What Is A Loan-To-Value Ratio (LTV)?

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If you’re investigating hard money loans, a type of private lending used to purchase or upgrade real estate, you’ve probably come across an unfamiliar acronym: LTV. We’ll take a look at what LTV is and the role it plays in lending.

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What Is A Loan-To-Value Ratio?

LTV stands for Loan-To-Value ratio. While it plays a more pronounced role in hard money, LTV isn’t unique to hard money loans. Banks also use the LTV ratio in their calculations when they write a mortgage.

Simply put, LTV is a number that represents the approximate risk of the loan to the lender. This number is expressed as a percentage. The higher the number, the greater the risk to the lender.

How Is It Calculated?

LTV is actually a pretty straightforward calculation. Simply take the amount borrowed, divide it by the value of the property, and convert it to a percentage. For example, if you’ve taken out a $100,000 loan on a piece of property estimated to be worth $140,000, your LTV would be 71%. ($100,000 / $140,000 = 0.7142.)

As that number increases, the lender takes on more risk. A lender that finances 100% of the property value is providing full financing. If the LTV climbs above 100%, the borrower is considered to be underwater. Banks will usually only offer higher LTV loans to customers with excellent credit.

The value of the property is usually determined by an appraiser, although some lenders will use a different metric. Hard money lenders, for example, may use the property’s after repair value (ARV) rather than its current market value.

What Role Does LTV Play In Hard Money Loans?

Hard money lenders use LTV to assess risk just like more traditional lending institutions. There are some small differences in how they use it, however. Because of the higher risk involved with hard money lending, the lenders have to consider the strong possibility that the borrower will default.

Whereas banks might heavily factor credit into their calculations along with LTV, hard money lenders will weight LTV substantially more than credit. Some lenders may not care about credit at all. As a counterbalance, they tend to use the equity the borrower puts into the property as a security. Effectively, this means hard money lenders will, in most cases, look for a lower LTV than a bank would.

How much are they willing to cover? The answer is a bit tricky. In addition to any background checks the hard money lender may decide to factor in, the property’s qualities will be considered. Properties in booming real estate markets and “up-and-coming” neighborhoods may push the lender’s LTV tolerance close to 75%, often considered the upper limit for hard money. In contrast, a property in a poor market, or a remote one, will push the maximum LTV closer to zero.

Similarly, the state of the property will play a large role in how much risk the hard money lender is willing to take on. The better the state of the property, the higher the LTV can go.

Remember that some lenders will calculate the LTV based on the ARV of the property. This is most likely to happen when you’re borrowing money to rehabilitate a property.

How Important Is It To Understand Your LTV Ratio?

At the risk of being evasive, let’s just say that it can’t hurt to understand how your lender is making their underwriting decisions to make sure you’re getting a good deal. On the other hand, you’ll end up seeing the LTV eventually in the form of the amount of money they offer you. The most important thing to remember is that the more the lender is willing to cover, the higher they’ve assessed the value of the property.

Final Thoughts

Hopefully this overview has given you a basic understanding of what LTV is and how it’s used in real estate transactions. If you’re looking for other options for business loans, check out our handy guide.

Chris Motola

Chris Motola is an independent writer, journalist, programmer, and game designer who has mastered the art of using his laptop in no fewer than 541 positions, most of them unergonomic. When he’s not pushing keys or swiping screens, he’s probably out exploring urban or natural environs, experimenting in the kitchen, or delighting/annoying his friends with his ideas and theories.

Chris Motola

“”

4 Ways Businesses Can Use Hard Money Loans

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In an environment where debts are high and credit tight, non-traditional forms of funding start to fill in the gaps. Within the real estate development industry, one popular form of alternative lending is hard money.

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What Is A Hard Money Loan?

Hard money is a form of private lending secured by property. Since these private contracts largely evade the regulations that govern banking, the terms are governed more by the whims of the lender than anything. However, hard money loans have a few things in common:

  • Fast: A simplified underwriting process means you can get the money much more quickly.
  • Expensive: Expect interest rates in the mid-to-upper teens. You’ll also pay a larger origination fee (2 – 10 percent) than you would with a bank.
  • Short-term: It’s rare for a hard money loan to last longer than five years. Most will last less than one.
  • Negotiable: You have a bit more leeway to haggle with a private lender than you do with a financial institution.
  • Based On Prospective Value: Hard money loans rely on a calculation called loan-to-value ratio. This ratio is based on the potential value of the property. So while a hard money loan will usually only cover a percentage of the property’s cost, that percentage is based on the property’s prospective value, not its current value.

Below, we’ll take a look at how hard money is used by businesses in commercial development.

Buying Property

One of the most straightforward ways for businesses to use hard money is to buy land. As a general rule, hard money lenders are looking for borrowers who also view the property as an investment. While there are exceptions, many frown upon owner-occupier arrangments — for example, intending to build an apartment complex that you’ll also reside in. This usually isn’t a big deal for businesses, but it’s a good thing to keep in mind.

To get the most out of your hard money loan, you’ll want to select a property that you feel is undervalued with the intent of cleaning it up and/or building upon it.

Stop-Gap Funding

In some cases, businesses will use the speedy process offered by hard money to secure a property until they can refinance through less expensive, more traditional means. You’ll want to be pretty sure that your bank loan will come through so you don’t get stuck paying high-interest rates any longer than you have to.

New Construction

Whether you’re acquiring a new property or already own one, a common way of increasing its value is to build something people want on it. This can be residential, commercial, or mixed-use. You will, of course, need to be familiar with the municipality’s zoning laws.

In some cases, the property may already have an obsolete structure on it, in which case you’ll have to take into account the cost of tearing down that structure as well.

Many hard money borrowers will then sell the property at a profit, paying off their hard money loan in the process.

Rehabilitation

Sometimes there’s a serviceable structure already on the property, but it’s outdated or in disrepair. This is the iconic fix-and-flip scenario that was popular before the 2008 financial crash. The difference is you’re dealing with private investor money rather than subprime bank loans.

The fix-and-flip strategy tends to work best in “hot” real estate markets, where you can be relatively sure that your rehabilitated property will sell, and sell quickly.

Final Thoughts

Remember that the idea behind hard money is to get in quickly, increase the value of your purchase, and make your exit. It’s a high-risk, high-reward strategy for developers and renovators who can’t access the funds they need within a critical timeframe. You’ll want to approach hard money lender cautiously, with a good idea of what you’re getting into.

Not sure what other loans are available? Check out our guide.

Chris Motola

Chris Motola is an independent writer, journalist, programmer, and game designer who has mastered the art of using his laptop in no fewer than 541 positions, most of them unergonomic. When he’s not pushing keys or swiping screens, he’s probably out exploring urban or natural environs, experimenting in the kitchen, or delighting/annoying his friends with his ideas and theories.

Chris Motola

“”

Do I Qualify For A Startup Grant?

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startup grants

Free money to start your business – isn’t that every entrepreneur’s wildest dream? It’s too bad that startup grants are so hard to come by. You can think of business grants sort of like scholarships for adults. Just as with a scholarship, you have to convince the grant-issuer that a) you will put the funds to really good use and b) you are more deserving of the money than other applicants.

There are many types of business grants offered by myriad organizations, both public and private. As you might figure, there are different eligibility requirements for different grants. In general, though, only certain types of businesses are eligible for grants. These include businesses belonging to economically disadvantaged demographics such as Native American Indian tribe members, single mothers, and veterans returning to civilian life. There are also grants for innovative businesses breaking new frontiers that benefit society  – think tech startups, doctors, and scientists.

In this post, I’ll talk about the types of businesses that might qualify for a startup grant, and give a few examples of organizations that offer grants to these businesses.

If you belong to any of the following business categories, you might eligible for a startup grant.

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Innovators

Many startup grants are for innovators and businesses which contribute valuable creations to society. These grants are generally for entrepreneurs in the fields of technology, medicine, science, agriculture, education, and research and development. Here are some grants you might qualify for if your business falls into this category.

Grants.gov 

While this is the one-stop shop for all U.S. government grants, the majority of these grants go toward businesses and nonprofits in science, medicine, and R&D.

Search for grants on Grants.gov or check your eligibility to apply for a grant from the federal government.

SBIR 

From The Small Business Innovation Research (SBIR) website:

The SBIR program is a highly competitive program that encourages domestic small businesses to engage in Federal Research/Research and Development (R/R&D) that has the potential for commercialization.

This US government-funded program awards grants of up to $150K in Phase I of funding. Depending on the results achieved after six months, recipients may receive up to $1 million over the next two years (Phase II).

NC IDEA 

This is a private foundation offering up to $50K for high-tech companies in the state of North Carolina.

Green Businesses

There are some public and private grants for green businesses, including startups. Generally, these grants cover the cost of installing sustainable infrastructure and/or energy systems.

Rural Energy For America Program 

As part of the USDA (U.S. Department of Agriculture), this program awards renewable energy systems and energy efficiency improvement grants. Grants are awarded to agricultural producers and rural small businesses for renewable energy systems or to make energy efficiency improvements.

Green Technology Business Grant Program 

This grant is designed to attract new green technology businesses or to expand existing green technology businesses in the City of Cleveland, Ohio. Eligible applicants may receive grants of up to 0.5% of new payroll to the city for up to five years and may also qualify for an additional $5,000 Moving Assistance Grant.

Rural Businesses

Various grants aim to stimulate the economy in rural and economically distressed areas. These grants serve to attract new businesses to struggling regions. Depending on where you are opening your business or nonprofit and the specifics of your organization’s goals, you might eligible for some of this grant money.

Rural Business Development

This grant is specifically for nonprofit and public entities. From their website:

This program is a competitive grant designed to support targeted technical assistance, training and other activities leading to the development or expansion of small and emerging private businesses in rural areas which will employ 50 or fewer new employees and has less than $1 million in gross revenue.

From the same agency, rural farmers/agricultural producers might be eligible for the Value Added Producer grant, while for-profit businesses that provide education or health care to rural areas through telecommunications might be eligible for the Distance Learning and Telemedicine grant.

U.S. Economic Development Assistance Grants

From their website:

EDA supports development in economically distressed areas of the United States by fostering job creation and attracting private investment. Specifically, under the Economic Development Assistance programs (EDAP) Notice of Funding Availability (NOFA), EDA will make construction, non-construction, and revolving loan fund investments under the Public Works and Economic Adjustment Assistance (EAA) Programs.

Interested? Check out the EDA’s grantee resources.

Women-Owned Businesses

There are many business grants you might be eligible for if you are a female entrepreneur. Additionally, some grant money goes to businesses that create solutions that benefit women and families.

InnovateHER Grant 

Sponsored by SBA’s Office of Women’s Business Ownership, the InnovateHER grant competition is an opportunity for entrepreneurs who create commercially viable products and services that benefit women and families. The first place prize awarded in 2017 was $40,000. There were also grants awarded in the amounts of $20,000, $15,000, and $10,000.

Chicago Foundation For Women

Women living in the Chicago metropolitan area are eligible to apply for a grant to start a new business through this nonprofit fund. Grants range from $15,000 to $150,000. These grants are very competitive and are only available to businesses that benefit women’s economic security, freedom from violence, and/or access to health care.

Nonprofit Organizations

Nonprofit startups that have 501(c)(3) status with the IRS are eligible for some government and private grant money. In fact, you’re much more likely to be awarded a grant if you run a nonprofit organization, as opposed to a for-profit business. While there are tons of nonprofit grants, I won’t spend too much time on this section, assuming this audience is mostly for-profit entrepreneurs.

These grants, which you can apply for year-round, are mainly for nonprofits and educational programs, though some small businesses may be eligible as well.

As mentioned, Grants.gov is the main stop for government grants, many of which go to nonprofit causes.

Veteran-Related Businesses

Veteran business grant money includes retraining grants for veterans returning to civilian life and grants to nonprofits providing services to veterans. Below are a couple examples.

StreetShares Commander’s Call Veteran Business Award

This StreetShares program awards annual grants to veterans and spouses of veterans who own small businesses. The first place award is $5K, the second is $3,000, and third is $2,000.

StreetShares also offers conventional business loans to some small businesses, veteran-owned or otherwise. Head over to our StreetShares Review for a rundown on their loan services.

Wisconsin Department Of Veterans Affairs Retraining Grants

This program awards up to $3,000 per year for up to two years to veterans receiving job-related training. Most “startups” probably wouldn’t be eligible for this program, but hey, it’s possible.

2501 Program

These grants, awarded through the USDA, go to veteran and minority farmers and ranchers. You might think that most startups aren’t in the farming sector, and you’d be right, but ag-tech startups are gaining prominence – think sustainable farming and other “smart” farming practices now possible with the help of new technology.

Minority-Owned Businesses

While there are grants designed to benefit various non-white business owner demographics – Hispanic Americans, African Americans, Asian Americans, and others – most government grants for minority businesses are specifically for members of federally recognized Native American Tribes. Here are a couple grants that may help fund minority-owned startups.

Healthcare-related small businesses can use this grant for programs that provide health services to minorities.

Native Arts Capacity Building Initiative

Offered through the American Indian First Nations institute, this initiative awards six grants of up to $30,000 each year to Native American institutions that support arts and culture.

Note that while the Minority Business Development Agency offers various resources designed to help minority business owners, this program does not include grants.

Just Plain Amazing Small Businesses

There are a few general small business grants available to any kind of business, but they are very competitive, so you will need a super impressive story to wow the judges. An impressive track record is a particular challenge for a startup business, which is usually defined as a business that’s been around for less than six months. But hey, if you’ve achieved a lot in just a few months or you have an especially amazing idea, you might want to apply to one of these highly competitive small business grant contests.

FedEx Small Business Grant Contest

Any type of small business may apply. To give you an idea of what kind of competition you’d be facing, in 2017 there were 4,500 applicants and 10 winners. The grand prize is $25,000, and the other winners in the top ten get $5,000.

Miller Lite Tap The Future

This grant is one of the few that’s actually specifically geared toward startups. With this Shark Tank-style entrepreneurship grant contest, participants have the opportunity to pitch their business ideas and compete for the grand prize of over $100K.

Visa’s Everywhere Initiative

This contest awards startups with innovative IT solutions, awarding $50,000 to the top three finalists.

Startup Grant Alternatives

Very few private businesses are actually eligible for a business grant. Unless your business or startup is highly innovative and provides a demonstrable benefit to your community or the world at large, unfortunately, you are probably not grant-recipient material. Even if you are eligible for some grant money and you make it through the lengthy proposal process, you may only land a few hundred to a few thousand dollars.

Furthermore, startup grants are particularly hard to come by, as grantees will generally want to see what kind of results you’ve achieved on other projects carried out by your organization. Don’t fall for government grant scams that will have you believe there are piles of free grant money out there for the taking – this is not the case at all.

So, rather than hoping to be among the fortunate few who are granted free money, you might want to look into grant alternatives for your business.

Startup grant alternatives include crowdfunding, P2P lending, online loans, equipment financing, and others. Some examples might include:

For more ideas on how to get the seed money for your new business endeavor, check out our article on the best ways to finance a business startup.

Shannon Vissers

Shannon is a freelance writer and editor based in San Diego, CA. Shannon has a three-year-old daughter named Izzy. Shannon likes to unwind by watching trashy reality television and reading literary fiction during the commercial breaks.

Shannon Vissers

Shannon Vissers

“”

Is Hard Money The Answer When You Have Declared Bankruptcy?

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Businesses that have declared bankruptcy can face a challenging road back to the regularly lending scene. If you search online for loan alternatives, sooner or later you’re going to run into the concept of hard money.

Hard money is a direct loan from an investor to an individual or business for the purpose of buying and developing real estate. The terms of a hard money loan are usually very specific to the investor extending the offer.

We’ll take a look at whether hard money is a good loan of last resort.

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Can You Get Hard Money With A Bankruptcy On Your Record?

In theory, yes. Whether the hard money lender is willing to take a risk on a borrower with a bankruptcy on their record will depend on a number of factors, including the lender’s appetite for risk. Usually, hard money lenders are more concerned with the opportunity presented by the property than they are with your credit. You should, however, expect this type of lender to check your credit even if they weigh other factors more highly.

In most cases you’ll have to wait until your bankruptcy discharges before hard money lenders want to touch you; this will happen more quickly if you filed Chapter 7 than Chapter 13. In some cases, you may be able to be able to convince your Chapter 13 trustee and a hard money lender to work with you, but don’t count on the lender wanting to take on that kind of risk.

One of the bigger challenges of getting hard money is finding hard money lenders. Because you’re dealing with real estate, you’ll generally have to work with investors who have an interest in developing property in your area. Your local real estate association might be able to help you find hard money lenders in your region.

What Are The Limitations?

A hard money loan is a non-traditional loan made by regular investors to (effectively) real estate investors. Since the loan is secured by the property you’re buying or developing, there are practical limitations on how you can use the money.

Here are the things hard money is typically used for:

  • Purchasing Real Estate: Hard money is often used to buy real estate in situations where traditional lending would be too slow.
  • Improvements And Renovations: A hard money lender who is more interested in the potential of the property rather than its existing state may write a loan for a developer interested in making capital improvements.
  • Construction: Hard money can be used to build new projects. As in the case of renovations, the lender will be interested in the potential value of the property.

There are a number of other potential uses, though most involve either improving or stabilizing the value of a property or circumventing the restrictions that come with bank lending. Since hard money loans don’t have the complex underwriting process of bank loans, some developers find them useful for quickly closing time-sensitive deals.

Should You Get Hard Money If You Can?

If you were recently underwater with debt, you may want to think twice about getting a hard money loan. You’re looking at double-digit interest rates and significantly higher origination fees to get your project off the ground.

These loans aren’t meant to be long-term financial solutions. The ideal use for hard money is to increase the value of the property in question, then flip it or refinance it. You don’t want to get bogged down by hard money’s high-interest rates over the long haul, or you could easily find yourself back where you were before.

Final Thoughts

Even if you’ve had a bankruptcy, you can dive back into the borrowing scene almost immediately after it resolves. Hard money is just one of your options. It’s costly, fast, and has narrow applications. If, however, you’re in a situation where you have a good investment opportunity and a well-developed exit-strategy, hard money can be a road back to solvency after a bankruptcy. If you’ve had experience with hard money, especially after a bankruptcy, we’d love to hear about it.

Not sure where else to look for loans? Our guide can be a good place to start.

Chris Motola

Chris Motola is an independent writer, journalist, programmer, and game designer who has mastered the art of using his laptop in no fewer than 541 positions, most of them unergonomic. When he’s not pushing keys or swiping screens, he’s probably out exploring urban or natural environs, experimenting in the kitchen, or delighting/annoying his friends with his ideas and theories.

Chris Motola

“”

How Can I Get A Bank Loan For My Business If I’ve Had A Bankruptcy?

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Bankruptcy shouldn’t be taken lightly. Aside from asset forfeiture, the shock to your credit rating is the main disincentive to filing bankruptcy. Prospective filers are cautioned that they’ll have a hard time accessing credit for up to a decade. While there’s some truth to these warnings, the worst case scenarios are also a bit overblown.

It’s possible to get bank loans after a bankruptcy, but you may have to work a bit harder to get them and approach the process with an open mind. We’ll look at some of the questions you should ask and strategies you can pursue below.

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What Happens To My Credit Score?

Even after bankruptcy, your credit rating will be one of the biggest determining factors in whether or not a bank will lend to you.

While you might assume bankruptcy completely destroys your credit, the truth is a bit more complicated. You can expect a bankruptcy to shave a hundred or two points off your credit rating which, of course, isn’t great. How negatively impacted your credit is will depend on the amount of debt being discharged and how many accounts are delinquent, as well as how many accounts are current. In fact, depending on how bad your credit was at the time you declared bankruptcy, it’s not impossible that your credit might slightly improve.

The bankruptcy will stay on your record for seven to 10 years, but your credit can begin to improve immediately.

How Can I Improve My Credit Score After Bankruptcy?

There are a number of different ways to improve your credit. Some of them apply to everyone, others more specifically those with bankruptcies on their record.

  • Get A Secured Credit Card: Unlike regular credit cards, secured credit cards require a cash payment as collateral. In fact, that deposit serves as your credit line. It’s not a great deal, but it will help rebuild your credit and offer the functionality of a credit card.
  • Pay Your Bills On Time: This is pretty obvious, but keeping your accounts current will help.
  • Use Only A Fraction Of The Credit You Have: Keep your balances small (somewhere below 25 percent of your available credit).
  • Take Out Loans and Keep Payments Current: Availability will vary based on your credit rating. We’ll be looking at some options below.
  • Use Alternative Lenders: Many alternative lenders cater to individuals and businesses with bad credit, just be aware that some of them won’t work with a borrower who recently declared bankruptcy.
  • Consider A Hard Money Loan: If you’re looking at a short-term real estate investment, hard money provides a risky way to get financing with bad credit.
  • Wait: On the bright side, the farther you get away from the date of your bankruptcy, the less impact it will have on your credit rating.

What Loans Are Available?

Lending is a gamble, but there are lenders willing to take a bigger risk in exchange for a potentially larger payday. Believe it or not, it’s possible to get a personal loan almost immediately after you declare bankruptcy. Business loans aren’t off the table either, although you may have to jump through additional hoops to prove the creditworthiness of your business plan.

The bad news is that you’re probably going to be paying through the nose for any credit that’s extended to you. But if you’re judicious about how much you borrow and don’t let a lot of interest accrue, you can still make good use of loans.

Since we’re looking specifically at bank loans, the good news is that they tend to be a bit more conservative when it comes to how much they’ll extend you and the length of the terms. Keep an eye out for any supplemental fees they charge on high-interest products.

Mortgages are a different story. It’s almost unheard of for a bank to offer a mortgage to a newly bankrupt customer. Depending on the type of mortgage you’re looking for, the waiting times can range from one to four years. If you’ve previously defaulted on a mortgage, your wait time is more likely to fall on the longer side of that range.

How Can I Find The Right Bank?

Not all banks have the same bankruptcy policies. Consider keeping your business and personal accounts with a bank or credit union willing to extend you credit. You’ll also want to gather as much information as you can about what products are offered to customers with a bankruptcy on their record.

Be wary of extremely high-interest rates and (especially) any monthly maintenance fees charged in addition to interest.

What If I’ve Filed Chapter 13?

Unlike Chapter 7 bankruptcies, Chapter 13 bankruptcies last several years while your business undergoes restructuring. During this time, you’ll have trustee-enforced restrictions on how you can borrow.

Final Thoughts

As big an impact as a bankruptcy has on your life and business, it’s by no means the end of the line in terms of getting credit. Just be patient, weigh your options carefully, and don’t get taken advantage of.

Chris Motola

Chris Motola is an independent writer, journalist, programmer, and game designer who has mastered the art of using his laptop in no fewer than 541 positions, most of them unergonomic. When he’s not pushing keys or swiping screens, he’s probably out exploring urban or natural environs, experimenting in the kitchen, or delighting/annoying his friends with his ideas and theories.

Chris Motola

“”

8 Alternative Crowdfunders To Fund Your Business

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alternative crowdfunders

When we survey the socio-economic landscape for entrepreneurs, two seemingly incongruous things stick out. First, recent economic data indicates that the rate of startup business creation in the US is near its 40-year low. Second, over this past decade — the very decade that has seen a nadir in entrepreneurship — young companies have raised billions of dollars from (mostly) ordinary people through crowdfunding campaigns. In fact, Kickstarter (the biggest rewards crowdfunding platform) has facilitated the raising of $3.4 billion since its birth in 2009.

From these facts, we can deduce that entrepreneurship is widely popular among Americans in 2017, if only as a spectator sport and not a participatory one. What also becomes clear is that people can be readily persuaded to financially support new businesses if they stand to benefit from that support!

If you’re building a new business at this moment in history, you may well be considering giving crowdfunding a go. You’ve probably heard of the “big three” crowdfunding giants: Kickstarter (see our review), Indiegogo (see our review), and GoFundMe (see our review). However, there are plenty of reasons why you might want to seek out an alternative crowdfunder. Maybe you’ve read accounts of how the process of crowdfunding on Kickstarter has become unduly influenced by investor-backed campaigns and crowdfunding agencies. Or perhaps you want to be able to offer rewards to your backers in a different way than the Big Three allow. Maybe you want to give people rewards on a continuing basis and not just once. Maybe you want to give donors equity in your company instead of a mere gadget or trinket.

The point is, there’s no one right way to do crowdfunding. Different crowdfunding platforms may have more to offer you than others, depending on your particular business type. The following alternative crowdfunders may help you tap the coffers of The Crowd in a different manner than the more established platforms.

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patreon

Perhaps it’s a bit of a stretch to refer to Patreon (see our review) as an “alternative” crowdfunder, considering their rising popularity and outsized public profile in the creative industries. However, their approach to crowdfunding still stands as unique. Patreon was founded in 2013 by a musician who was frustrated by the lack of ways for up-and-coming artists to effectively monetize their work. He saw his friends set up Kickstarter campaigns for support with one artistic project, then struggle to come up with a rationale to launch a second Kickstarter campaign for their next endeavor. Seeing an opportunity to offer a more rational crowdfunding model for creatives who release content continuously, he started Patreon.

Unlike Kickstarter and just about every other rewards crowdfunding platform, Patreon operates almost like a subscription service for artists and other content creators. People who like your work can sign up to financially support you on either a per-month or per-creation basis. In exchange, they get access to exclusive content that you make available only to your paying followers, whether it be an LP, drawings, videos, podcast episodes, or just about anything else under the sun.

Patreon takes 5% of the money you raise in fees, which is pretty much the standard rate in rewards crowdfunding. Unfortunately, an additional ~5% goes to the payment processor, which is more than Kickstarter’s payment processing fee rate of approximately 3%. For most creatives on the site, however, the convenience of not having to launch a whole new campaign for their every endeavor makes Patreon quite the cost-efficient prospect nonetheless. What’s more, Patreon is more relaxed than many crowdfunders when it comes to permitted content, allowing for a wider spectrum of expression than the competition. From the political irreverence of Chapo Trap House to the various hentai artists using the platform (not gonna include any links here, sorry), Patreon supports content creators other crowdfunders might shy away from.

Read my Patreon review if the idea of long-term crowdfunding sounds appealing.

fundrazr

You may not have heard of Fundrazr (see our review), but, as it happens, it is Canada’s largest crowdfunding platform. It might not have the name recognition of some of its larger competitors south of the 49th parallel, but this rewards crowdfunder has some distinct advantages for certain kinds of businesses.

First off, FundRazr doesn’t pre-screen campaigns before allowing them to fundraise, nor does it limit the duration of your campaigns. It also permits you to keep whatever you raise even if you don’t reach your funding goal. These are three things Kickstarter doesn’t allow. What’s more, FundRazr’s fees match those of most of the crowdfunding industry (5% to the platform with an additional ~3% for the payment processor), so you’re not paying extra for this flexibility.

Another unique feature offered by FundRazr is Crowdfunding As A Service. If you choose to use this, you can host funding campaigns on your own website, under your brand, not that of FundRazr. Essentially, this turns FundRazr into a white label crowdfunder. Hosting crowdfunding campaigns for people in your community under your business’s name can provide your brand with a nice image boost.

Check out our FundRazr review to see if what’s good enough for Canada is good enough for your business.

kiva logo

What if there were a way to get crowdfunded support for your business in the form of a loan instead of a gift premised on future rewards? What if I were to tell you that these loans come with 0% interest? Does this sound too good to be true? Well, Kiva U.S. (see our review) shows that this concept is indeed a reality.

Kiva U.S. is a nonprofit P2P (peer-to-peer) small business microlender whose funding campaigns resemble those of other crowdfunding sites, except in this case, your backers are lenders who chip in to offer you a loan. Kiva U.S. operates on the principle of “social underwriting,” meaning that your loan-worthiness depends not on your credit score (Kiva U.S. doesn’t even check your credit score) but on the trust of the community. The hope is that you’ll be motivated to stay in the good graces of the community, which is especially important if you decide to seek a second loan from said community!

Of course, you’re getting a loan, not a gift, so you’ll have to pay the money back if you don’t want Kiva telling the business credit agencies of your misdeeds. However, these loans carry no interest whatsoever. Neither are there any origination fees. You are only responsible for paying back the principal. You can raise as little as $25 to as much as $10K. For the right type of business, it’s a remarkable funding deal.

Read our Kiva U.S. review if the idea of interest-free loans for your business appeals to you.

crowdfunder

With the most generic name in the crowdfunding industry, Crowdfunder (see our review) is far from a generic crowdfunder. In fact, Crowdfunder is a pioneer in the field of equity crowdfunding. Equity crowdfunding is a form of investment in which your backers are investors who fund you in exchange for equity in your company, not gadgets or other exclusive content. Equity crowdfunding has only recently become legal thanks to the passage of the JOBS Act in 2012.

Crowdfunder lets you raise money from accredited investors (this term refers to people with high incomes and/or significant wealth and doesn’t necessarily denote any particular skill in investing). This is a crowd that likes to keep a pulse on the next big thing, so if your new business is one of the rare startups with exponential growth potential, Crowdfunder’s investors may well want to get in on the action.

Crowdfunder is unique in other ways as well. Crowdfunder doesn’t collect the funds pledged to your venture — you have to collect the funds offline from the investors themselves. Accordingly, neither Crowdfunder nor any payment processor takes a cut of what you raise. However, you will need to purchase a subscription package in order to fundraise on the platform. Crowdfunder’s monthly subscription packages start at $449 per month.

It’s not for everybody, but Crowdfunder’s unique flavor of equity crowdfunding holds great potential for the right kind of business. Read our Crowdfunder review for more information.

Ulele bills itself as the “the 1st European crowdfunding site” though they host campaigns from North America and Australia as well. Ulele strives to lend a human touch to rewards crowdfunding, offering personalized coaching to all Ulele project creators, which (according to Ulele) has produced a 68% funding success rate for projects on the site. Ulele claims that this is a “record rate among international mainstream crowdfunding platforms.”

Ulele maintains a consistently bright and cheerful feel throughout the site, and its focus is on fashion, design, games, music, and art. Ulele is worth considering as a crowdfunding platform if you have items of value to offer as rewards that might have a particular appeal to the European market, as Ulele is more of a known entity there. As for fees, Ulele charges 6.67% of all funds received by credit card and 4.17% of all funds collected via check or PayPal.

fundable

Fundable (see our review) is a hybrid crowdfunding platform in that its hosts both rewards- and equity-based crowdfunding campaigns. Not just anyone can start a campaign on this site — as with Kickstarter, Fundable pre-screens all campaigns to determine their suitability for crowdfunding. Another trait it shares with Kickstarter is the fact that the funding campaigns are all-or-nothing. If you don’t reach your funding goal, you collect $0, and you do not pass Go.

Instead of charging a platform fee on what you raise, Fundable charges a flat monthly fee of $179. Unfortunately, this means that you can end up in the red if your campaign doesn’t hit its marks. And while Fundable charges a fee of about 3.5% for payment processing for rewards campaigns, it does not do so for equity campaigns, because all payments are made offline from the investor to the campaigner in a Fundable equity campaign.

There’s something of an air of exclusivity around Fundable, but certain businesses may stand to benefit from this unique platform. For instance, you can start off with a Fundable rewards campaign, and if you’re successful, you can use your success to demonstrate the appeal of your product to investors and pivot to an Equity campaign without having to go to another service.

Check out our Fundable review if you’re intrigued.

wefunder

The other equity crowdfunding platforms I’ve covered thus far have been for accredited investors (i.e. rich investors) only. Wefunder (see our review) is different. It is, by a significant margin, the largest equity crowdfunding platform that lets non-accredited investors (everyone) invest in your business. Sometimes referred to as Regulation Crowdfunding, Wefunder is the one company that has figured out how to do it right.

Regulation Crowdfunding has only existed since May 2016, when the provision of the JOBS Act authorizing it finally took effect. It’s fair to say that the kinks are still being worked out. However, if you want to get in on this new field and feel like a pioneer, Wefunder is the platform to go with. It does charge $195 to launch your campaign, however. Wefunder also takes 7% of what you raise in fees. However, all payment processing fees are paid by the investors.

Read our Wefunder review if you want to get in on Regulation Crowdfunding.

kickfurther

So far, we’ve covered rewards crowdfunders, debt crowdfunders, and equity crowdfunders. However, Kickfurther (see our review) is difficult to even classify! Truly an alternative crowdfunder, Kickfurther is entirely unique in that instead of raising money in exchange for rewards or equity shares, you offer your backers the chance to purchase inventory on consignment. Your backers also get their own Kickfurther-branded online store in which they can sell your products.

It’s an odd arrangement, so I’ll try to explain it using an example. Perhaps the most prominent project on Kickfurther was the Vaportini, a weird alcohol vaporizing system. If you backed the project, you were offered a 16% return on your investment in the event that 88% of the inventory is sold. To be sure, it’s an odd system, but if you like the idea of having your backers help finance your inventory purchases and having some of them sell your product online, you might want to look into Kickfurther.

One caveat for backers: Kickfurther doesn’t appear to do a good enough job ensuring that backers get paid what they’re due. In fact, a comment was left on my review from one of the backers of the Vaportini, claiming that the company took their money and defaulted on the payback “with no enforcement, follow up, or communication from Kickfurther.” I found other reports from backers of Kickfurther projects with similar stories. Bottom line: Kickfurther may be an interesting prospect for businesses with unique products to sell, but backers have ample reason to be wary of the platform.

Read our Kickfurther review if you’re interested in crowdfunded inventory purchases and/or alcohol vaporizers.

Final Thoughts

I wanted to take you beyond the Kickstarters and Indiegogos of the crowdfunding world to show you some of the innovative — and sometimes downright bizarre — crowdfunders out there doing it their own way. There’s no “right” way to conduct a crowdfunding campaign. It all depends on the type of business you own and the sort of product, service or experience you have to offer. Know your options, then dive in and give it a shot!

Jason Vissers

Jason Vissers is a writer, cereal chef and Netflix aficionado from San Diego. A native Californian who enjoys the beach, Jason nonetheless prefers to do his surfing on the World Wide Web, the raddest wave of them all. Jason can’t eat raisins.

Jason Vissers

“”

A General Guide To Filing For Bankruptcy For Small Businesses

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Inability to meet your expenses is one of the most frightening things you can experience as a business owner. When you have no reasonable hope of getting your head above your water, it may be time to consider filing for bankruptcy.

Table of Contents

What Is Bankruptcy?

Bankruptcy comes in a variety of forms that we’ll cover below, but broadly speaking, bankruptcy is a formal, legal declaration that you’re unable to pay debts. In the U.S., there are several different types of bankruptcy, all of which have their own rules and processes. Of those, the ones most likely to apply to you (as a small business owner) are Chapter 7 and 13 (and more rarely Chapter 11).

There are, of course, drawbacks to declaring bankruptcy. You stand to lose assets, and you’ll probably have a harder time accessing credit for years.

Types Of Bankruptcy

Bankruptcy law is outlined in the United States Code under Title 11. The different types of bankruptcies, referred to as “chapters” after their location in the document, are as follows:

  • Chapter 7 – The most common form of bankruptcy. With Chapter 7, a trustee is appointed to examine your finances. As Chapter 7 is more of a liquidation process than a reorganization process, the trustee will, in most cases, liquidate your assets. Creditors are paid in priority according to the amount of risk they assumed. Creditors who took on less risk get paid first. You can also file Chapter 7 as an individual, in which case some of your property may be exempt from liquidation.
  • Chapter 9 – Governs municipal debts. You probably won’t be filing Chapter 9.
  • Chapter 11 – You remain in control of business operations, but are subject to the oversight of the court. Chapter 11 can be used for either liquidation or reorganization. Creditors are kept at bay until their claims can be resolved in bankruptcy court. Note that the restructuring process can still result in the entire business being liquidated. Anyone can file Chapter 11, but most filers are large corporations or wealthy individuals.
  • Chapter 12 – Covers only family farms and fishermen but is otherwise similar to Chapter 13.
  • Chapter 13 – Allows you to propose a reorganization plan for your finances that will unfold over the course of three to five years. Rather than discharging debt, Chapter 13 functions as a more comprehensive form of debt consolidation that can even cover secured debt, liens, and taxes.

Rationales For Filing A Bankruptcy

Debt might be one of the most poorly understood financial topics. Conventional wisdom dictates that paying back your debts (plus all accumulated interest) is a moral–if not civilizational–imperative. As reasonable as that sounds at first, it’s actually a pretty absurd idea. The system only works because both the borrower and the lender take on risk when they agree to the terms of a loan.

If there are no risks to the borrower, the borrower is incentivized to take out as much money as possible. If there are no risks to the lender, the lender is incentivized to recklessly load up as many suckers as possible with debt.

Lenders have options for damage control when it comes to bad debt. For example, they can write debt off in their taxes and sell it to collections agencies. You, as a borrower, have bankruptcy protections. In short, you’re doing something so common it’s almost banal.

Filing Options

Strictly speaking, you don’t need to have a lawyer to file bankruptcy, and there are numerous resources online that can walk you through the process of navigating your state’s bankruptcy system step-by-step. Costs vary depending on where you’re located, but filing without a lawyer can save you a lot of cash. Expect to put a lot of research time in if you decide to file on your own. If you’re filing Chapter 7 as an individual, for example, you’ll want to know which of your assets are exempt from liquidation. Due to its greater complexity, it’s much harder to successfully file Chapter 13 without a lawyer than it is to file Chapter 7. You can find the forms on the United States Courts government site.

While you can file on your own, your chances of success rise substantially if you hire a bankruptcy lawyer. A lawyer can walk you through important questions—such as what debts are dischargeable— help you determine what “chapter” bankruptcy to file, advise you how to fill out forms, and even tell you whether or not it’s a good idea to file in the first place. Lawyer fees vary greatly, but on average will range between the mid $100s to the mid $1,000s.

Legal and filing costs may vary depending on the type of bankruptcy you file for. Expect higher costs filing for Chapter 13 than Chapter 7, for example.

If you find yourself in a Catch-22 where you’re so cash-limited that you can’t afford these fees, you can qualify for pro bono counsel if your income is less than 150% of the poverty line.

Chapter 7 vs Chapter 13

Here’s a side-by-side comparison of Chapter 7 and Chapter 13 bankruptcy:

Chapter 7 Chapter 13
Eligibility: Individuals and businesses. Must meet means test Individuals and sole proprietors. Unsecured debts < $394,725. Secured debts under $1,184,200
Length: Up to 6 months 3 – 5 years
Assets: Nonexempt property is liquidated Assets are retained
Debts: Most debts are discharged Debtor must pay unsecured creditors an agreed upon amount, usually the value of nonexempt assets. Grants time to pay mortgages, taxes, etc.
Stays on record for: 10 years 7 years

Final Thoughts

Bankruptcy is probably one of the last things you want to think about. But as unpleasant a prospect as it can be, businesses regularly fail. If that happens, don’t be afraid to look into bankruptcy and give yourself a fresh start.

Chris Motola

Chris Motola is an independent writer, journalist, programmer, and game designer who has mastered the art of using his laptop in no fewer than 541 positions, most of them unergonomic. When he’s not pushing keys or swiping screens, he’s probably out exploring urban or natural environs, experimenting in the kitchen, or delighting/annoying his friends with his ideas and theories.

Chris Motola

“”

Tips To Get A Loan For The Start Up Business

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loans for business

It’s the central conundrum of beginning a company. It appears that everybody, from politicians on lower, ritualistically extols the benefits from the American small business operator. Those are the ur-icons of star-spangled capitalism and also the sturdy first step toward our national exceptionalism, sitting square alongside mother, apple cake, and also the ghostly visage of Dale Earnhardt. We can’t praise them enough within the abstract.

But, at any given time when corporate earnings are reaching all-time highs and firms like Apple are located on more money compared to what they get sound advice with, it remains very hard for ambitious entrepreneurs to get the capital they have to launch and also be a brand new business. Indeed, despite our valorization of startup culture, the speed of recent business creation within the U.S. is near its 40-year low. When the ability for anybody to produce a start up business is the reason why America special, the forces-that-be possess a funny method of demonstrating their reverence for the putative ideals.

On the floor level, there’s an indisputable logic towards the reluctance of lenders to loan money to start up business proprietors. In the end, most new companies fail. Entrepreneurship is inherently dangerous. In addition, many small company proprietors do not have great credit. Add the truth that if you are just beginning out, obviously, your business won’t have 2+ many years of existence within the books — a financial institution requirement of most loans. Just how can start up business proprietors navigate this atmosphere to get hold of some capital?

Continue reading to uncover the strategies by which you’ll give legs for your startup business.

Table of Contents

Buddies & Family

I recognize this suggestion reeks of privilege. Most us citizens — individuals from in the past disadvantaged communities particularly — simply don’t have the same sources inside their personal and family systems just like individuals from wealthier precincts. But when wealth does exist in your family or perhaps your circle of buddies and you aren’t too squeamish concerning the apparent challenges of blending business with your own personal existence, you might like to try it out. Just make certain to speak your company plans making them conscious of the potential risks. Things could easily get awkward in case your business goes south, but a minimum of Aunt Dorothy is not as likely than the usual bank to repossess your vehicle!

(Clearly, I’m making assumptions regarding your aunt. For those I understand, Dorothy’s a genuine hard-ass)

Unsecured Loans For Business

If your company is under 2 yrs old, best of luck obtaining a business loan. However, have you thought about getting an unsecured loan and taking advantage of it to pay for business expenses?

Eligibility for an unsecured loan is dependant on your individual credit-worthiness and never those of your company. This really is clearly good if your company is just getting began, but you will have to have a good credit score along with a decent earnings, and you will be restricted to borrowing $35K-$50K. Around the plus side, unsecured loans are usually unsecured, meaning you won’t be required to set up collateral. The loan provider can continue to file suit you should you not repay the borrowed funds, however, you won’t go outdoors to locate your vehicle being towed out of your front yard by a few goon.

If the option suits your conditions, take a look at our help guide to using unsecured loans for business purposes. And when you’re searching to have an online personal bank loan vendor, here are a few options that you should consider.

P2P Loans

Let’s say I were to let you know that it is possible to acquire a loan online even when your credit rating isn’t so hot? Enter P2P, or peer-to-peer, lending. It’s considered a kind of crowdfunding, though in contrast to Kickstarter, you spend back your contributors. While there’s some overlap between this type of loan and also the kind I described within the last section, P2P lenders are usually more generous in who they’ll give loan to than “traditional” online lenders. Let’s take particular notice at a couple of them.

Kiva U.S.

Kiva U.S. (see our review), a nonprofit P2P microlender, offers crowdfunded microloans with % interest! Actually — Kiva U.S. offers loans where the loan provider doesn’t are in position to profit whatsoever. In addition to this, it normally won’t even check your credit rating. Kiva U.S. is dependant on “social underwriting,” and therefore rather of your credit reportOrearnings/etc. figuring out your credit-worthiness, the “crowd” items you financing making use of your status as leverage. It’s an amazing deal for individuals whose credit score is incorporated in the crapper. A few of the drawbacks: you are able to only borrow as much as $10K through Kiva, and also the application can require two several weeks.

Accion

Accion (see our review) is yet another nonprofit P2P loan provider to think about — one we at Merchant Maverick are particular fans of. Unlike Kiva, Accion’s loans aren’t “free,” however with much greater borrowing amounts (as much as $50K), terms and charges that rival nearly anybody’s, complete transparency, a readiness to give loan to startups, along with a dedication to financial education, Accion is a superb choice for jump-beginning your brand-new business.

Other P2P lenders include:

Small business administration Loans

Small business administration loans are loans supported by the us government by means of the Sba. The company doesn’t offer loans themselves but instead guarantees some of the loan from a lender. Should you default around the loan, the Small business administration covers part of the loss. This will make the borrowed funds a lesser dangerous prospect for that issuing bank (or any other lenders).

While you might have trouble qualifying to have an Small business administration loan if you were running a business for under 2 yrs, it’s still worth a go. Some online lenders streamline the entire process of trying to get this type of loan, thus hastening the best decision in your approval. Here are the online services offering Small business administration loans:

Short-Term Loans

Short-term loans really are a relatively recent product provided by many lenders. Are they all attractive to start up business proprietors is they typically require 3 months’ price of business history to acquire.

Short-term loans differ in certain fundamental ways from traditional loans. Charges aren’t calculated using rates of interest, but instead are fixed, i.e. calculated once to ensure that you’ll be aware of exact amount it’s important to pay back. Furthermore, as you may have suspected, they have… watch for it… temporary lengths.

Short-term loans have low customer qualifications, no use needs, along with a rapid application and funding process, so it’s easy to understand their attract start up business proprietors. However, they most likely should not be the first resort, because the charges are usually extremely high and also the loan + fee should be paid back relatively rapidly.

Read our piece on short-term loans to find out more.

Grants

It might be nice to obtain a loan that you simply didn’t need to pay back, wouldn’t it?

Business grants are awarded through the government (federal, condition, and native) in addition to certain NGOs and companies. Obviously, whether it were easy to obtain a grant, everybody could be providing them with — and I’m guessing you most likely have no idea lots of business grant recipients.

Most grant programs are very specific regarding the type of companies they plan to benefit, so it might take you a while before you decide to uncover a grant program that the business aligns with. You’ll should also detail your company plans having a high amount of precision. In addition, many grant programs need a compelling, well-written pitch promoting our prime-mindedness of the vision. Grants might be free money, but, ironically enough, you’ll need to actually work on their behalf.

It could be a job tracking lower the various entities available offering grants to small companies, and that’s why this Fundera article detailing 106 organizations offering small company grants is really an opportune resource.

Crowdfunding

I discussed P2P lending earlier, that is a type of debt crowdfunding. However, when many people consider crowdfunding, they’re considering rewards crowdfunding. Let’s explore rewards crowdfunding and it is more youthful brother or sister, equity crowdfunding. Both hold significant possibility of the budding businessperson.

Rewards Crowdfunding

Vast amounts of dollars happen to be elevated on rewards crowdfunding platforms like Kickstarter (see our review) and Indiegogo (see our review). Using these platforms, you employ social networking to get the word out regarding your business and to inquire about financial support. In exchange, you provide rewards for your backers. Most such platforms allow you to host campaigns that you attempt to achieve a particular funding goal inside a defined period of time. However, Patreon (see our review) works differently for the reason that backers join give you support on the ongoing basis — monthly or per creation — in return for use of a steady flow of exclusive content. Rewards crowdfunding is especially well-suitable for individuals in the industry of manufacturing products of singular value, like innovative gizmos, tabletop games, and art of varieties.

Equity Crowdfunding

With equity crowdfunding, rather of offering rewards for your backers by means of gadgets or graphic novels, you are offering equity inside your company. Thus, the backer becomes a trader. Equity crowdfunding was just lately legalized by federal legislation, therefore the market is still experiencing growing pains, but it’s likely to grow because the relevant rules are further streamlined. Equity crowdfunding generally is a more complicated prospect than rewards crowdfunding — you need to accept the truth that you’re ceding partial charge of your organization to investors (with whom you’ll be accountable).

Crowdfunder (see our review) is one particualr pure equity crowdfunding platform, while Fundable (see our review) hosts both equity and rewards crowdfunding campaigns. A effective rewards crowdfunding campaign can set you up nicely to have an equity raise, because it tells investors the viability of the product available on the market.

Read this article on crowdfunding to obtain a more in-depth explanation of the best way to use various kinds of crowdfunding to finance your company.

Final Ideas

There’s never been a far more challenging time to launch your personal business. Society is flush with pockets of obscene opulence, yet so very little of this wealth makes its method to the burgeoning companies where it might perform the most good. Thankfully, we’re here that will help you inside your mission to fund your dreams. Here are a few more useful articles for proprietors of emerging companies seeking funding:

Not too you’ll require it, because you’re awesome, but: Best of luck!

Jason Vissers

Jason Vissers is really a author, cereal chef and Netflix aficionado from North Park. A local Californian who enjoys the shore, Jason nevertheless would rather do his surfing on the internet, the raddest wave of all of them. Jason can’t eat raisins.

Jason Vissers

“”

Mirador Finance & Merchant Maverick: Making Small Company Loans Simpler

Our impartial reviews and content are supported partly by affiliate partnerships. Find out more.

Although business financing are available from numerous sources, loans, lending institutions, and nonprofits consistently provide the best terms, rates, and charges.

However, these financing options will also be notoriously nearly impossible to find traditional lenders are recognized for getting lengthy, sometimes prohibitively attracted-out application processes. Although many small company proprietors may be able to qualify for a financial institution loan, many don’t bother applying simply because they don’t have time.

Let’s say you can circumvent the slow application?

Merchant Maverick’s Community of Lenders is scheming to make that possible. Using the Merchant Maverick Community of Lenders, you should check eligibility and obtain a small company loan through participating banks, lending institutions, and independent lenders across the nation. Because of our platform, a credit card applicatoin that accustomed to take 10 hrs now takes only about ten minutes.

Applying for a financial loan is totally free, and you may look at your eligibility prior to making a free account and finishing a complete application. Keep studying to find out more, together with a detailed walkthrough from the whole process, or mind to the Merchant Maverick Community of Lenders platform now to find out if you qualify!

What’s The Merchant Maverick Community Of Lenders?

The Merchant Maverick Community of Lenders is definitely an online matchmaking platform that connects retailers to banks, lending institutions, and independent lenders nationwide. Rather of spending some time trying to get loans you will possibly not be qualified for, the woking platform determines whether you’ve got a good possibility of qualifying for a financial loan having a couple of initial questions. If you’re qualified, you are able to complete a complete application (which usually takes about twenty minutes).

Merchant Maverick has partnered with Mirador, a fintech company, to create this particular service possible.

Who’re Lenders?

With the technology from Mirador, Merchant Maverick has partnered with banks, lending institutions, and independent business lenders round the U . s . States to give the Merchant Maverick Community of Lenders program.

These institutions have a tendency to carry lower rates of interest than other business financiers. Generally, you are able to expect to encounter rates of interest for example:

  • Banks and lending institutions: 4% – 9%
  • Independent lenders (typically nonprofit and never-for-profit lenders): 10% – 15%

For comparison’s sake, quick installment loans and credit lines from online lenders tend to possess rates of interest between 5% and 30%, and a merchant cash advance or short-term loan might cost much more.

Step-by-Step Application

The Merchant Maverick Community of Lenders could be utilized through the sidebar on any Merchant Maverick loan provider reviews, or through the links at the very top or bottom want to know ,.

You will find six steps:

  1. Answer fundamental prequalification questions
  2. Make a free account
  3. Enter details about your company
  4. Enter details about yourself
  5. Upload documents
  6. Evaluate the application

In most, the applying generally takes around ten minutes to accomplish. Because the majority of time is devoted to compiling and uploading various business documents, it might take you more or under ten minutes for the way easily you have access to the required documents.

The initial step is prequalification. At this stage, you’ll have to enter fundamental details about your company and also the loan you’re searching for.

Getting began

You will be requested for an additional information in this step:

  • Requested amount borrowed
  • Your business’s zipcode
  • Period of time running a business
  • Your individual credit rating
  • The intended utilisation of the loan proceeds

The machine uses these details to find out whether you fit someone lender’s qualifications to obtain a loan.

If what you’re searching for doesn’t match exactly what the loan provider offers, or you don’t be eligible for a some other reasons, the interface will show you immediately so that you can begin searching elsewhere for funds.

However, if you’re qualified, you will be motivated to create a free account to carry on the procedure. The applying may also provide you with details about the borrowed funds product you’re trying to get, including the plethora of rates of interest readily available for the merchandise.

The following steps are to enter details about your company and yourself (and then any partners). Although the data requested will be different with respect to the loan provider and lending product, generally, you’ll be needed to go in fundamental details such as the addresses for your house and business, age your company, as well as your annual revenue.

The very first three steps generally only take a couple of minutes.

The majority of the applying time is going to be allocated to the next phase: uploading business documents. In an attempt to achieve an all natural look at your business’s financials, the loan provider you’re signing up to may wish to see various financial documents. Once more, the documents needed will be different with respect to the product and also the loan provider, but here are a few generally needed documents:

  • Bank statements
  • Tax statements
  • Legal documents
  • Profit and loss statements
  • Balance sheets
  • Debt schedule
  • A/R aging report

If you have submitted all of the information you need, the only real step left is to review your information and submit the applying.

Should you encounter any problems and have any queries throughout the application, customer support can be obtained via live chat to assist you.

Along the way with the application, you’ll have an chance to pick from the very best match lenders before finishing and submitting the application. If you have posted the application, financing officer will review and verify the data. They’ll result in the ultimate decision about whether or otherwise the application is recognized and, if that’s the case, what terms and charges they are able to provide you with.

Time from application submission to approval or denial varies with respect to the lender—it might take between a couple of days to some month. If you are on a busy schedule, it’s better to inquire how lengthy verification will require before beginning the applying.

Prepared to look at your eligibility? Follow the link below to obtain began.

Look At Your Eligibility

Bianca Crouse

Bianca is really a author in the Off-shore Northwest. Like a product from the digital age, she likes absorbing considerable amounts of knowledge and figures she may as well transfer. If not looking in a screen, she’s most likely foraging for food outdoors, playing games, or harassing somebody with theories about this movie she just viewed.

Bianca Crouse

Bianca Crouse

Bianca Crouse

“”

Equity Versus Non-Equity Crowdfunding

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equity crowdfunding

Crowdfunding is extremely popular nowadays. I do not have to let you know this it’s a manifest truth, apparent on the planet around us. In the Kickstarter-driven boom within the tabletop gaming industry to using GoFundMe like a rickety replacement for a nationwide healthcare safety internet, crowdfunding is really a fundraiser solution formed through the occasions (it’s no coincidence that crowdfunding has had off within the decade because the start of the truly amazing Recession and also the resulting tightening of use of capital). It’s a primary influencer of economic and cultural trends.

Go into the federal legislation referred to as JOBS Act. This act, formally known as the Jumpstart Our Business Startups Act (Congress might be damaged in lots of ways, but never doubt their acronym game), was passed with bipartisan congressional support — though not without critique — and signed into law by President Barack Obama this year. The primary reason for the Act ended up being to legalize equity crowdfunding. Basically, rather of backing a startup venture in return for an incentive or internal satisfaction, you back a business in return for equity–an possession stake in the organization. Rather to be only a backer, the contributor becomes an investor.

You could think: Therefore the distinction between equity crowdfunding and Kickstarter is you offer rewards using the latter and equity using the former? Awesome.

To that particular I only say: Whoa there, cowboy. It isn’t that easy.

Let’s delve further in to the variations between both of these completely different way of performing a crowdfunding campaign.

Table of Contents

Equity Crowdfunding

In the centre from the profound distinction between equity crowdfunding and non-equity crowdfunding may be the disparity between investing and creating a donation in return for a guaranteed reward. As the commitment of an incentive can carry by using it some extent of legal obligation, offering investment possibilities is really a wholly different proposition within the eyes from the law. Capital investment is an infinitely more heavily-controlled field, for apparent reasons. Securities fraud is among the most pervasive and insidious strategies by which honest people and organizations can lose everything they’ve labored for, because the victims of Bernie Madoff can attest. To totally deregulate securities buying and selling is always to give free reign towards the scammers and fraudsters in our midst.

(I recognize the ever-growing pace from the news cycle means this stuff get forgotten more rapidly than in the past, however, you do remember Bernie Madoff, right? Please agree.)

Regardless of the risks natural within the securities trade, it grew to become obvious within the wake from the Great Recession more funding avenues must be distributed around capital-starved startups and small-to-medium-sized companies. The legalization of crowdfunded securities was seen in an effort to help bridge this funding gap, and therefore the roles Act was pressed through Congress and signed into law, legalizing the advertising and solicitation of securities.

Hold on! Ends up, the JOBS Act wasn’t just rather simple of Legalizing It. The Roles Act was made up of a number of different sections known as Titles, which Titles associated with different way of offering crowdfunded securities. They didn’t work all at one time. For instance, let’s consider the three Titles best to equity crowdfunding: II, III and IV.

Title II from the JOBS Act required effect in 2013. It approved equity crowdfunding using accredited investors only. What’s a certified investor, you may well ask? A certified investor is just someone who either includes a internet price of $a million USD excluding the need for their primary residence or whose earnings continues to be $200K or even more during the last 2 yrs and who expects to create a minimum of much in the present year. “Accredited investor” doesn’t denote any particular skill — it simply describes individuals who make a lot of money and/or have a very high internet worth. The concept behind treating them differently as investors is they are less easily easily wiped out by a regrettable financial commitment.

By comparison, Titles III and IV from the JOBS Act approved equity crowdfunding for non-accredited investors—basically everyone else. These Titles required effect in 2015 and 2016 correspondingly. Partly because of the gap over time between once the Titles required effect, equity crowdfunding for accredited investors is much more prevalent right now, with the likes of Fundable (see our review) and Crowdfunder (see our review) taking on the task. Equity crowdfunding for unaccredited investors (average folks), however, continues to be just getting began, though the likes of Wefunder happen to be attempting to make a try from it within this arena.

Regrettably, equity crowdfunding has yet to consider off in the way envisioned once the JOBS Act was passed, particularly equity crowdfunding for non-accredited investors. Analysts have attributed this towards the dollar limits enforced along with other regulatory challenges. Nevertheless, it’s anticipated that Congress and also the SEC continuously refine the relevant rules managing the field, so equity crowdfunding will probably be around for a while in the future. Just be familiar with the possibility hazards. Here’s the disclaimer I insert into my equity crowdfunder reviews:

Keep in mind that equity crowdfunding is really a still-evolving field, using the full impact from the JOBS Act still being assessed. Equity crowdfunding is really a more complicated proposition than, say, rewards-based crowdfunding, as investing is a lot more substantially controlled. Consult a lawyer for those who have any legal queries about the procedure, SEC rules, etc.

Non-Equity Crowdfunding

Non-equity crowdfunding encompasses a lot of what an average joe thinks about once they hear the word “crowdfunding.” Individuals who produce goods by means of tech gadgets and art are particularly attracted to rewards crowdfunding — crowdfunding where the backer receives the merchandise or work created through the campaigner in return for their contribution.

As you’re probably aware, two such platforms are Kickstarter (see our review) and Indiegogo (see our review). As the two platforms get their variations — Kickstarter is much more exclusive regarding who are able to campaign on their own site and Kickstarter necessitates that you are offering rewards — both of them cash in keeping. Both offer entrepreneurs, startups and SMBs the chance to tap the public’s desire to obtain the following big factor. Both also take 8Percent of the items you raise in charges, with 5% visiting the platform and roughly 3% visiting the payment processor.

GoFundMe (see our review) is yet another big player within the crowdfunding field, but when you can easily generate a GoFundMe campaign for the startup or small company, GoFundMe is really strongly identified with crowdfunding for medical expenses/emergencies that the more commercial campaign might find it difficult to gain traction around the platform.

One crowdfunder has upended the Kickstarter/Indiegogo/GoFundMe funding model and it has accordingly designed a big splash recently. Patreon (see our review) will work better compared to other crowdfunders for artists yet others who produce new content continuously. Using their funding model, the backer subscribes to aid the campaigner with an ongoing basis. The machine resembles a regular membership service. The backer props up campaigner either on the monthly or perhaps a per creation basis, as well as in exchange receives exclusive content in the campaigner. It’s how Twitter legend dril gets support for his nuggets of timeless knowledge.

I’ll observe that there’s a second kind of non-equity crowdfunding. Frequently it’s known as debt crowdfunding. Basically, this requires borrowing funds from the crowd of investors rather of from the bank. LendingClub (see our review), Kiva U.S. (see our review) and Prosper (see our review) are the leading debt crowdfunding sites.

Naturally, many startups will discover the possibilities of dealing with debt to obtain funding less attractive than offering rewards or equity. Also referred to as P2P (peer-to-peer) lending, debt crowdfunding is much more similar to applying for a financial loan than performing a rewards or equity crowdfunding campaign, therefore if you are interested in going after this type of business funding, take a look at my article on personal loans for business use. In the following paragraphs, I examine both P2P lenders and much more traditional online lenders when it comes to services provided and term-lengths.

Hybrid Platforms

To help complicate things, some crowdfunders host both equity and rewards crowdfunding campaigns. While Indiegogo is better noted for its rewards crowdfunding, they really offer equity crowdfunding too via a partnership with Microventures known as First Democracy VC. Fundable (see our review) is yet another platform offering both rewards and equity crowdfunding. Using these hybrid platforms, you normally can’t conduct both types of campaigns at the same time. If you wish to do both, the smart factor to complete would be to conduct a rewards campaign first. If you are effective, after that you can use the prosperity of your rewards campaign to show to equity investors the viability of your products or services and it is attract consumers.

Final Ideas

As I’ve stated, equity crowdfunding has yet to consider off like other kinds of crowdfunding. The main rewards crowdfunders have used up the majority of the oxygen within the crowdfunding room, cheap the regulatory landscape is really new (cheap equity crowdfunding involves investing) implies that submission using the relevant laws and regulations and rules is much more complex compared to the flimsily-controlled realm of rewards crowdfunding. Nevertheless, the area is ripe for growth.

Essentially, in case your entrepreneurial/business attempts are dedicated to a distinctive product or experience that may potentially generate viral enthusiasm, rewards crowdfunding is the best choice. If, however, you’re creating a company with exponential growth potential but which doesn’t create a singular product that people salivate over, equity crowdfunding helps make the most sense. Obviously, there isn’t any reason you cannot do one and so the other!

Jason Vissers

Jason Vissers is really a author, cereal chef and Netflix aficionado from North Park. A local Californian who enjoys the shore, Jason nevertheless would rather do his surfing on the internet, the raddest wave of all of them. Jason can’t eat raisins.

Jason Vissers

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