make it difficult to meet the approval requirements for a business line of credit.

You need to pursue credit lines that you can qualify for. If your business credit is not yet established, your personal credit could help you to qualify. That’s why it’s good to build your personal credit in addition to your business credit as a business owner.

Borrowing Limits

You need to calculate how much capital you need. Lenders always put some limits on the business lines of credit they make available. You won’t be able to borrow as much as you want. You’ll be able to borrow as much as you qualify for.

When you’re getting ready to find a line of credit, you need to know how much you need. Figure out how much capital is necessary for your envisioned project. Then, check out the various borrowing limits for different lenders. Pinpoint the lenders who are offering credit amounts that are adequate for your needs.

Repayment Options

You need to be aware of how repayment is made on the lines of credit you’re considering. When you borrow money, it has to be paid back. You need to factor repayment into your company’s budget. Be aware of how quickly borrowed money needs to be paid back according to the line of credit terms. This will help you with your budgeting.

Repayment convenience is also important. It’s essential that you make all your payments on time to avoid damage to your business credit. That’s why it’s ideal to have automatic payment capabilities available. This way, payments automatically come out of your company account so that they’re on time.

Costs

The costs of your company’s credit need to be carefully considered. Borrowing money from a lender is never free. You’ll need to pay interest on the money you borrow. This is not necessarily the only expense when you borrow. You may also have to pay a variety of additional fees.

A lot of lenders require fees for taking out a line of credit. They also may charge an annual fee for every year this line of credit is open. You’ll also probably have to pay fees if any of your payments are made late. You can, also, explore the benefits of personal loans for your business and how much they can cost you.

Your goal regarding costs is to find the line of credit that is least expensive for your company.

Customer Service

Cost is not the only important factor in evaluating business lines of credit. Customer service also needs to be considered. You may need to contact your lender with questions. You want to work with a lender that will be easy to communicate with. It’s important that you can get someone on the phone to answer your questions as necessary.

Even if everything sounds great on paper regarding a lender, you need to research customer service. You could end up with a lot of frustrations and regrets if you borrow from a lender with poor customer service.

Final Thoughts

As a business owner, you need to explore the above-mentioned business lines of credit. Learn as much as you can about each credit line option. Also, make a list of what credit line characteristics are most important for your company. This will help you to get the capital you need. It will also help you to establish a company credit history.

Once you have established a strong credit history, your company will be able to get needed capital. This simplifies many of the challenges of excelling as a company. Acquiring capital is among the biggest challenges that business owners face.

Established business credit assists your company in more ways than simply acquiring capital. Strong company credit can be helpful when you’re partnering with other companies or devising contract agreements with business partners or clients. A strong credit history shows that your company is dependable and established.

Get started establishing your company’s credit by opening up one of the above-mentioned business credit lines.

The Top Places to Find Federal Business Loan Grants

Side view close-up of two young man shaking hands while sitting at the wooden desk

When you start a business, one of the biggest hurdles – funding – can seem unsurmountable. You can obtain funding using multiple means. One of the basic ways is to bootstrap your business, but if cobbling together small amounts from various areas of your personal budget and maxing out your credit cards does not appeal to you, you can go through the more formal approach of applying for grants or loans.

Best Places to Look For Federal Business Loan Grants

The federal government provides both grants and loans to small businesses. You can find both types of opportunities on the Small Business Administration website. But, since both options would take a really long time to complete the applications for, which of the two best suits your needs? If you still don’t know, keep reading and you may get the answer.

The US federal government offers numerous grant programs to help small businesses fund their start-up, development, or expansion. Some of these programs only extend to specific industries or businesses in specific development phases. You will find most of these opportunities on the website grants.gov.

Small Business Innovation Research Program

The Small Business Innovation Research Program (SBIR) provides grants for entrepreneurial ventures that introduce a commercially viable technology innovation. SBIR focuses on specific areas of development such as clean and safe water, environmental/green construction, healthcare advancement, homeland security, and land revitalization. The program works in concert with numerous government agencies, including:

  • Departments of – Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, Homeland Security, and Transportation
  • Environmental Protection Agency
  • NASA
  • The National Science Foundation

Small Business Technology Transfer Program

You often see the Small Business Technology Transfer Program (STTR) mentioned in tandem with the SBIR program. The government provides workshops on applying for the funding for both programs. It combines discussion of these two programs since many businesses eventually apply for both. While SBIR funding helps launch a technology, such as helping a tech startup fund development of its minimum viable product (MVP), the same company may later develop an expanded use for the technology. The STTR program provides grants for innovative research and development. There must be an existing technology involved, hence the connection to SBIR. STTR small businesses develop their technology in formal collaborations with research institutions. Not all US government agencies participate in the STTR program. Those that do include the:

  • Departments of – Defense, Energy, and Health and Human Services
  • NASA
  • National Science Foundation

Although they each participate in the STTR program and that program has its own application process, each agency also has a say in how things get done. These agencies set their own guidelines and grant deadlines. That means that the DoD may have an open STTR opportunity at a time when DoE or NIH do not. The federal website, grants.gov, lists all open STTR grants and specifies which agencies participate. Here is a brief rundown on the focus of each:

Whew! That’s it for the STTR program. Now you know why it and the SBIR have their own workshop devoted solely to them. The vast program extends across numerous federal agency boundaries and though most use the STTR’s mechanism for application, some add their own special twist to things. You must follow each agency’s quirks and rules.

Federal Grant Programs That Support Service as a Type of Start-up Business

SBIR/STTR makes a great choice if your business engages in R & D, but unless you will create a minimum viable product (MVP)  that will eventually go into mass production, you cannot use the STTR option. You must develop an actual product to qualify for the SBIR. This means you cannot use these options if the business you start provides a service. There are federal grant programs that do support that type of business though. The Innovate HER program from the Small Business Administration provides just such a program.

InnovateHER Women Business Challenge

It hosts a grant contest to open only to women-owned businesses with a business plan. The company must offer an innovative product or service. Rather than apply to a federal level program, the applicant applies to a local Challenge hosted by a local organization. The local challenge winners advance to the semi-final round. Those winners compete at the national InnovateHER business challenge. They must pitch their ideas to expert judges who select the top three businesses. These three receive awards of $10,000 to $40,000. The business can be in the start-up phase, so it works well for those in the planning stage. The program also looks for businesses that improve or positively impact the lives of women.

Tired yet? There are a TON of business loan opportunities from which to choose if you are starting a new business or developing an existing one. The best way to get started is to visit the grants.gov website and peruse the grant programs. Each program has its own request for proposals (RFP).

Okay. Now, if you have never slogged through, I mean, read, an RFP, prepare yourself. If your dentist pulled your teeth without anesthetic, it might be more fun. Sorry to be so honest, but it is the truth.

RFP Application Details

I spent a lovely decade at the University of Oklahoma working in various nerdy, science, and weather/climate-related departments, and wow, have I read a lot of RFPs and written a ton of grant applications. RFPs require a pot of espresso. Nope. I did not mean an espresso shot. I mean you go brew a full pot of coffee but use espresso. RFPs describe the grant program, the specific offer, or need of the agency in excruciating detail. It also includes excruciatingly detailed information on how to format the application.

How detailed you ask?

Let me warn you. You must use the font they say to, the font size, the headers they specify, the order of the items in your line-item budget. You might break into tears while working on one. It is not a girl thing.

They do that because they need to compare actual apple to apples. They need to be able to lay a few budgets next to each other on a table or in a virtual desk and compare and contrast.

Sometimes, the directions for how to prepare the application packet actually goes longer than the application. Your RFP could be 30 pages, but your application will only take 20 to prepare. Go make your coffee now.

Choosing a Grant or Loan

At the most basic level, the difference between a grant and a loan boils down to whether you need to pay it back. A grant you get to keep the money without repayment while with loans you must repay all of the funds within a specified period. Some federal loans may charge zero interest or feature very low-interest rates.

The other truly basic difference is that with a grant, you must spend the funds exactly as the grant specifications say you may. With a loan, in most cases, you get to spend the funds in the way which you would like.

The thing they have in common is paperwork. You have to put together an application package. This requires a cover page with titling and categorical information provided by the grant funding application organization; an executive summary of both the need and the intended use of the funds; budget, typically line-item, and a budget description that details each line item; a description of any positions to be funded by the money; and a descriptive section that describes the details of the need, the reasoning behind the grant or loan request, delves into the existing research or product development, and explains the anticipated or desired outcome of the project.

Grants and loans do not provide a shortcut to successfully funding. You will put just as much time in as you would on landing angel investor funding or entertaining a venture capital firm. Some loans do require you to stick to the spending you detailed in the application. Read the requirements carefully.

Federal or Private Foundation or Lender Funding?

There are many options to finance your business. This article focuses on your federal funding options using business grants or business loans. Private foundations and your local banks also serve as options for funding. While this article focuses on the government, I will provide a quick, short list of private grant opportunities for small businesses:

  • Bill and Melinda Gates Foundation Grand Global Challenges
  • Caleb Brown Urban Entrepreneur’s Community grant
  • Eileen Fisher grant program
  • FedEx Small business grant
  • InnovateHER Women Business Challenge
  • Nav’s “Legitify Your Small Business” grant

Loans, You Can Take Out Loans, Too

Maybe you think that loans are not what you want. You do not want to pay back the money but wait. In many cases, a federal business loan makes great sense. That is because it helps you build your business credit while it funds your business needs. Plus there really is no business loan shopping since the sources remain so limited.

A government loan gives the new business the best chance at a yes. Most for-profit lenders refuse loans to anyone without strong credit and a great financial history. You do still need to have decent credit, but you can rely on your personal credit if the business is in the start-up phase. Like the grants, you must follow program guidelines including the repayment period and interest rates. These rates are far less than those in the for-profit sector though. Also, loans require no competition. As long as you are creditworthy, you will receive the money.

If you take out a loan though, you MUST pay it back. If you default on a business loan, you essentially lose your business. You can have your equipment repossessed. Your lack of repayment could also result in a business lien, a UCC filing, or cause you to need to file bankruptcy. If you do not pay back a business loan, you have ruined your credit. Your Dun & Bradstreet report will tell the dastardly tale and no organization will do business with you. You think I am kidding. Every business deal relies on your D&B.

Create Your Business D&B Account

Business does occasionally use Experian but typically relies on D&B reports. You must set up an account with the organization because it does not automatically monitor a business’ credit. You must register with your FEIN. All federal grants and most of the federal loan programs require you to have a D&B.

Setting up the account is a simple process. You can do it online. I set up the D&B for my consulting firm in 2013 and found the process straightforward. You will need essential business information in front of you including your physical address, mailing address, banking information, and your FEIN. Let me say it one more time: you cannot apply for federal government grants without a FEIN and a D&B account.

Where to Find Federal Business Loans

Although the US federal government is huge, and I mean massive, the agencies that offer loans are few. There are two. Yes, really.

The USDA and the SBA.

That is it.

USDA

The USDA offers low-interest loans to agricultural producers. In case you wondered, an agricultural producer means a farmer or a rancher. The government and academia really LOVE fancy terms. The Department of Ag also offers help to spur the development of economic growth in rural communities. This means that some rural businesses related to agriculture may also qualify. You can apply for these loans through your local Ag Development office or online at the USDA website. While it might seem like it would be simpler to just go to the website, you will probably benefit from a visit to the local Ag office. The personnel there specialize in these loans and their knowledge can help you build a stronger loan package.

SBA

The SBA authorizes the loans and provides a government-backed guarantee so that lenders know their risk is absolved if you do default since the government will pay off the balance. The Administration offers a number of loan programs, each targeted toward a specific business need.

  • 7(a) Loan Guarantee Program – This is the loan for startups and expansion. A business can obtain a loan of up to $5 million through this program
  • MicroLoan Program – This program provides loans for short-term purposes including office furniture, computers, transportation, or other goods. A business can obtain up to a $50,000 loan
  • 504 Fixed Asset Program – Businesses with a business model the provides a direct benefit for their community can apply for these loans that offer a fixed-rate and a long term. The latter makes these easier to pay off since the length of time spreads out the payments so they are smaller. The typical community benefits include jobs or introducing needed services to an underserved area. A business can obtain up to a $5 million loan
  • Disaster Assistance – When a natural or man-made hazard impacts a home or a business structure, this loan program provides low-interest, long-term loans to fund property repairs to the pre-disaster condition

Every program requires a good business credit score and report. Each state has an SBA office. While you can use the website to apply, visiting in person can help you by letting you meet with a program representative who, like with the USDA loans, can provide tips and advice on how to best present yourself in the loan package.

In Conclusion

You can get a loan or a grant for your business to help with startup costs or to expand your operations. The federal government provides numerous programs for these grants and loans. Get started on the USDA and SBA sites for business term loan lenders and grants.gov and usa.gov/grants for competitive today.

How to Start a Business Without Going Into Debt

Starting a business and being self-employed is a great way to enjoy greater freedom and independence. When you run your own business, you are your own boss. You’re also not financially dependent on another entity. However, it costs money to start a business. If you want to know how to start a business, you need a way to fund your business venture.

Launch Your Own Business Without Going Into Debt

There are numerous challenges to starting a business. Though being self-employed is fulfilling and exciting, it’s not necessarily easy. Unfortunately, a lot of businesses fail because those who start them take on too much debt. You want to start a business without going into debt.

Fortunately, you have a lot of resources available as a new business owner. Do your research to explore these resources. Many resources available to new business owners will help you cover startup costs. Most types of businesses require capital out the outset. Hopefully, you have some savings you can devote to your venture. If not, you may need to acquire a small business loan.

Primary Concerns in Starting a Business

You might feel overwhelmed at first when you’re starting your business. It’s true that there are numerous concerns when you learn how to start a business. Yet you can break down the task into individual steps. Take things one step at a time. This will allow you to start your business without becoming overwhelmed.

Make a list of all the main concerns in starting your business. Then, you can get started without feeling overwhelmed. Focus on one task at a time. The following are five basic steps you’ll go through when you’re starting up a successful business.

Developing a Sound Business Plan

Anyone who knows how to start a business understands what a business plan is. A business plan is essential for any new business. You need to have a plan for what industry you’ll be in and how you’ll make money.

A business plan isn’t just about deciding what kind of company you want. It should also include strategizing about what will give your company a competitive advantage. Any business faces competition. There are going to be other companies out there offering the same product or service. When devising your business plan, you need to think about why clients will choose your company over the competition.

Creating a Separate Business Entity

There are numerous legal setups for a business to choose from. The simplest type of business is a sole proprietorship. While you can set up a sole proprietorship, it’s a good idea to choose a business setup that creates a separate legal entity. This way, your own personal finances are separate from those of your company. This means that you cannot be personally pursued for your company’s debts and liabilities.

It’s best to discuss your business setup needs with an accountant when learning how to start a business. Your accountant can explain to you the pros and cons of particular setups including partnerships, corporations, and limited liability companies.

Financing Your Business Venture

Starting a business costs money. There are numerous things you’ll need to pay to start your business. You’ll need equipment to offer a service or create a product. You also may need to hire employees. You’ll even have legal and accounting expenses you’ll need to cover in the beginning.

Knowing how to finance a business is important. It’s unlikely that you’ll have all the money you need to finance your business in savings. Even if you do, you might not want to risk all of your savings on your new business. You might be able to cover needed capital through savings initially. However, over time your company will hopefully grow. Business loans are often used to finance the expansion of a pre-existing company.

You need to know what sources of financing are available as you establish and grow your company.

Establishing Credit for Your Company

To fully establish your company, you’ll need to establish credit. This way your company can rely on its own credit history to secure business loans. You don’t need to put your own personal credit on the line when taking out a business loan. Establishing credit is a key step regarding how to start a business.

At first, you’ll need to rely on your own credit history to acquire business financing. However, you can build your company’s credit history over time. Take out business loans and pay them off on time to build on the credit standing of your business.

Growing Your Capital

In addition to establishing business credit, you should also be accumulating capital for your company. As your company starts to make money, set funds aside in savings.

Create a budget for your company. This budget should include setting a certain portion of your profits aside for savings each month. These funds can be used down the road to finance business expansion and new projects. Grow your company’s capital to improve its prospects for the future. Setting funds aside also gives you an emergency fund that can keep the cash flow going when business is slow.

Loan Options for Businesses After You’ve Established Solid Revenues

As you learn how to start a business, you need to explore business loan options. You might not qualify for every type of business financing out there. The trick is to find the options that you do qualify for. The more business financing resources you are aware of, the greater your chances are of acquiring financing.

Below are four of the major types of financing available to young businesses. Explore all these options. Even if you cannot qualify for one of these financing options now, your company may be able to down the road. For now, learn as much as you can. You can keep these possibilities in your business’s financing arsenal. Then, you can rely on each one as necessary to get the capital you need.

Personal Loans

When you first start out, personal loans may be important for financing your company. Your company won’t have any credit history. Therefore, you’ll rely on your own credit history. Those learning how to start a business usually need personal loans to finance their venture.

When you take out a personal loan for your business, you simply borrow the money yourself and put it toward your initial business expenses. Hopefully, you have strong personal credit. If not, you may need to take out a secured loan. Otherwise, you can consider some of the other financing options.

You can get a loan from a traditional bank or online lender. If you’re interested in getting a loan to start your business, let Loanry try to help you. Insert your information and you may get offers that suit your needs best.

SBA Loans

Small Business Administration (SBA) loans can help many young companies get financing. These loans are guaranteed by the Small Business Administration. Because they are backed by the SBA, these loans generally have less strict credit requirements.  The lender takes on less risk in lending to the borrower because the loan is guaranteed.

Although the requirements may be more lenient, SBA loans entail a thorough application process. You will need to provide a good deal of information to the lender through the application and your financial documents. However, these loans are a great deal for those who are approved. They feature relatively low interest rates. They can help you build your business credit over time.

Private Loans

You should consider the possibility that you have private loans available. Perhaps you have a family member or business partner who can put up some capital for you. This could be a great way to get the capital you need with little or no interest. However, not everyone has the possibility of private loans available.

Consider personal and professional contacts in your network. Perhaps you have contacts who would be willing to put money toward your venture for a cut of the profits.

Crowdfunding

Another way you might acquire startup business financing is through crowdfunding. Crowdfunding involves using social media to get your personal contacts, future customers, and investors to contribute funds. Do some research on crowdfunding platforms you can use on the web.

Do you have a large network of contacts and a strong social media presence? If so, you might be able to make crowdfunding work for you. It takes hard work and engagement to raise money through crowdfunding. However, crowdfunding is becoming an increasingly popular way for young companies to acquire financing.

Considerations When Borrowing for Your Business -Avoid Debt You Can’t Afford

Before you borrow for your business, you need to think things through carefully. Knowing how to manage to finance is an important part of how to start a business. There are a few considerations you absolutely must take into account before borrowing.

If you’ve borrowed personal loans before, you have a basic understanding of how business borrowing works. Yet you need to analyze loan considerations within the unique context of business borrowing. The following are three things you must consider before taking out a business loan.

Loan Term

You need to decide on an appropriate loan term for your needs. The loan term is how much time you have to pay back the loan. A longer loan term gives you more time. However, longer loan terms also usually mean higher interest charges.

You need to work out an appropriate loan term with your lender. You also need to consider what your monthly repayment amount is. If your loan term is shorter, monthly payments will probably be higher.

Create a budget for your business borrowing. Don’t borrow so much that you won’t be able to keep up with payments.

Interest Rate

Interest rates are another key consideration. The interest rate is how much the loan will cost you. You want to get the lowest interest rate possible. You should try to avoid loan interest rates of over 20 percent. However, you may not have a lot of options when you’re first starting out.

A good interest rate on a business loan would be 10 percent or lower. If all you can qualify for is a loan with a higher interest rate, you need to be careful to avoid getting in over your head. You might even want to take some time to build up your credit before borrowing.

Fund Allocation

You should know what you’ll spend loan funds on before you borrow. If you’re borrowing for business startup funds, you might be putting money toward numerous expenses. This means you need to decide how to allocate loan funds. Put careful thought into this consideration. Set your priorities regarding business spending. Pay for the most essential needs of your company first.

Tips for Borrowing for Your Business Venture

Business borrowing requires a great deal of thought and planning. When you borrow, your business takes on debt. Debt can quickly get out of hand if you’re not careful. If you want to know how to start a business successfully, you need to avoid debt that gets out of hand.

Fortunately, there are many things you can do to protect your fledgling business from too much debt. The following are four helpful tips that will ensure that you borrow carefully to fund your business.

Minimizing Expenses

It’s important to minimize expenses in the beginning. Learn how to start a business the smart way to minimize expenses. The early days of your company’s existence are the most fragile. Saving money should be a priority. You should focus on maintaining a healthy cash flow. This means you need to avoid unnecessary expenses.

Finding Free Options

Reflect carefully before paying expenses. In the early days, you should take advantage of free options that are available to you. Don’t hire on too much labor if you can handle the workload yourself. Also, avoid paying for expensive equipment if you can rent it. Take advantage of free trials and subscription software usage agreements to keep your overhead expenses as low as possible until your revenue grows.

Avoiding Too Much Debt

Your priority is to avoid getting overwhelmed with debt. Borrowing might be necessary. However, you need to have limits in terms of how much debt you take on. Keep careful track of your existing debt. Also, track the progress you make with paying your debt off.

You might experience the temptation to borrow more and more. Borrowing may become increasingly easy as your company becomes established. Yet you shouldn’t borrow just because you can. Scrutinize your borrowing options carefully. Don’t jump on every opportunity to borrow that presents itself.

Only Borrow When Necessary

Never borrow if you can pay for an expense in cash. When you learn how to start a business, make sure you stress only borrowing when necessary. When you borrow, the money you use costs you money. Interest expenses can be very high if you borrow frequently.

Before you take out a business loan, make sure you’ve considered every other option for handling expenses. Only then should you commit to a loan. Also, pay off loans as early as possible. If you have a surprisingly good quarter, put a chunk of profits toward paying outstanding debts.

Here are two other things to remember about limiting your borrowing.

Take Out Private Loans When Possible

You may be able to get a private loan from a friend or family member. This might mean you won’t have to pay interest. Always take this option when it is available. Private loans generally have more lenient terms and are more affordable.

Analyze the Pros and Cons of Each Borrowing Option

If you’re undecided about borrowing, consider listing the pros and cons of taking out a particular loan. This is a good way to make an informed decision when you borrow. Make sure you’re putting enough time and thought into analyzing your options. You don’t want to jump into any loan agreement without adequate research and consideration.

Final Thoughts

Now that you understand a bit more about how to start a business, you can put this knowledge to use. The sooner you start your business, the sooner you’ll start reaping the rewards. Enjoy a more fulfilling professional life by working for yourself. Those who are business owners generally report a great deal of satisfaction in being able to make their own way professionally.

Are you tired of depending on your employer? Would you like to increase your income? Do you feel at a dead-end in your job? Starting your own business might be the solution. The only obstacle is getting the capital you need to fund your venture.

Being a business owner requires persistence and resourcefulness. By using the financing ideas mentioned above, you should be able to get the capital you need. Be cautious and disciplined in the early days. Resourcefulness and discipline will allow you to start a business without going into debt.

A Business Loan Terms and Definitions Handy Guide

Side view of young businessman sitting on chair in interior with business sketch.

You might have come into contact with certain loan terms. That is if you ever tried obtaining an auto loan, student loan or a mortgage. But when you business loan shop, you need to understand business loan terms and definitions. Because this type of loan includes a lot of specialized languages, this is our topic today.

A business loan can contain collateral requirements. Because of this, avoid signing any document you do not completely understand. Most importantly, you need to understand the basics of business loans. Remember, you need to understand every word. Because you could be signing away your business if you default on the loan. Therefore, it is a good idea to keep a copy of this business loan terms and definitions guide with you. Especially while you read over the loan application and the loan documents.

Article Warning: This will not be the humor infused feature article to which you have become accustomed. This is a glossary.

Business Loan Terms and Definitions: Glossary of Terms

This mini-dictionary provides you a quick, efficient method of finding the term you need. It will help you understand it and its related or similar terms. Also, you can keep this open for finding terms using control plus “F”. Do this especially while you read the loan documents from your financial institution. These documents will include the information and documents you need to include with your loan application. Also, you’ll be given explanations of the terms used on applications and the terms used in loan documents. When it comes to your financial education, knowing this stuff is the basics. You simply cannot do anything in the bank or when communicating with the lender if you don’t know what they are talking about.

Because of this, it’s always important to get to know the basic terminology, whether you are getting a loan, a mortgage, a credit card, or something else. This is the only way to avoid being tricked into accepting something you would not normally accept. And by normally, I mean had you known what it actually means. So make sure you check your knowledge before entering any kind of financial talk. This blog encompasses all relevant business loan terms. Maybe you know some of them, so it’s great to revise. And maybe you’ll learn something new. I hope you will.

So, let’s jump right in and start because you definitely need to know this awesome stuff.

Financial Statement Terms

Firstly, when applying for a business loan, you will need to place with the loan application numerous supporting documents. As you maybe know, these documents include financial statements. These statements describe the current state of your business and forecast its potential. We’re not going to go into each individual document, what it shows and why the lender needs it. But we’ll try to cover as many terms as possible which you may come across when you start applying. Remember, the internet is full of useful information. Loanry is a credible source you can use to research various topics about business loans, so use it!

Assets and Balance Sheet

The first two terms we are going to discuss are assets and balance sheets. Assets are any item of value or ownership or interest in personal or real property. It can be leveraged as collateral for obtaining a loan or to pay off a debt. On the other hand, a balance sheet is a financial statement typically calculated monthly. It defines the assets, liabilities, equity and net worth of an organization as of a specific moment in time. You can see how relevant these are when you’re applying for a loan.

Business Plan

Secondly, we have a detailed document that defines your business framework, strategy, and development plan. These are typically professionally researched, written, printed and bound. The contents of this document include an executive summary, industry or sector overview and how your business fits within the sector. Also, it includes market analysis, competition analysis, your marketing plan including your Unique Selling Proposition, management plan including your specific legal structure.

Moreover, it consists of a complete accounting of management resources, operating plan, financial plan with detailed financial statements, balance sheet, income statement. Also, it includes the cash flow statement or cash flow projection if yours is a new business. The business plan’s appendices and exhibits include marketing studies, product photographs or mockups and relevant legal documents. Businesses often hire a consultant to lead the research and development of a business plan.

While we’re here, let me just take a short detour. A business plan is something you should definitely have, regardless of whether you’re planning to get a business loan or not. This is literally your way to success. Without a carefully constructed plan to guide you as a new entrepreneur, you have no chance. I mean, maybe you do, but it’s much slimmer. A business plan means that you invested time in the route which you are going to take so you would succeed. And lenders like to see that.

Business Revenues

Thirdly, we have business revenues. This is the amount of money a business receives in a definite time period such as the first quarter. This figure includes deductions for returned merchandise and discounts. Your business revenue, also called gross income, is the figure you subtracted from when calculating net income. When you apply for a loan, the financial institution will require full disclosure of the business revenue, typically for the past three years, and your Debt Service Coverage Ratio (DSCR). You do not have this information when founding a new business, so you forecast projections based on anticipated product sales.

Capacity

Onto the next one: capacity. This refers to the repayment ability of an organization. Part of a loan application consists of the capacity documentation which includes a repayment schedule accompanied by an explanation of the sources of the repayment funds. An organization’s capacity includes its revenues, expenses, credit history, cash flow and timing of cash flow.

Capital

This term refers to the cash, assets and the organization utilized in transacting its business; also, the owner’s investment in the organization. The loan officer will consider both the capital’s amount and quality.

Collateral

The next term we’re going to talk about is collateral. This refers to the sum total of assets personally owned by the applicant that will be offered as loan security. Banks require collateral, but alternative lending platforms typically require little to no collateral. Therefore, you must provide documentation of your collateral.

Current Ratio

Next we have the current ratio. This is a measure of liquidity calculated by dividing the current assets by the current liabilities. The greater the ratio, the more significant the cushion between an organization’s current obligations and the organization’s ability to meet them.

Equity and Equity Participation

The next two terms are equity and equity participation. Equity refers to the value of an organization’s property greater than the total debt held on it. This can be an owner’s share or percentage of a business that earns them a return of the profits. This type of investment carries a greater risk than a loan, but also provides greater returns, if successful. On the other hand, equity participation refers to an owner of an organization or partner in a business venture. Importantly, the equity participant provides an investment in exchange for a potential return on investment (ROI). ROI depends on how profitable the organization becomes.

Fund Balance and Limited Recourse

The next two are pretty short and easy to remember. On one hand there is fund balance. This refers to a calculation of total assets minus total liabilities. Also called net worth in a nonprofit organization. On the other, we have limited recourse which are rights only to specifically stipulated assets to satisfy an unpaid debt.

Loss Reserves

Next, are loss reserves. This is a permanent capital or a part of the fund’s earnings that the board of directors has designated as a reserve against a potential loan loss. The loan reserve remains unavailable for lending purposes. Loan loss expense must be reflected as an annual expense deduction on an accrual basis. The loan loss reserve is shown as a contra asset that reduces loan assets. On a balance sheet, the loan loss reserve is shown as a loan portfolio deduction.

Net Working Capital and Net Worth

Finally, we have two terms that are known to you. Net working capital in business refers to a calculation including in the loan application of current assets minus current liabilities. Lastly, when it comes to financial statement terms is net worth. This refers to a calculation achieved by subtracting the total liabilities from the total assets. The aggregate net value of the organization. This is called fund balance in a non-profit organization

Business Loan Terms and Definitions: Real Estate Terms

In business, real estate loans have a few terms of their own. These apply to types of business loans offered only in this specific industry.

Firstly, there is a bridge loan is a short-term loan generally used in real estate that provides temporary financing until the buyer obtains permanent financing. Another important term is interim financing. Similar to a bridge loan, this provides a short-term loan to in effect until the debtor obtains permanent financing

General Business Loan Terms

Some business loan terms do spill over into other types of loans. And ome you will hear in investment circles or in discussions of economic theory and practice. Let’s cover those as well, so you have a complete glossary of all the basic terms you could come across.

Bad Debt, Capitalization, Capital Markets, and Cash Flow Financing

  • Bad Debt. A debt the creditor cannot collect which becomes worthless
  • Capitalization. A term used in long-term debt which refers to the amount borrowed, what is repayable to third parties and the permanent capital
  • Capital Markets. Those financial markets, including institutions and individuals, that exchange security, especially long-term debt instruments
  • Cash Flow Financing. A short-term financing option to cover cash shortfalls when revenue is forthcoming such as payment of receivables

Conditions

Refers to an economic climate term that encompasses externalities such as general economic particulars. And the financial situation of the lending institution and the borrower. The term also includes reference to the loan’s purpose. So when filing the loan application, the applicant must include details on the money’s use. I’m going to quickly mention something that’s maybe obvious. You can always ask about any terminology that you may not understand clearly. Or you can go online (like you’re doing right now) and research yourself. Just don’t let it go and hope for the bast.

Covenant

A formal agreement or contract that agrees to do or not do a set of items. It can be a part of a deed. The covenant includes full disclosure, preservation of net worth, asset quality maintenance, adequate cash flow maintenance, control of management. Also, it includes control of growth, assurance of legal existence and concept of going concern and provision for lender profit or program goals.

Credit Score

Refers to the business’ FICO score. Yes, businesses have them, too. There are several kinds of business loans. But for all of them, this remains the single most important factor when attempting to obtain a business loan. When looking for a loan to establish a business, the applicant must use their personal FICO score to obtain the loan. This applies to both bank loans and Small Business Administration loans.

Current Asset and Current Liability

  • Asset. An asset that typically converts to cash within a year
  • Liability. Liability that will normally be repaid within a year

Debt, Debt Service, Debt Service Coverage Ratio, Debt Service Reserve

  • Debt. The amount owed on a loan. This includes the loan amount and its interest. Plus fees that are secured by a bond, note, mortgage or another instrument. The note includes the repayment and interest provisions
  • Debt Service. Refers to the regular due payment required to meet the debt agreement. It typically comes due on a monthly, quarterly or annual basis
  • Debt Service Coverage Ratio. Refers to your debt relative to your income. Banks prefer a DSCR of 1.25 or greater
  • Debt Service Reserve. Refers to cash reserves the borrower sets aside to repay the debt in case the business operations generate insufficient funds. This may be required by the covenant

Default, Delinquent, and Due Diligence

  • Default. Refers to a failure to repay the loan or comply with the covenants
  • Delinquent. This refers to late, overdue, past due or unpaid bill or loan
  • Due Diligence. Refers to the practice of fact-checking the materials and critical assumptions the borrower presents. It includes confirming the accuracy of financial statements, verifying income sources, the value of collateral assets, borrower tax status and other material facts

Endowment or Trust, General Recourse, and Guaranteed Loan

  • Endowment or Trust. A fund containing assets that earn income and restricting income withdrawn from the fund to that earned by the assets
  • General Recourse. Lender’s right to demand payment from the debtor, accessing their general assets without seniority in access to specific assets
  • Guaranteed Loan. Refers to a third-party’s pledge to cover the debt payments. Or perform an obligation if the debtor fails to make payment

Intermediaries

Refers to institutions with special lending capacities that obtain capital through equity and low-interest loans. They typically obtain capital from other funders such as foundations. This creates a lending pool from which the intermediary processes many small loans or investments. This includes some banks, credit unions, loan funds, and venture capitalists. Don’t let the fancy terminology scare you or confuse you. By now you saw that almost all terms have pretty simple explanations.

Lender-Agnostic Market and Leverage

  • Lender-Agnostic Market. Refers to brokers or loan marketplaces that connect borrowers with alternative and traditional lenders.
  • Leverage. Refers to the practice of utilizing long-term debt to secure organizational funds. It can also refer to financial participation by other sources in social investment.

Liabilities

  • Total Liabilities. The total value of financial claims on a firm’s assets. Equals total assets minus net worth
  • Limited Liability. Limitation of shareholders’ losses to the amount invested

Line of Credit, Linked Deposit, and Loan Agreement

  • Line of Credit. Agreement by a bank that a company may borrow at any time up to an established limit.
  • Linked Deposit. A deposit in an account with a financial institution to induce that institution’s support for one or more projects. By accruing no interest or low interest on its deposit, a foundation subsidizes the interest rate of the project borrowers.
  • Loan Agreement. A written contract between a lender and a borrower that sets out the rights and obligations of each party.

Market Rate, Negative Covenants, and Opportunity Cost

  • Market Rate. The interest rate at which a company receives its loan funds. Businesses can receive a zero-interest rate or below market rate interest rate on program-related investments.
  • Negative Covenants. Refers to an agreement or contract that stipulates actions or events the borrower must prevent.
  • Opportunity Cost. This refers to an economic principle related to the Pareto optimal. It describes the missed potential benefit from not following the financially optimal methods.

Personal Guarantee

You probably know this term from auto loans or student loans. It refers to a document that the borrower signs stating a legal promise to re-pay. In a business loan, this guarantee typically includes specific methods including liquidating collateral to pay the remaining balance. As you can see, there are some terms which appear in different context. Make sure you pay attention to these. And even if you are absolutely sure you know a term because of your past experience, it isn’t a bad idea to double-check the meaning in the context of business loans. Moreover, you maybe learn something new. And you also may save yourself from making a huge mistake.

Portfolio

This refers to an investment term describing the total sum of assets held by an individual or group. This includes those that provide both financial and non-financial returns. Typically, a portfolio includes a variety of assets vis a vis type and size. They are referred to as the asset mix or portfolio balance which maintains an appropriate risk and return level.

Principal and Program-Related Enterprise

  • Principal. Refers to the amount of the loan. Importantly, you pay interest based upon the principle of the loan
  • Program-Related Enterprise. A revenue-generating enterprise that promotes the organization’s social purpose goals. It can be a product or a service that charges a range of prices from fee-for-service to a full-scale commercial venture

Program-Related Investment, Promissory Note, and Receivables

  • Program-Related Investment. Refers to a fiscal term including all asset purchases, conversion of asset(s) to charitable use, equity investments. Also, it includes linked deposits, loans, loan guarantees, and some recoverable grants.
  • Promissory Note. Similar to the personal guarantee, the promissory note is a legal document which the borrower and the lender sign
  • . In this note, the borrower promises to repay the loan. And that provides an evidentiary document of the borrower’s indebtedness
  • Receivables. It refers to the accounts receivable of an organization which refers to the amount owed to the business typically due to an extension of credit

In Conclusion

You probably did not guess that borrowing money for your business would use so many different business loan terms and definitions. If all your loan experience consists of auto loans or educational loans, you probably had a few surprises. However, you now know many of the terms specific to business loans which can help you in business loan shopping. As with any part of your finances, you need to be up to date. It’s important that you understand everything about loans, credit cards, mortgages when you read about them.

Without proper education, you will not be able to understand your rights and your obligations. You’ll certainly get into financial troubles if you don’t understand terminology and definitions. New ones pop up every day as the lending community changes and grow. As recently as two decades ago, there was no online banking. But today, we bank online and apply for loans on the Web. Check back with us here at Loanry. You’ll learn new business loan terms and definitions as online banking and investing develop. And you can also find a lender who may give you a loan.

The 7 Best Places to Shop for a Business Loan

Magnifying glass with searching for money bag put on the wood

People decide to start new business ventures for a wide variety of reasons. If you’re one of the millions of businesses that operate in the U.S., whatever your reason may be for starting a business, you may find it necessary to apply for a business loan. But before you begin to shop for a business loan, there are several things that you need to be aware of beforehand, such as the type of loan you need, how much you need to borrow, how long it may take you to repay the loan and a host of other things. In fact, the more you know about the kind of business loan you need the better.

You will need to be armed with enough information to provide to the lender. That way they will be able to make a more informed lending decision about your loan or some other financial business option request.

Best Lenders for Your Business Loan

If you’re interested in applying for a business loan now or in the immediate future, below is some information that will help you as you begin to shop for a business loan. It will also help you identify the best seven places to shop for a business loan.

Below is a list of seven places to shop for a business loan.

BlueVine

Bluevine online lender logoBlueVine is a lender that is the best for borrowers that have a FICO Credit Score of as little as 530. They offer a variety of different business loans that include invoice financing, business lines of credit, and term loans. BlueVine assists businesses that have been in operation for a minimum of six months and have a minimum annual revenue of $100,000. Their loan amount ranges between $5,000-$5 million. The term of the loan is between six months to a year for business lines of credit and between 26 to 52 weeks for term loans.

Concerning the credit scores, a credit score of 530 is the minimum requirement for invoice factoring. A credit score of 600 is the minimum requirement for either a line of credit or a term loan.

BlueVine does not have loan origination fees and has an A+ rating with the Better Business Bureau.

StreetShares

Streetshares logoStreetShares is the best lender for borrowers who have been in business for at least six months. They provide term loans, invoice financing and lines of credit to business owners. Their loans start as low as $200,000. They require that a business has been operational for a minimum of one year but has provided loans to those who have been in business for a minimum of six months. There is no minimum annual revenue requirement or FICO credit score.

Their loan amounts generally range from the lowest of $2,000 up to approximately $250,000. They also provide loans for $200 for new customers. The term of the loan is between three to 36 months. Their origination fee is either 3.95% or 4.95%. StreetShares has an A + rating with the Better Business Bureau.

TD Bank

TD bank logoTD Bank is the best lender for providing online loans as well as lines of credit for less than $100,000.  They have roughly 13 branches throughout the US and offer SBA back loans. They also offer business lines of credit to small business owners as well as equipment loans, commercial mortgage loans, and expansion and renovation loans with TD Bank.

Their SBA loans that are offered include the following:

  • Express loans
  • 7(a)
  • 504

Funding Circle

Funding logo online lender logoFunding Circle is considered one of the best lenders for loans that have a maximum term of five years. They offer fixed rate term loans for companies that have been in business for two years. They do not have an annual minimum revenue requirement but the minimum requirement for the FICO score is 620.

As far as their loan amounts, they provide loans between the range of $25,000 – $500,000 and the terms are between six months up to five years.

They charge a one-time loan origination fee on each loan that they fund. Their loan origination fee is between 3.49% to 6.99% based on your creditworthiness. The fees and terms of the loan are both determined during their underwriting process.

Funding Circle has an A+ rating with the Better Business Bureau.

Rapid Finance

Rapid finance logoRapid Finance is known as being the best lender for providing loans in the range of $500 up to $100 Million. The term of their loans is between three to 60 months. They have a wide variety of different loans that include invoice factoring, bridge loans, merchant cash advances, business lines of credit, as well as asset-based loans. To qualify for their loans, they require businesses to be established and operational for a minimum of three to 6 months.

Their annual revenue requirement, minimum FICO score, and their loan origination fee has not been disclosed. However, Rapid Finance does have an A+ rating with the Better Business Bureau.

OnDeck

Ondeck online lender logoOnDeck is considered the best lender that does not require collateral. They have been in business since 2007 and have served $100,000. They provide business lines of credit with fixed interest rate and term loans for up to $500,000. The minimum loan amount is $5,000 and they require that you’ve been in business for at least one year to qualify for their loan.

OnDeck requires that business owners have a FICO credit score of at least 600. They have not disclosed the term of the loans or their loan origination fees. They have an A+ rating with the Better Business Bureau.

Accion

Accion lender logoAccion is a great lender for start-up companies. The loan between 15,000 up to $1 million however, they lend more of the lower end. It’s typical to see loans for a minimum of $300 up to $250,000 however. Their interest rates are 7% and there’s no mention of a minimum annual income threshold on how long the company needs to be in business prior to being considered for funding.

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What You Need to Know Before You Shop for a Business Loan

Before you shop for a business loan, you need to know what the loan is for because the lender is certainly going to ask. In fact, when completing your loan application, it is likely that you will need to plug this information into the application along with the loan amount. Below are some reasons why most business owners need additional financing and the type of loan lenders provide.

  • Seed Financing
  • Equipment Financing
  • Inventory or Purchase Order Financing
  • Financing for General Working Capital
  • Business Lines of Credit
  • Funding Needed To Establish Credit
  • Commercial Real Estate Loans

Types of Business Loans

As you begin to shop for a business loan, there are different types of business loans that you may not be aware of. However, it’s certainly important to learn more about them so you’ll know exactly what to look out for as you shop for a business loan.

Traditional-Term Business Loans

Traditional-term business loans consist of loans whereby a lender provides a borrower with a certain amount of money.  The terms are set for repayment over a designated period of time along with applicable interest and fees.

The term of the loan is typically between the range of one to 25 years. It is offered as a short-term business loan, an intermediate-term business loan or a long-term business loan.

The interest rates could be either a fixed or a variable rate. The approval process for traditional-term business loans is typically pretty rigorous. The approval often requires collateral to qualify.

Traditional-term business loans normally have flexible terms and include a monthly repayment schedule. These loans have been known to fund long-term projects and are also offered to established small business owners who have a proven track record and good credit. These loans typically include funding for major capital improvements, construction projects working capital or business acquisition.

The term of these loans, as well as the interest rates, are based on your creditworthiness.

The duration of typical business loan terms usually falls into three different categories: short-term, intermediate-term, and long-term loans. Each of which is spelled out in more detail below.

Short-Term Business Loans

There are several types of short term business loans. But they are typically designed to help business owners get over a hurdle or a financial roadblock. It’s typically for those who are having cash flow issues and need to make large purchases – typically for inventory. They are often solution-oriented and target small business owners who do not have a credit history.

When you shop for a business loan, you’ll notice that the short-term business loans typically have higher interest rates and higher loan origination fees. And because they often assist business owners get over a financial roadblock, they are sometimes large loans. These loans must normally be paid off within a year but sometimes the payment terms extend to 18 months.

Intermediate-Term Business Loans

An intermediate-term business loan typically has a repayment schedule of between one to three years. These loans are considered the most common for business owners to expand to a new location, refinance debt, purchase new equipment or hire additional staff members. Intermediate-term business loans normally require collateral payment

Long-Term Business Loans

Long-term business loans have a much longer repayment period, which is usually between three to 25 years. However, a repayment period that is between five to 10 years is typical. The interest is normally lower than short term loans considering the repayment period is scheduled over a longer period of time.

Long-term business loans are a great source of financing for projects that take a long time to complete. Often times the project is tied to the loan and could be used for collateral in some cases.

These long – term loans have restrictions and cannot be used for dividend payout distributions, to pay salaries or to pay off other debts.

Business Loans With Balloon Payments

Some business loans have a larger payment amount required toward the end of the loan repayment schedule. These are more common with commercial loans. As the life of the loan progresses, only part of the principal is repaid while the remaining portion covers the interest, then towards the end of the loan the remaining balance, referred to as the balloon payment becomes due all at once.

These loans are usually restricted for businesses that plan to have a large influx of cash near the end of the repayment period to cover the balloon payment.

SBA Loans

An SBA loan also referred to as a United States Small Business Association loan is a government agency that works with lenders to ensure that small businesses receive the finances they need to operate. Although the SBA does not provide funding itself, it does work with lenders to be matched with qualified entrepreneurs. The SBA has also been known to guarantee a wide variety of loans that reduces the risk for funders.

There is an application process for SBA loans that is extremely rigorous. However, these loans are also offered with extremely competitive interest rates and fees. They also may have a lower down payment and most do not require collateral.

The SBA is designed to offer additional support and resources to U.S. small business owners. Business owners can expect SBA a loan ranging from extremely small to exceptionally large. The SBA has been known to provide working capital so that business owners can get through seasonal hardships or other cash flow issues. The SBA is also commonly used to purchase fixed assets or real estate.

Additionally, the SBA has flexible standards with respect to working with business owners with less than perfect credit.

Where to Shop for a Business Loan

Now that you’ve been armed with critical information, you probably feel a lot more confident about the knowledge that you’ve just acquired. So now that you’ve gotten this new-found knowledge, you can put it to use as you shop for a business loan.

How to Qualify for a Business Loan

Although each lending institution has its own set of funding requirements. When applying for traditional term business loans, lenders usually consider what they referred to as the five C’s. They consist of the following:

  • Character
  • Credit Capacity
  • Collateral
  • Capital
  • Confidence or Comfort

Each of these areas is explained in more detail below.

Character

A character has to do with how the borrower has handled previous financial obligations in the past on both a professional and personal level.

Credit Capacity

Credit capacity has to do with the lender performing more financial analysis to better determine whether the borrower has the wherewithal and the financial capacity to repay the loan.

Collateral

Collateral is when the lender requires the borrower to have something of value that will serve as a back up should the borrower defaults on the loan.

Capital

Lenders are interested in finding out whether or not the borrower also owns additional assets that they can consider should the loan need to be repaid relatively quickly if necessary.

Confidence or Comfort

Comfort or confidence is associated with a lender having a certain level of confidence in the borrower’s business plan, whereby a much more in-depth analysis is performed as it relates to the income and expenses of the company requesting a loan. It basically is a form of due diligence where the lender confirms the sources of income and business expenses.

How to Apply for a Business Loan

Before applying for a business loan, you should take the time to do your homework based on the information provided above. Make sure you gather all the necessary information in advance and have any supporting information relatively close. Perform your own analysis to see if there is anything that you can do to make your company appear more favorable in the eyes of the lender. In other words, make sure your financials reflect your historical financial information that has been gathered along with any supporting documentation.

Also, point out any potential threats in advance so that you can let the lender know what solutions you have in place to resolve them should they arrive. You can also point out any financial trends that occur in your industry any additional collateral that you may have along with anything else that will make the lender see you as a company worth lending to.

Conclusion

To conclude, as a business owner, it’s important to build relationships with lenders prior to requesting a loan.  In fact, you may start off by borrowing money that you don’t really need. Money that you know you can pay back with your normal working capital. As time progresses, you can borrow more and repay them with ease. Then, should an emergency take place, you would have allowed the lender to observe your repayment patterns and your character in general. Also, you will continue to build trust and show lenders that you have a sound character, good business ethics, and have taken the time to establish your creditworthiness.

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Should You Get a Business Loan from a Bank or Online Lender?

Rear view of a thoughtful well dressed businessman scratching his head.

When you are in a business, you may find yourself in a position where you need money to keep your business running. Businesses need owners that have perseverance and be willing to take some calculated risks. As a business owner, you have to understand that you have to take some risks with a possibility that it might not work out. When you take the leap to start a business, you are not likely to give up on your dream easily, so you may need some help to get you through the tough times. When you are considering a business loan, you have to make a choice between a bank or an online lender. Each one offers you something slightly different. It is important that you understand the details of those differences so you can make the best choice for your business. Continue reading to find out more about business loans.

Bank or Online Lender for Your Business Loan?

You can get a loan from a traditional bank or online lender. More recently, online lenders have been on the rise as they are gaining more respect in the lending world. The company’s credit is one of the determining factors for the lender to approve a loan. There are other factors, as well, such as how long a company has been in business, the financial status of the company and if they have any collateral. There are many reasons why you might need a business loan, regardless if you use a bank or online lender. You can use a loan to purchase equipment, stock equipment, or working capital. Some loans are riskier than others, which may mean you have a higher interest rate.

What Is A Business Loan?

A business loan is similar to a personal loan, except that it is intended for business purposes. The basic gist of a business loan is as a business, you borrow money from a lender. You make a promise to repay the money you borrow with regular, usually monthly, payments. The lender adds interest to the amount of money you borrow as a fee for allowing you to borrow the money. The amount of interest a lender charges you is directly related to your credit score. Business loans come from different lenders and can often be in larger amounts than personal loans. As with personal loans, business loans can be secured or unsecured. A secured loan means that you need collateral to back up the loan. Typical business loan terms can vary greatly from less than a year to up to 3o years depending on the loan type and lender.

Difference Between Banks Vs Online Lenders?

One of the major differences between a traditional bank and an online lender is the actual building. Traditional banks have brick and mortar buildings where you have to go to transact business. Some traditional lenders offer an online banking feature, but they still have physical locations. Online lenders, on the other hand, do not have an actual building that you can enter to handle your business. You handle all of your business online via your computer. Online lenders offer options such as specific types of short term business loans. Typically, you will not find those types of business loans with a traditional banker. They offer the most traditional loans.

Pros and Cons of Going to The Bank

In your decision between a traditional bank or online lender, you have to look at both sides. If you have an established relationship with a bank, they may be a little more willing to work with you than a lender that has no relationship.

Bank Advantages

A traditional bank gives you a more personal interaction where you feel like you are important to the bank and not just a number. When dealing with a bank, you have an actual person with whom you can interact. When you have questions or concerns, you have someone to whom you can turn.

A traditional lender may be able to offer you a lower interest rate to offset the slight inconvenience you have from actually going into the building. A traditional bank may have some more options to offer. They may be able to give you a loan different from you intended but works better for you. Traditional banks often have more products, so you can do a wide variety of business all in the same place. You can work on establishing a relationship if you do not already have one. With a traditional bank, you may have access to a network of ATMs as well as branches no matter where you are.

Bank Disadvantages

As with anything, there are downsides to taking on a business loan. It does not matter if you choose a bank or online lender, some of the downsides remain the same. You are taking on more debt, which means you need to pay it back. A loan is not a gift and you must pay it back timely. Even if your business fails, you still owe the money and have to pay it back. Taking on more debt increases your debt to income ratio. This could show up as your personal debt (depending on how your business is set up). That means it could impact your credit score and your debt to income ratio. Even if you are able to pay back the loan, It still has a temporary negative impact. You may not be able to borrow enough money.

Depending on how much money you can borrow, you have to make sure it is enough to cover your needs. If you can only borrow a portion of what you actually need, that might hurt you more than helping you in the long run.

In addition to taking on more debt, there are some of the downsides to using a traditional bank for your loan option. While some banks may have different products to offer you, not all of them do. Some banks are not able to offer competitive rates or fees and are limited in the products they can offer to you. Some banks require you to have an account with them before they will approve a loan, so that means you have to open a bank account with them. Many of the big banks do not offer a high-interest return on their savings accounts.

Pros and Cons of Online Lenders

As you can see so far, on the surface there is not a stark difference between a bank or online lender. Bank or online lender, both of them have positive and negative sides. Online lenders are more willing to provide you a loan than a traditional bank if you are new in the business world. So, if you have a startup business and some ideas and you are willing to take the risk, maybe you should consider an online lender before the traditional bank.

Online Lender Advantages

There are some benefits when selecting an online lender. The most obvious benefit is that you can apply for a loan from the comfort of your own home or office. It is fast and efficient. Many business owners do not have a lot of extra time to spare filling out paperwork. Online applications are easy and can usually be completed in minutes. The response time from an online lender is also fast. They tend to have more flexible terms. Usually, an online lender only lends money, so they want to give you a loan. They are often more willing to work with you even when your credit and business history is a little shaky.

Online lenders tend to be a little more willing to take a risk on a business owner. That may not be something that you find in a traditional bank. They may be so far removed from what it is like to be a small business owner and they just are not willing to take the risk. You should shop around to see where you can find the best loan for you, but do not overlook online lenders. You may want to check them our first since you do not have to go anywhere but the internet to find out some basic information.

Online Lenders Disadvantages

One of the downsides of online lenders is that you do not receive the same type of customer service that you get from a traditional bank. The only type of customer service you receive via the phone, chat, or email. In general, the customer service is less personalized with an online lender. Transactions with an online bank take more time than a traditional bank when it comes to deposits. Depending on the online bank that you are using, there may be limited ways for you to make deposits. You may only be able to use their mobile app to make deposits and then have to wait days before the transaction posts to your account.

If the online bank that you choose does not have a large network of ATMs, you may find yourself having to use whatever ATM you can access quickly. As a result, you may face high fees at the ATM that you must use. If you do not like to use the internet, then online banking may not be the best option for you.

Key Points

At some point as a business owner, you may find yourself in need of a business loan. There are numerous options available to you, but your needs may dictate whether you choose a traditional lender or an online lender. If you are looking for a personal touch and many branches available to you with your loan experience, then a traditional lender is the best choice for you. If you are looking for the ability to handle as much of your business on your own through a website and never have to interact with a person, then an online lender is your best bet.

You may be able to find a wider range of options through an online lender, whereas a traditional bank may only be able to give you one possible option. If you want more options for your business, an online lender may be the best way for you to go. As a business owner, you have to determine what is most important to you right now. Do you need access to the money right away? Do you need the ability to speak to someone? Or are you looking for more than one option from which to choose? However, you answer those questions that can guide you towards which lender may be the right one for you.

Which Loan Is Best For My Business?

If you have a young business that has been in operation for just a few years and you only need a small amount of money for your business, an online lender is your best bet. Traditional banks do not like to lend money to businesses that do not have a solid history. They prefer businesses that are well established and have a proven track record for making money. They do not want to take the risk that comes with a young business. An online lender is best for your business if it is different and unique. A business that is different and does not fit a set business model tends to scare traditional banks because they pose a greater risk. If this is the type of business you have, you may have a difficult time finding a bank that is going to approve you for a loan.

If you are a seasonal business and you need to restock before the new season starts, but you do not have any cash. You need to buy stock to have a product to sell so that you can make money. It is a common problem for small businesses. An online lender is most likely the best option for you if you find yourself in that position.

If you have a well-established business and you are in need of a large amount of money because you need to move to a new space or buy a large and expensive piece of equipment, then a traditional lender is going to be your best bet. Most likely, you are going to find the best rates and the largest amount of money to borrow from a traditional bank.

Conclusion

Truthfully, while this article contains a lot of information about the differences between a traditional bank and an online lender, I hope this article has taught you that a traditional bank or online lender may not always be the right lender for you. It may not matter where the lender is, or if the lender has an actual building. What matters is where can you get the best loan to meet your needs. As your business grows, your needs change and the lender that is right for you may change, too.

Today, a traditional bank may be the right one, but in ten years, it might be an online lender. Do not make the choice between a traditional bank or an online lender without doing research. You need to find out all the information you can about the loans available to you before you make a final decision about which one is the right one for you. As a business owner, your needs are going to change over time. You do not want to box yourself into one type of lending option for the entire length of operation for your business. Understand that as your business needs change, so will the banking option that is right for you.

The Best Ways to Use A Loan to Grow Your Business

Having capital available is essential to growing any business. You can take advantage of growth opportunities that come up with a loan to grow your business. It’s good for you to put research into the ways that you can use a loan to grow your business.

Achieving excellence regarding your product or service is an important part of achieving success as a business. However, another important part of achieving success is knowing how to manage your company’s finances. You should know how to get a loan and where to look for financing. You should also know what the different types of business loans are that are available to you. Analyze the pros and cons of each of these loan types to pinpoint the best option for each borrowing situation.

Determining What to Use Loan on to Upgrade Your Business

Perhaps there are numerous things you need capital for. If this is the case, you must decide the best way to use your loan to grow your business. Every business has numerous expenses. Some expenses come from necessity. Others result from efforts to seize opportunities. Others are investments you make in your company that you hope will pay off long term.

Gauging Your Need to Borrow

Never borrow money for your business without thinking things through carefully. Taking out a loan will impact your company financially. There are many things to think about before deciding to borrow a loan to grow your business.

Borrowing puts your company in debt. This doesn’t necessarily make borrowing bad. However, it does mean that carefully analyzing your situation is essential. Before deciding to borrow, have a good reason to borrow. The following are some important things to do when you gauge your need to borrow.

Here are some possibilities to consider if you have many possibilities for what to use your loan on.

Renting or Purchasing a Business Facility

Having a fixed place of business is essential in most industries. Unfortunately, commercial real estate is expensive. Whether you rent or buy, your facility costs could make up a significant percentage of your expenses. That’s why borrowing to cover real estate costs is common.

Available real estate is often not available for a long time. This is a big reason to borrow. The perfect facility may be perfect for your competition too. That means it won’t stay on the market long. Therefore, you may need to borrow to jump on good real estate opportunities.

Purchasing Equipment

Equipment tends to be a huge expense for startup companies. Startup business financing is often used to purchase equipment. Depending on your industry, it might cost a lot of money to buy the necessary equipment to get into the business.

Like real estate, equipment is often available through fleeting opportunities. You need to make the purchase now or that piece of equipment will sell to someone else.

You might already be established and want to purchase updated equipment. New equipment might increase your productivity and efficiency. When you have an opportunity to be more productive with better equipment, you should take it.

Benefits of equipment finance

Hiring Employees

Any company that keeps growing eventually needs to hire employees. Employees allow you to get more work done. They also free up your time to focus on management tasks.
Unfortunately, labor costs are notoriously high. They are made even higher if you have to purchase worker’s compensation or health insurance to hire workers.

Buying Inventory

If you own a retail store, you can invest in inventory to sell more. The more product you have available, the more potential you have to make money. If you buy inventory in bulk, you’ll probably pay less. The savings you enjoy from buying in bulk could justify borrowing to purchase large amounts of inventory.

Covering Expenses During Downtimes

It’s not uncommon for business owners to need loan funds for emergencies. If you’re experiencing downtime, you still need to maintain cash flow. You might have to put all or part of your loan funds toward everyday expenses.

Don’t fret if you need to borrow to cover expenses. Most companies experience downtimes and struggle at some point. It’s important to borrow carefully in this situation. Hopefully, you know that business is going to pick up soon. Once business picks up, you can pay off your loan and continue to grow your business.

Important Steps to Borrowing for Business Growth

There is a process you’ll need to go through to take out a loan. While the process varies slightly by loan type, there are some steps that are common to any financing type. It’s important that you understand the process before you get started. If you’ve never taken out a business loan before, there are some things you should know.

You need to go through these steps correctly for the best possible loan type. The following three steps will be necessary regardless of what business loan type you pursue.

Business Plan

Planning is essential. When you borrow a loan to grow your business, you should work out a detailed business plan. Borrowing and investing money is a whole new business venture.

The business plan should include many details. You should determine what you will spend the money on. You should determine how much money you will spend. And you should also create a time frame for the project. As part of the business plan, determine who you will borrow from. Determine where you will buy the supplies you need or how you will find new employees, for example.

Another important part of your business plan is determining your new budget. After borrowing, you’ll need to repay your loan. This means you’ll have an added expense in your monthly budget. You need to account for this expense in your budget and figure out how it will impact your total budget.

The more effort you put into your business plan, the more confident you can be in your decision to borrow. As a business owner, you may already be familiar with the process of formulating a business plan. Any skills with planning and organization will benefit you significantly in your new project.

Necessary Information and Documents

There are a lot of documents that could be needed. The lender may want to see your bank statements. The lender may also want to see your balance sheets. Another type of document that is often required is your tax returns. Time in a business report is probably necessary. The longer your company has been in business, the easier it will be to find a loan offer.

Your original business plan and your business plan for your current project might be helpful. It’s good to be organized and thorough regarding your documentation. You want to make sure you’re coming across as professional to the lender.

Applications

When you have a business plan and essential documents, it’s time to apply. You’ll probably want to choose one or a few lenders to apply with. When you apply, your credit history is checked. This can negatively impact your score if it happens too frequently. It’s, therefore, best to limit the number of lenders you apply with.

Some loan applications are longer and more detailed than others. Generally, you’ll have to enter information about the history of your company. This includes how long you’ve been in business and what your earnings are.

Some lenders these days can get back to you very fast about whether you’re approved. Also, some lenders send out funds quickly to those who are approved. Once you get a response, you can evaluate any loan offers you receive. Remember to carefully compare offers to choose the best option.

Types of Loans Available to You

If you’ve determined you need to borrow, it’s time to shop for a loan. These days, business owners have so many options. Numerous loan types cater to business owners looking to expand. If you don’t like to feel pressure while repaying a loan, think about long-term business loans. Here are the basic loan types you’ll choose from.

A loan to grow your business can come in various forms. The following are five of the main types of loans to choose from.

Personal Loans

Many business owners use personal loans to fund their businesses. If you want a loan to grow your business, you should consider personal loans. Also, you can use personal loans to start your business. Personal loans are an especially good option if your personal credit is good but your business credit is not yet established.

When it comes to personal loans, the interest rate can vary significantly. The better your credit is, the lower your interest rate will be. Personal loans offer the advantage of giving you complete freedom with the funds. You don’t have to spend personal loan money on a particular expense. Generally, you won’t have to submit a business plan to the lender. You need decent credit but can spend the funds as you see fit.

SBA Loans

An SBA loan is a loan that the Small Business Administration guarantees. Any business owner should check this option out. The big advantage of SBA loans is that their interest rates are low. One disadvantage is that these loans can be difficult to qualify for.

The process for applying for an SBA loan is fairly involved. You will need to submit a lot of documents. You will also have to answer a lot of questions about your company. However, the very fair terms of SBA loans make them appealing to you. These loans are designed to help small businesses. They’re therefore more forgiving and helpful than traditional business loans.

Equipment Loans

If you need to borrow to purchase equipment, consider an equipment loan. An equipment loan is a lot like a vehicle loan. You borrow to purchase equipment and the lender owns the equipment until you pay off the loan. Of course, equipment loans can only be used on equipment purchases.

Equipment loans are secured loans. This means that they are often easier to qualify for than personal loans. It also means that their interest rates tend to be on the low side. An equipment loan could be a great way to purchase equipment or upgrade existing equipment.

Real Estate Loans

If you need to purchase a business facility, a real estate loan may be the answer. These are basically like equipment loans but for real estate. They are secured loans. The property you purchase will be the collateral on the loan.

One possible difference with real estate loans is that they may offer better interest rates on average than equipment loans. Interest rates are good because not only are the loans secured, but the collateral is a fixed piece of real estate. This means that you cannot run off with the asset if you can’t keep up with payments.

Credit Lines

A credit line could be the best financing option for your business. Credit lines are good options because they offer a great deal of flexibility. They offer funds that are readily available should you decide to spend them. However, you don’t have to spend all the funds a credit line makes available to you.

The flexibility of these credit lines does come with some cost. That’s because interest rates are often higher for business lines of credit. You could possibly enjoy lower interest with an actual loan.

That being said, credit lines are great for funding ongoing projects. You may be offered more through a line of credit than through a loan. Some suppliers offer their own credit lines to regular customers. It can be easier to get approved for a credit line through a supplier than through a financial institution.

Importance of Expenses You’ll Spend Funds on

You never want to spend business loan funds frivolously. If you’re taking out a loan to grow your business, you’re probably using funds on nonessential expenses. However, that doesn’t mean you should spend loan funds on just anything.

Only borrow to spend money on expenses you know have a good chance of growing your business. You want to take as small a gamble as possible with your company’s money. It can be difficult to predict the success of some investment projects. Just do your best to gauge the risk of the project before deciding to borrow.

Your Company’s Financial Situation

It’s essential to evaluate your financial situation. Taking out a loan to grow your business isn’t a good idea if you’re struggling financially. If your company is not doing well financially, you don’t want added expenses. Borrowing means the added expense of making a regular loan payment.

You may be able to arrange a loan with deferred repayment to borrow despite poor finances. However, you need to realize that you’re taking a gamble. Work extra hard to make sure that borrowing doesn’t put you in an even worse situation.

If everything is going well financially, take out a loan to grow your business. Borrowing may make your already profitable business even more successful through growth.

Costs of Borrowing vs. Benefits of Having a Capital

One good thing to do before you borrow a loan to grow your business is to compare the costs of borrowing with the benefits of borrowing. If possible, do this using numbers. You might not be able to determine the exact return you’ll get on investing your loan funds in your business. However, you should at least make an effort to estimate.

Another factor to consider is what you’ll miss out on by not borrowing. A lot of business opportunities are fleeting. If you don’t have the capital at the moment, you must let the opportunity pass you by. This means you’ll miss out on the growth and profit opportunity. Consider the lost opportunity cost of not borrowing when evaluating costs.

In Conclusion

Taking out a loan to grow your business shows your ambition for your company. It takes money to make money. Fortunately, just about any business owner has some options these days for getting a loan. Even bad credit business loans are available. Borrowing could be the option for you, but make sure you do it right. Too many business owners struggle because they borrow too much or too carelessly.

A good business owner never jumps into a big decision. Taking out a loan is a big decision for your company. Be thorough in your research and planning. You shouldn’t borrow until you know you’ve found the best possible offer for you. Once you research and plan, enjoy the excitement of starting a new venture with your company.

The 9 Best Online Small Business Loan Lenders

Close up portrait a pile of money on computer keyboard.

Business owners on the market for small business term loans have many options to choose from. You can choose from among various online small business loan lenders. If you’re on the market for a business loan, you need to familiarize yourself with the different lenders out there. Then, you need to determine which lender offers the loan that best suits your needs.

Maybe your small business has started growing really fast and you need a capital injection. But before you decide which online small business loan lenders to work with, you should learn about small business loans. It’s important to understand how these loans work. It’s also important to know how to identify a good business loan product.

Now is the time to get started exploring online small business loan lenders.  If a business opportunity is presenting itself to you, go for it! Get the funds you need with the right loan product.

Business Loan Lenders to Look Into

Pursuing loans via online lenders is very convenient. However, there are so many out there. You should know the details about all the most prominent online small business loan lenders.

When you’re looking for the right lender to work with, you might not know who to choose. Fortunately, the Internet provides some vital information about business loan terms, interest rates, and other loan information. When you’re researching lenders, look into the interest rate range. You can also look at the credit rating necessary for approval. Some online lenders also post income requirements or minimum time in business to qualify. You need to track down lenders that post qualifications your company meets.

The following are nine online small business loan lenders to consider. Read through the following information and determine which of the following lenders are best for your company.

Kabbage

Kabbage online lender logoKabbage is a lender offering companies convenient access to business funding. This lender offers one of the fastest ways to acquire funding out there. Those who borrow through Kabbage can qualify for lines of credit. Lines of credit offer convenient financing. Borrowers can use funds whenever they have a need. They don’t have to spend all the loan money upfront.

Businesses who apply for a loan with Kabbage don’t have to submit tax returns or credit scores. The application is simple. In fact, those who apply to receive a response in minutes. If you’re a business owner with no time to waste, Kabbage might be the right lender for you.

Some of the advantages with Kabbage include an automated approval and no minimum credit score. Another advantage is that funding is sent out via a bank account, Paypal, or an actual card that can be charged. However, there are a few drawbacks. Kabbage is known for having relatively high-interest rates. Also, the lender is known for having a fee system that can be confusing.

OnDeck

Ondeck online lender logoThis is another popular online lender for business loans. OnDeck is popular for those who want to borrow numerous loans into the future. This online lender offers better terms to repeat borrowers. This online lender offers both term loans and lines of credit. The term loans can be anywhere up to $500,000. Interest rates on term loans start at 9.99 percent. Lines of credit are available totaling as much as $100,000. The interest rates on these lines of credit start at 13.99 percent.

The application process is fast with OnDeck. Applicants receive a response within minutes. They can either apply online or call in their application. Funds are sent out within a day in many cases.

OnDeck is known for offering good customer service. Those who are interested in a loan can discuss their needs with a financial advisor. This is a great way to get valuable advice on business finances. The company is known for having a Better Business Bureau rating of A+. Also, the lender has loaned out $13 billion to companies all over the world.

Funding Circle

Funding logo online lender logoFunding Circle is another popular small business lender. This lender is especially good for businesses looking for peer-to-peer lending. This means that Funding Circle hooks borrowers up with investors. Despite this difference, the application process with Funding Circle is much like that of traditional lenders.

The advantages of borrowing with Funding Circle include low costs upfront and minimal starting rates. Also, Funding Circle is known for exceptional customer service. However, the application requirements are a little strict for some borrowers. Companies need to be in business for at least two years. It’s also worth noting that Funding Circle only offers secured loans.

Currency

Currency FinanceCurrency is a business lender that focuses specifically on equipment financing. This is the only type of expense Currency loans can be used on. The interest rates on these loans start at 6 percent and go up to 24 percent. Those who qualify must have at least a 585 credit score. The rates provided by Currency are highly competitive in comparison to other online lenders.

A possible drawback of Currency loans is the prepayment penalty. Those who decide to pay their loan off early might have to cover this expense. Another drawback is that those who borrow through Currency must have a lien on their business. They also must provide a personal guarantee. Business owners need to be in business for at least six months to be approved. They also need to bring in at least $75,000 per year. Another requirement is that a company’s net loss can’t exceed 10 percent over the previous year.

Credibility Capital

Credibility-CapitalCredibility Capital offers quality business loan products. However, not all companies will qualify. Business owners need a relatively high credit score to qualify. The minimum credit score required is 680. Also, businesses need to have been in existence for two years. However, those who can qualify enjoy low-interest rates on these loans. The APR range on Credibility Capital loans is between 10 percent and 25 percent.

Those who take out these loans don’t need to pay any prepayment penalty. They can make extra payments to bring down their total interest costs. There are a few more requirements those interested in borrowing should know about. Companies need to bring in at least $250,000 every year in revenue. Also, they cannot have had any bankruptcies on their record over the previous five years.

BlueVine

Bluevine online lender logoThe lender BlueVine offers working capital. These loans meet short-term financing needs. Those who apply only need to have a credits core of 600 to potentially qualify. The interest rates on these loans are a little on the high side. Interest rates range between 15 percent and 78 percent.

One huge advantage with BlueVine is that companies who haven’t been in business for a year can still qualify. Also, funds from BlueVine are dispersed quickly. Funds are sent to the borrower’s account in as little as 12 hours. One drawback of BlueVine loans is that they are not available everywhere. These loans are not available in the states Vermont, South Dakota, and North Dakota.

Fundbox

Fund BoxFundbox is another lender that provides credit lines to business owners. One unique and advantageous feature here is not having to fill out application details. Instead, Fundbox uses an automated algorithm to make approval decisions based on a company’s bank account. The automated application is very convenient for business owners. Also, Fundbox’s requirements for approval are not particularly strict. Funds are dispersed quickly to those who are approved. One disadvantage is that the APRs on these loans are a little high. Also, loan amounts are relatively small for Fundbox loans. However, these loans are highly accessible.

Lendr

lendrLendr is an example of online small business loan lenders offering a fast application procedure. If you have better credit or can finance your business by other means then you should. On the other hand, if you have bad credit,  This lender can be a good option. They have very good customer service, which is always a plus. Lendr takes a different kind of approach with retailer doing only merchant cash advances. During your small business loan shopping, you should definitely look into Lendr offerings if this type of less than prime credit and you’re run a merchant type business.

There are a few possible downsides to doing business with Lendr. Rates and fees can sometimes be quite high on these advanced.

Kiva

Kiva online lender logoKiva is an online provider of microloans. These microloans are typically for amounts of $10,000 or less. While many business owners might need to borrow more than this, these small amounts could be ideal for others. Kiva is a unique lender that uses crowdfunding to help come up with funds.

With crowdfunding, the business owner will seek out financial assistance from family members and friends. This makes it so that it takes some time for many borrowers to get the funds they want. Yet the interest rate with Kiva can be as low as 0 percent. This is a huge advantage for many companies that don’t want to pay expensive interest charges.

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Understanding How Small Business Loans Work

Familiarize yourself with what online small business loan lenders are and how loans work before you get started. A small business loan is very much like a personal loan. However, you borrow the loan in the name of your business. Hopefully, your business has built up a strong credit history. This makes borrowing a small business loan easier.

Small business loans have similar repayment arrangements for personal loans. The borrower makes regular payments on the loan until it’s paid off. Also, the lender charges interest on the loan. The amount of interest the borrower pays depends on credit history.

Of course, there are some significant differences between online small business loan lenders and personal loan lenders. There are major differences regarding the key documents for applying. The lender is going to be analyzing your business’s condition and financial health. Therefore, you may need to furnish documents like income statements and financial projections. You might also need to provide your business tax return when you apply.

Another difference is that business loans could require you to submit a business plan to the lender. Business loans are more complex than personal loans. They’re usually geared toward a particular project or business venture. The lender may analyze the borrower’s business plan when making the approval decision.

The Process for Applying

Applying for a loan with online small business loan lenders is a lot like applying for a personal loan. The borrower must fill out an application. This application could ask for a variety of details. These could include the revenue the company generates and the history of the company. The application will also ask for details about the business owner.

Online small business loan lenders often make it possible to apply completely online. This is highly convenient for business owners looking to borrow. Online applications can be filled out and submitted quickly. Applicants also often enjoy a quick response to their applications.

Factors Influencing Your Approval

Online small business loan lenders look at many factors when making approval decisions for your business loan. Lenders want to lend to businesses that are well established. They want to lend to companies that are reliably making profits. They also want to lend to business owners with a good plan. The credit history of the company applying for a loan is an important factor. The personal credit histories of the business owners are also sometimes evaluated. This is especially common for younger companies without established credit.

Characteristics of Good Business Loan Lenders

You need to know what to look for when evaluating online small business loan lenders. The more research you do, the better the lenders you will find. You need to put effort into understanding the characteristics of a good business loan.

The following are three important characteristics of good online small business loan lenders.

Low-interest Rate

The interest rates that a lender offers is a primary consideration. The higher the interest rate, the more expensive the loan is. Business loan interest rates vary widely. Rates could vary from around 5 percent to 35 percent. In some cases, interest rates could be significantly higher than 35 percent.

Before applying with a lender, you should know the interest rates they typically offer. Also, learn the interest rates typically offered for a business with your credit and income situation. You don’t want to apply with a lender if you know they don’t offer competitive interest rates.

Flexible Repayment Plans

Another valuable characteristic of a business loan lender is flexibility in repayment. A good lender will let you work out repayment terms that fit your budget well. Look into the repayment issue of a lender before applying. It’s best to call the lender and discuss repayment with a representative. Ask what types of options they offer.

One key issue is the loan terms offered by particular lenders. The loan term indicates how quickly you’ll need to repay the loan. A longer loan term could mean a lower monthly payment. However, it could also mean more interest costs. When planning for your business loan, put thought into the loan term you prefer.

Customer Service

Customer service is a big concern. You want to work with a lender that will offer good customer service. This way, you’ll be able to call in and ask questions. This gives borrowers greater peace of mind as they borrow. It also makes the whole borrowing process more convenient.

Any loan you take out for your business will have a big impact on your company’s finances. You need to be careful what kind of financial agreement you get in. You want to borrow in a way that is likely to improve your company’s profitability. Being able to call the lender with questions is important.

Poor customer service from a lender is a bad sign. If customer service is poor, it could mean that the lender is not devoted to customer needs. The best way to determine customer service quality is to read reviews from previous borrowers. Reviews could tell you if it’s difficult to get in touch with customer service personnel. They can also tell you if the quality of customer service personnel is poor. Customer service staff can’t do much for you if they never have the answers to your questions.

In Conclusion

At some point, borrowing is the perfect solution for many businesses. Without financing, you might have to wait indefinitely to grow as a company. That is why it is important to determine if the small business loan is right for your business. When you borrow, you can speed the process up. Regardless of your credit situation or business history, there is probably a small business loan out there somewhere that you can qualify for. Research the lenders mentioned above and determine which one is best for the unique needs of your company.

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