Zoho Invoice VS Zoho Books

Zoho Invoice VS Zoho Books

Accounting

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Features

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Pricing

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Tie

Hardware & Software Requirements

Tie

Tie

Users & Permissions

Tie

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Ease of Use

Tie

Mobile Apps

Tie

Tie

Customer Service & Support

Tie

Tie

Negative Reviews & Complaints

Tie

Tie

Positive Reviews & Testimonials

Tie

Integrations

✓

Tie

Security

Tie

?

Winner

?

Review Visit

Review Visit

Zoho offers a suite of over 40 products including Zoho Invoice and Zoho Books. But when two sibling products from the same family tree go head to head, which comes out on top? That’s what we’re here to find out.

Zoho Invoice and Zoho Books both offer incredible invoicing and international business features for small businesses, as well as strong mobile apps, excellent customer service, and positive customer reviews.

Zoho Invoice was created in 2008 and today has grown to offer over 16 invoice templates, multi-lingual invoicing, and tons of invoicing automations. Top that with a beautiful client portal, project management, expense tracking, and ten different payment gateway options and it’s easy to see why Zoho Invoice is our top 5-star invoicing software.

The Zoho Books software we know today was redesigned and launched in 2014. The software offers the same great invoicing features as Zoho Invoice but adds accounting features like journal entries, bank reconciliation, and accounts payable. The software also offers inventory, tracking categories, and a few more third-party integrations, which has earned it the Merchant Maverick title of Best Accounting Software For Invoicing.

But which bookkeeping software app is better, and which is more suited for your small business? Let’s find out.

At Merchant Maverick, our goal is to help you to find the best software for your small business needs. So to make your decision easier, we’ve carefully researched and tested both products. We’ll put Zoho Invoice and Zoho Books head to head by comparing features, pricing, customer experience, reputation, and more, so you don’t have to. Read on to see which software is right for your business.

Don’t have time to read the whole post? Or looking for a different accounting option? Check out our top-rated accounting solutions to see our favorite recommendations.

Accounting

Winner: Zoho Books

Zoho Books is the clear winner here because Zoho Invoice isn’t accounting software — it’s simply straightforward invoicing software.

Zoho Invoice does provide a few basic bookkeeping tools like expense tracking and mileage deductions which might be enough for some smaller businesses. However, if you want true accounting, Zoho Books is the way to go.

Zoho Books provides the full accounting package, so much so that it gives QuickBooks Online a run for its money. Zoho Books features bank reconciliation, journal entries, ample reports, fixed asset management, and a customizable chart of accounts.

Features

Winner: Zoho Books

Zoho Invoice VS Zoho Books

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Invoicing

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Estimates

✓

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Expense Tracking

✓

✘

Bank Reconciliation

✓

✘

Chart of Accounts

✓

✘

Fixed Asset Management

✓

✓

Contact Management

✓

✘

Accounts Payable

✓

✓

Time Tracking

✓

✓

Project Management

✓

✘

Inventory

✓

✓

Reports

✓

✘

Tracking Categories

✓

✘

Print Checks

✓

✓

Mileage Deductions

✓

✓

Sales Tax

✓

✘

Tax Support

✓

✓

Importing & Exporting

✓

The chart makes it easy to see which app takes the cake in this category.

Both Zoho Invoice and Zoho Books have some of the best invoicing features and automations on the market. The features that the programs do share are nigh identical; the main difference is that Zoho Books takes the UI and feature set of Zoho Invoice and ups the ante with more features.

While Zoho Invoice is incredibly full-featured for an invoicing software, Zoho Books add accounts payable, inventory, tracking categories, and tax support in addition to the accounting features mentioned earlier.

Pricing

Winner: Zoho Books

Zoho Invoice and Zoho Books have very similar pricing structures. Zoho Invoice offers a forever free plan as well as three paid plans ranging from $9 – $29/month. Zoho Books’ three pricing plans also range from $9-$29/month.

While Zoho Invoice seems like it has the edge by offering a free plan, the plan itself is severely limited and impractical for most businesses. We give this category to Zoho Books because you get much more bang for your buck in terms of features for the same exact price as Zoho Invoice.

Hardware & Software Requirements

Winner: Tie

As cloud-based software programs, both Zoho Invoice and Zoho Books are compatible with nearly any device so long as you have an internet connection. Both also offer an incredible number of mobile apps for Apple products, Androids, Microsoft phones, Smartwatches, and even Kindles.

Users & Permissions

Winner: Tie

Zoho Invoice’s largest plan allows 10 users. Similarly, Zoho Books’ largest plan allows nine users and one accountant. Additional users can be added to each software. Both programs also offer decent user permissions and the ability to approve transactions for added control, putting them on the same footing as far as user permissions go.

Ease Of Use

Winner: Zoho Invoice

Both Zoho Invoice and Zoho Books are generally easy to use. Each software can be difficult to navigate at times, but luckily there are ample support options to help you find what you’re looking for. The UI and user experience are almost identical with each program, but we gave Zoho Invoice the win here based on the sheer fact that there are fewer features to have to learn and navigate.

Mobile Apps

Winner: Tie

Both Zoho Invoice and Zoho Books offer strong, full-featured mobile apps that receive much praise from customers.

Customer Service & Support

Winner: Tie

Both Zoho Invoice and Zoho Books have excellent customer support (are you catching the theme yet?). Since Zoho is in charge of both products, it’s not surprising that their customer support options are similar. In my experience, phone wait times are short, email responses are generally quick, and representatives are usually friendly and helpful for both products. The best part is that Zoho Invoice’s and Zoho Books’ knowledgebases can be accessed directly from within the respective programs to make your life a bit easier.

Negative Reviews & Complaints

Winner: Tie

Both Zoho Invoice and Zoho Books receive predominately positive customer reviews. The products have such a similar number of negative reviews that we had to give them a tie.

The complaints that do exist regarding Zoho Invoice mostly revolve around lack of integrations, a few poor customer support experiences, and occasional navigational difficulties. Complaints about Zoho Books center around a similar lack of integrations, the lack of payroll, and the desire for more features (mostly more reporting and user permissions).

Positive Reviews & Testimonials

Winner: Tie

Again, Zoho Invoice and Zoho Books tie in the number of positive customer reviews they receive. Both receive high ratings across the board from sites like G2Crowd and GetApp, as well as iTunes and the Google Play Store.

Zoho Invoice customers love how easy the software is to use, how professional the invoices look, and the ability to run their business on the go. Zoho Books users also love how easy the software is to use and appreciate how affordable it is, especially considering the robust feature set.

Integrations

Winner: Zoho Books

Zoho Invoice has 25 integrations as opposed to Zoho Books’ 33, which gives Zoho Books the edge here.

Security

Winner: Tie

Zoho uses the same security measures to protect both Zoho Invoice and Zoho Books, including SSL encryption, two-factor authentication, and regular virus detection and prevention to protect customer data. The company also performs regular data backups onto multiple servers in undisclosed locations, which are guarded by a number of physical security measures. Visit Zoho’s website to learn more.

And The Winner Is…

Zoho Invoice VS Zoho Books

While both products are similar and are tied in a number of categories, Zoho Books is undeniably a step up from Zoho Invoice. I almost always recommend using full accounting software over solely invoicing software. When it comes to running your small business, you need a way to balance the books and keep strong accounting records for tax season.

This is why Zoho Books was the clear winner from the start. Not only do you get more bang for your buck with Zoho Books in terms of features, you also can rest assured that your books are balanced correctly. Key features like bank reconciliation, accounts payable, inventory, and tax support make Zoho Books a more practical small business solution. Plus, you get the same great mobile apps and customer service but with more integrations.

However, this doesn’t mean that Zoho Books is necessarily the right choice for everyone. If you are looking for invoicing software and don’t want the extra accounting features, Zoho Invoice is one of best — if not the best — invoicing software out there. It offers great invoice templates and customizations, expense tracking, a client portal, and project management — all at a relatively affordable price.

Zoho Invoice and Zoho Books each boast strong mobile apps, excellent customer support, almost identical pricing structures, and tons of positive customer reviews, so you really can’t go wrong with either choice (unless your small business needs payroll, in which case you’ll need a more advanced accounting software). The decision ultimately comes down to what features your business needs.

If you want to explore all of your options, check out our other accounting software reviews and/or view our full invoicing software reviews.

The post Zoho Invoice VS Zoho Books appeared first on Merchant Maverick.

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Government Business Loans: What Small Businesses Need To Know

Not all small businesses are the same, but they all have one thing in common: the need for capital to grow, expand, and be successful. Unfortunately, small businesses don’t have unlimited funds available, so they often need a helping hand in the form of a business loan. Getting funding from a bank, credit union, or another traditional route isn’t always possible. Small businesses – especially those that have not been in business for long – are intrinsically risky prospects, and many lenders don’t want to take that gamble.

However, there is an alternative to traditional loans: government-backed business loans. These loans offer benefits to borrowers and lenders alike, creating a win-win situation for everyone involved. How does the process work? Is a government loan right for your business?

Read on to learn everything you need to know about government business loans.

What Are Government Business Loans?

Government business loan programs offer opportunities for small businesses to obtain funding. Small businesses and startups are often unable to obtain traditional bank loans since they’re viewed as riskier ventures by lenders. That’s precisely why the Small Business Administration has stepped up to provide funding options that benefit both the lender and the borrower.

The Small Business Administration, or SBA, was established in 1953 to provide resources for small businesses. In addition to offering training programs and other tools to help small business owners succeed, the SBA has also established several funding programs designed specifically to aid small businesses.

The SBA itself does not provide loans to small business owners. Instead, partner lenders known as intermediaries are used to provide funding. The SBA has established guidelines under each program, keeping interest rates low and offering longer terms to make loans more affordable for the small business owner. The SBA guarantees a percentage of the loan — usually anywhere from 50-85% of the funding. In other words, the Small Business Administration agrees to repay the guaranteed portion of the loan if the borrower defaults. This mitigates much of the risk for the lenders, giving them more incentive to lend to small business owners.

Who Are Government Business Loans For?

project management software

Government business loans are available to every for-profit small business in the United States, providing the business meets the qualification guidelines. To obtain an SBA loan, each business must officially qualify as a small business based on its number of employees, net worth, and annual revenue.

The SBA offers multiple programs to fit the needs of just about any small business. Established businesses can use SBA-backed loans to expand with new or updated facilities, purchase equipment, or obtain working capital. Startups can also qualify to receive funding for their next big project. The purchase of businesses and franchises can be funded through SBA loan programs as well.

The SBA offers funding opportunities for military veterans and service members through the Veterans Advantage program. Businesses run by women, minorities, and veterans, or those in underserved communities — including low-income areas — can request funding through the Community Advantage program.

SBA Loans For Immigrants

Although SBA loans are for businesses based in the United States, loan opportunities are available for immigrant small business owners. Permanent residents, naturalized citizens, and refugees or asylees with lawful permanent resident status can apply for government-backed loans. Lawful non-permanent citizens can also qualify provided they have up-to-date work visas. There are no special requirements for immigrants when applying for this funding. However, all immigration paperwork and documentation – in addition to the standard loan paperwork – will be required.

SBA Loans For Felons

Small business owners with felony records may still be able to obtain SBA-backed loans. The SBA’s rules state that funding will not be available for anyone with a record containing crimes of moral turpitude. This includes violent crimes such as homicide or aggravated kidnapping, as well as crimes of dishonesty such as theft, embezzlement, or fraud.

Felonies that do not involve moral turpitude may also disqualify an applicant from receiving funding based on the policies of the intermediary. Some lenders may opt to not loan to anyone with a felony record; therefore, any applicant convicted of a felony may have to shop around to find a lender willing to work with their criminal background.

Types Of Small Business Loans Offered By The Government

The SBA has multiple loan programs in place to meet the needs of small business owners. Potential borrowers should understand the interest rates, terms, repayment plans, and how each loan’s proceeds can be used before applying for a government loan.

General SBA 7(a) Business Loans

When most people think of government business loans, the SBA 7(a) program is typically what comes to mind. This program is the most popular because of its high maximum loan amounts, long repayment terms, and flexibility regarding how funds can be used.

SBA 7(a) loans can be used for just about anything. Funding is available to acquire a business or franchise. Existing businesses can purchase equipment, real estate, or use the money as working capital. Existing debt can also be refinanced using 7(a) loan proceeds. The possibilities are virtually endless with the SBA 7(a) loan, which is why it’s such a popular choice among small business owners.

Loans of up to $5 million can be taken out through the SBA 7(a) program. Interest rates are extremely competitive and are capped at a maximum of 4.75% over the base rate.

Loan Amount Less Than Seven Years More Than 7 Years

Up to $25,000

Base rate + 4.25%

Base rate + 4.75%

$25,000 – $50,000

Base rate + 3.25%

Base rate + 3.75%

$50,000 or More

Base rate + 2.25%

Base rate + 2.75%

Repayment terms are set at 10 years for most purposes and 25 years for real estate. Ready to get started? Learn everything you need to know about SBA 7(a) loans.

SBA Express Loans

The SBA Express program is very similar to the 7(a) program in terms of how money can be employed. These funds can be used for just about any business-related expense. However, there are a few key differences between the Express program and the 7(a) program.

One of the biggest differences is that applicants for an Express loan will receive an approval response within 36 hours, compared to weeks through the 7(a) program. A major drawback with this program, however, is that the maximum loan amount is capped at $350,000.

Maximum repayment terms are the same as for 7(a) loans: up to 10 years for working capital and 25 years for commercial real estate. Interest rates are slightly higher for Express loans at 4.5% to 6.5% over the base rate.

SBA 7(a) Loans SBA Express Loans

Time to Approval

2 – 4 weeks

36 hours

Max. Loan Amount

$5 million

$350,000

Interest Rates

Base rate + 2.25% – 4.75%

Base rate + 4.5% – 6.5%

Max. Repayment Terms

  • 10 years for working capital
  • 25 years for commercial real estate
  • 10 years for working capital
  • 25 years for commercial real estate

SBA Lines of Credit (CAPLines)

The SBA offers lines of credit known as CAPLines. There are four different CAPLines programs that designate how funds can be used.

CAPLine Type Loan Use

Working Capital CAPLines

Lines of credit that can be used for short-term needs such as working capital or operating expenses. 

Seasonal CAPLines

Lines of credit used by seasonal businesses to cover the costs of seasonal increases in accounts receivable or inventory. Seasonal CAPLines can not be used to cover costs during the off-season. 

Contract CAPLine

Lines of credit available for contractors to cover the costs of specific contracts. Credit lines can be used for overhead and general / administrative expenses. 

Builder’s CAPLine

Lines of credit used for expenses related to the construction and renovation of a residential or commercial buildings for resale. This line can be used for costs such as labor, supplies, materials, landscaping, or other substantial costs during the construction and renovation process. 

  • Contract CAPLines are used for financing costs related to specific contracts. These proceeds can be used toward overhead costs, administrative expenses, and general expenses. These loans cannot be used for purchasing assets, refinancing debt, or paying back taxes.
  • Seasonal CAPLines provide funding for inventory and accounts receivable during a busy seasonal period. In some instances, it can be used to fund increased labor costs.
  • Builder’s CAPLines are used to pay for expenses related to the construction or renovation of residential and commercial buildings that will be resold. Proceeds can be used toward labor, materials, landscaping, utility connections, and fees such as building permits.
  • Working Capital CAPLines provide short-term working capital for businesses. Fixed assets may be acquired using this credit line, but it must be refinanced within 90 days.

Loans of up to $5 million are distributed through all CAPLines programs. The maximum repayment term is 10 years, with the exception of Builder’s CAPLines, which have maximum terms of 5 years. The interest rate will never exceed 4.75% over the base rate.

Term Rates/Fees

Maximum Borrowing Amount

$5 million

Maximum Term Length

  • 5 years for Builder’s CAPLines
  • 10 years for Seasonal, Working Capital, and Contract CAPLines

Percentage Guaranteed By The SBA

  • 85% for loans below $150,000
  • 75% for loans above $150,000

Interest Rates

Base rate + 2.75% to base rate + 4.75%

Fees

  • Guarantee fee of 0.25% – 3.75% of the portion of the loan guaranteed by the SBA
  • Other possible fees charged by the bank / partner lender

SBA CDC/504 Loans

The SBA CDC/504 program is a government business loan program that provides financing for business expansion. Loan proceeds can be used to purchase buildings or land, build new facilities, renovate existing facilities, or purchase long-term machinery. Loan funds can also be used toward consolidating existing debt related to the purchase or renovation of facilities or equipment.

Through the SBA CDC/504 program, a borrower receives up to 40% of the project costs through an SBA-approved Certified Development Company, or CDC. Fifty-percent of the project cost is obtained by the borrower through a bank, credit union, or other lenders. The remaining 10% is paid by the borrower.

The maximum funding amount through the CDC/504 loan program is $5 million. Repayment terms are set at 10 years and 20 years, while the interest rate is based upon the 5-year and 10-year Treasure issues rate.

SBA 504 Loans

Borrowing Amount

No maximum, but the SBA will only fund up to $5 million

Term Lengths

10 or 20 years

Interest Rates

Fixed rate based on US Treasury rates

Borrowing Fees

  • CDC servicing fee, CSA fee, guarantee fee, third party fees (however, most of these fees are rolled into the interest rate or cost of the loan)
  • Possible prepayment penalty

Personal Guarantee

Guarantee required from anybody who owns at least 20% of the business

Collateral

Collateral required; usually the real estate/equipment financed

Down Payment

10% – 30%

Find out more about the terms, rates, and requirements for SBA 504 loans.

How Does The CDC/504 Program Differ From The SBA 7(a) Program?

CDC / 504 Loans SBA 7(a) Loans

Loan Size

The CDC portion of the loan has a size limit, but the overall loan can be used to finance larger projects.

Offers flexibility for size projects, but are generally used for smaller sized projects.

Interest Rates

504 loans offer fixed-rate financing, which locks in low rates for the full length of the loan.

Usually has lower fees, but are variable, not fixed, and are adjusted quarterly. Rates typically rise over time.

Prepayment Penalty

High prepayment penalties

Prepayment penalties vary depending on loan

Loan Structure

  • 50% Bank Loan
  • 40% CDC Loan
  • 10% Borrower Down Payment

Varies depending on risk. Minimum 10% down payment for the borrower.

Loan Fees

Fees are negotiated per the 50% bank loan. Can be financed within the 504 loan.

Fees are based on the size of the loan. Can be financed within the 7(a) loan. An extra .25% of fees can be charged on portions of a 7(a) loan exceeding $1 million.

SBA Microloans

The SBA Microloan program provides loans to all small businesses that meet the basic requirements of the SBA. Non-profit childcare centers are also eligible to apply. Microloans can be used as working capital or to purchase inventory, supplies, fixtures, or equipment. Microloan proceeds cannot be used for the purchase of real estate or to refinance debt.

The maximum amount that can be borrowed through the Microloan program is $50,000. Interest rates for microloans vary by lender and are dependent upon their cost of funds. The typical interest rates for these government-backed loans are between 8% and 13%. The maximum repayment term for microloans is 6 years.

SBA 504 Loans

Borrowing Amount

$500 – $50,000

Term Lengths

Up to 6 years

Interest Rates

6.5% – 13%

Borrowing Fees

Possible fees from the loan issuer

Personal Guarantee

Guarantee required from anybody who owns at least 20% of the business

Collateral

Collateral normally required, but depends on the lender

Down Payment

  • No down payment for most businesses
  • Possible 20% down payment for startups
  • Possible 10% down payment for business acquisition loan

Learn more about microloans and if these loans are right for your business.

SBA Disaster Loans

A disaster or unexpected event can cripple a business, even leading to its closure. SBA Disaster Loans are available to provide small business owners with the aid they need to keep their businesses alive.

  • Business Physical Disaster Loans provide up to $2 million to businesses and non-profit organizations to rebuild or replace property including buildings, equipment, and inventory following a disaster. Interest rates for these loans are set at 4% and 8%, with repayment terms up to 30 years.
  • Economic Injury Disaster Loans are available to small businesses, non-profits, and agricultural co-ops that are significantly affected by economic injury. Funding up to $2 million is available to help cover operating expenses and debts. Interest rates for these loans are 4% with repayment terms up to 30 years. Businesses may obtain a Business Physical Disaster Loan in addition to an Economic Injury Disaster Loan, but proceeds between both loans may not exceed $2 million.
  • Military Reservists Economic Injury Loans are available to reservists who are put on active military duty. These funds can be used to cover operating expenses but do not apply to refinancing debt, business expansion, or to cover profit or income loss. A maximum of $2 million may be borrowed based on the SBA’s calculation of the actual economic injury. Interest rates are 4% with maximum repayment terms of 30 years.
Term Rate/fee

Borrowing Amount

Maximum $2 million

Term Lengths

  • Max 30 years if no credit available elsewhere
  • Max 7 years if credit available elsewhere

Interest Rates

  • Maximum 4% if no credit available elsewhere
  • Maximum 8% if credit available elsewhere

Fees

None from the SBA; possible fees from outside agencies

Qualifying For A Government Business Loan

personal loans used for business

 

To qualify for a government business loan, a business must be based and operated in the United States. Unless otherwise specified, businesses should be for-profit. All businesses should meet the definition of a small business under the SBA’s guidelines, which limits the number of employees, annual revenues, and company net worth.

Applicants must have a good credit score, with a minimum recommended score of 680. Business and personal credit reports will be considered when applying for an SBA loan.

For many government loans, collateral is required. If there is not adequate business collateral, personal collateral in the form of real estate may be accepted. All borrowers must also sign a personal guarantee to be held liable in the event that the loan goes into default.

Down payments and fees will also be required and will vary based on the type of loan taken, the amount borrowed, and the lender’s policies.

To qualify for the Community Advantage program, the business must operate in an underserved area. To qualify for the Veterans Advantage program, the business must be at least 51% owned and operated by a military veteran, service member, reservist, National Guard member, or qualifying spouses or widows.

Can I get a government business loan if I have bad credit?

Credit is an important factor in qualifying for a government business loan. A minimum score of 680 is typically required to qualify for most SBA loan programs.

In addition to the credit score, intermediary lenders will also evaluate a credit report. Previous defaults on government-backed loans, bankruptcies, and foreclosures will be likely to disqualify the loan applicant. Additional negative items, such as collections and missed payments, will need to be explained by the applicant.

Any potential borrower that does not have a good credit score should work on raising their score before applying for government-backed loans. This can be done by obtaining a free credit report and score, paying off existing debt, and disputing any erroneous credit report items. Learn more about ways to boost your credit score.

I’m not qualified for a government business loan. What are my other business loan options?

Whether your credit score misses the mark or you just don’t meet the standard requirements need for government business loans, there are other options available. These options include working with your bank or credit union, borrowing from non-profit lenders, or seeking financing through online lenders.

How To Apply For A Government Business Loan

You know what government business loans are out there. You’ve selected a loan that fits your needs. The next step is to apply for your loan. Though the process can be time-consuming, it’s not much different from applying for a traditional loan from your bank.

To begin, the first step is to find an intermediary lender. You can find a lender through the SBA’s Lender Match tool, by a referral through your existing financial institution, or through an online loan broker.

In order to apply for a government business loan through an intermediary, required paperwork will need to be gathered. This includes business balance sheets, income statements, personal and business income tax returns for at least 3 years, and personal financial statements.

If loan proceeds are to be used toward the purchase of a business or franchise, documentation including real estate purchase agreements and business/stock/asset purchase agreements will be required. For debt refinancing, copies of notes, leases, and payment transcripts will need to be submitted with the loan application.

Startup businesses that don’t have all the required documentation must provide proof of industry experience, a detailed business plan, and financial projections with their applications.

Once the loan application is submitted, approval can take several weeks. However, with Express loans, approvals are given within 36 hours, although underwriting and funding can add additional weeks to the overall timeline. When going the traditional route with an intermediary lender, the entire loan process will take approximately 30 to 90 days.

To expedite the process, some borrowers opt to work with Smart Biz. This online marketplace simplifies and shortens the government loan application process and even provides non-SBA loan options when applicants fail to qualify.

Learn more about the process of applying for an SBA small business loan.

Alternatives To Government Business Loans

Even though government business loans are preferred by many entrepreneurs due to their long repayment terms and low interest rates, not every small business qualifies. Whether your business doesn’t qualify, your credit score isn’t yet high enough, or you need funding immediately, there are alternatives to consider.

Online Business Loans

Applying for a loan online is a great choice for many small business owners because these loans can be funded fast and requirements are much less stringent. Loans are available for business owners with credit scores as low as 500, although it’s important to note that terms and interest rates won’t be as favorable.

Through online lenders, small business owners can obtain installment loans, short-term loans, a business line of credit, equipment financing, or invoice financing. The required time in business and revenues vary, but requirements are typically lower than those required to obtain a government-backed loan. Depending on the type of loan requested, there may not be as much paperwork required as when applying for a government business loan.

Interest rates are based on the loan selected and creditworthiness. Repayment terms also vary and can range from a few months to several years. Daily, weekly, and monthly payment options are available depending on the lender and loan selected.

This is a great option for business owners with a low credit score or who don’t meet the requirements needed to get a government business loan. Interested in an online business loan? Narrow down your lender search by easily comparing lenders.

Banks & Credit Unions

Another business loan option is to go the traditional route with a bank or credit union. This option is best for a business owner that has collateral and a good credit score.

To apply, start with your existing financial institution. Speak with a loan specialist at your local branch, online, or over the phone to find out the types of loans available. This could include term loans, unsecured lines of credit, or other types of financing. Terms and interest rates vary by institution, creditworthiness of the borrower, and financing option selected.

It’s also important to learn about the requirements for obtaining one of these loans. Generally, collateral is needed as well as a credit score in the high 600s. However, requirements vary by institution. For loans, the funding process can take several months. If a faster option is needed, business credit cards for qualifying borrowers can typically be approved and sent out within days.

Non-Profit Business Lenders

Working with a non-profit business lender is another way to obtain small business loans. Typically, the loan amounts available through these lenders are much lower than government loans, usually maxing out at $50,000.

Because non-profit lenders are more limited in how much they can lend, they may be more selective with approvals. Applicants should expect to gather much of the same paperwork as required with government loans, while attending training or workshops may be required as a condition of the loan.

Loans from non-profit lenders often come with low interest rates. A good credit score is typically required, although qualifications vary by lender. Proof of sufficient cash flow, no bankruptcy filings, and other factors may be considered for loan approval.

Final Thoughts

Getting funding is often a critical step for taking a small business to the next level. For those who qualify, government business loans offer some of the best rates and terms on the market, helping to grow a business without adding a heavy debt burden. Though the process can be a bit difficult to navigate, knowing what to expect and the steps needed to qualify will pay off in the end for many small business owners.

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What Are CAPLines? 4 SBA Lines of Credit You Need to Know About

Before we take a deeper dive into the SBA’s CAPLine program—and determine whether it’s right for you—let’s take a few moments to talk about what the SBA is and how its services differ from traditional loan programs. SBA loans are backed by the Small Business Administration, a government-run program that aims to help strengthen American businesses. The Small Business Administration has delivered millions of loans to American workers since it was established in 1953. Since then, its primary mission has been to, “aid, counsel, assist, and protect, insofar as possible, the interests of small business concerns.”

The SBA has evolved in recent years to encourage the small business in more ways, with programs tailored to reach women, minorities, low-income, and veteran business owners.

By far the most popular SBA program is the SBA 7(a). That’s because it provides a lump sum to fund startup costs, purchase new land, machinery, or storefront furnishings, undertake growth projects, and more. But sometimes these larger lump sums aren’t the best fit, and a revolving line of credit — such as the one offered by the CAPLines program— makes more sense.

Go to our guide on best business line of credit options.

What Are CAPLines?

Most people associate the SBA loan program with traditional lump-sum, small business financing; many business owners aren’t aware that lines of credit are also available to them. There may be many situations in which a line of credit just makes more sense than a traditional loan. Whether you’re facing an upcoming project with a looming, uncertain budget, or extra seasonal requirements for inventory due to your business model, CAPLines (SBA lines of credit) may prove to be invaluable.

Read on to find out more about the four SBA loan programs that offer lines of credit under the CAPLines umbrella.

The 4 Types Of CAPLines

There are four distinct loan programs offered under the CAPLines program for small business owners. Offering loans of up to $5 million, backed by a 75-80% SBA guarantee, this program provides necessary funds to business owners who may need a revolving line of credit while easing the burden of risk for lenders. Thanks to that SBA guarantee, acquiring the financing you need for those cyclical ebbs and flows in your revenue may be more accessible than you think.

The four types of CAPLine loans are the Working Capital CapLine, Seasonal CAPLine, Contract CAPLine, and Builder’s CAPLine. We will go into each in much deeper detail below, so keep reading to find out which may be the perfect fit for you.

CAPLine Type Loan Use

Working Capital CAPLines

Lines of credit that can be used for short-term needs such as working capital or operating expenses. 

Seasonal CAPLines

Lines of credit used by seasonal businesses to cover the costs of seasonal increases in accounts receivable or inventory. Seasonal CAPLines can not be used to cover costs during the off-season. 

Contract CAPLine

Lines of credit available for contractors to cover the costs of specific contracts. Credit lines can be used for overhead and general / administrative expenses. 

Builder’s CAPLine

Lines of credit used for expenses related to the construction and renovation of a residential or commercial buildings for resale. This line can be used for costs such as labor, supplies, materials, landscaping, or other substantial costs during the construction and renovation process. 

Working Capital Line of Credit

A Working Capital Line of Credit is a CAPLines program geared toward businesses that sell on credit. If that sounds like your business model, it may make sense for you to consider this type of loan—especially if you’ve struggled with the availability of financing from other types of loans.

Working Capital CAPLine loans offer a source of financing in the form of a revolving line of credit that can be used for your short-term operating and working capital needs. However, funds from this type of loan can not be used to pay state sales tax or other similar trust funds, nor can you use them to pay delinquent withholding taxes or floorplanning. For more on collateral requirements, see the SBA Line of Credit Eligibility & Collateral Requirements section below.

Seasonal Line of Credit

A Seasonal Line of Credit CAPLine can be used to finance businesses that require additional inventory, accounts receivable, or labor at certain times of the year. It’s a misconception that this type of credit is meant to get you through the off-season, as the proceeds must go towards supporting growth during high-volume periods rather than boosting your working capital during slow periods.

A seasonal line of credit works great for business owners who understand their seasonal patterns and want to avoid taking one lump sum. Lines of credit can relieve holiday pressures and help you keep momentum to fulfill growth during those busy seasons—it’s a win-win.

Contract Line of Credit

A Contract Line of Credit is there to fulfill one purpose: to finance the costs of specific contracts. Funds can be used to cover overhead or administrative costs and general expenses, too, as long as these are allocable to a specific contract or contracts.

When applying for a Contract Line of Credit through CAPLines, consider that the money cannot be used for certain purposes, including:

  • Permanent working capital
  • Purchasing fixed assets
  • Paying delinquent taxes
  • Refinancing existing debt
  • Financing a contract that is already significantly underway
  • Change of ownership for floorplan financing
  • Covering a markup or profit
  • Financing the performance of another contract

Other SBA loan programs (the 7(a) program comes to mind) would be more appropriate for the above financing needs. Contract Line of Credit CAPLines should only be considered if you need funding for one or more specific contracts, and you’ll have to account for those for in relation to the work or outcome.

Builder’s Line of Credit

Similar to the Contract Line of Credit, a Builder’s Line of Credit can only be used for very specific purposes. If you’re a business owner who needs to finance the cost of direct expenses incurred during a construction project, this may be your opportunity.

You can’t use the funds to purchase vacant land for future construction or hold any rental property for future rehab, but you can use funds for the following:

  • Labor
  • Supplies and materials
  • Equipment rental
  • Direct fees like permits, inspections, etc
  • Utility connections
  • Septic tank construction
  • Landscaping
  • Renovation (over ⅓ of the purchase price or fair market value)

When you’re developing residential or commercial properties to resell and you need a line of credit to cover expenses, the Builder’s Line of Credit may be the right fit for your needs. Read on below to find out more about CAPLine requirements, eligibility, and how to get started.

SBA Line Of Credit Eligibility & Collateral Requirements

To qualify for any type of loan through the SBA, including CAPLines, you’ll need to meet the SBA size standards for a small business, operate for profit, and have reasonable equity to invest. There are certain requirements for size depending on industry and type of business—you can check out the SBA size standards to see if you qualify.

The most basic things you’ll need to do first are demonstrate your need for the funds and show that your business (or your business plan if you’re a startup) and credit score are healthy. In general, to receive an SBA CAPLine, you must:

  • Be a small business as defined by the SBA
  • Demonstrate you have the ability to repay the loan
  • Operate for profit 
  • Conduct business in the U.S. and have a physical location in the U.S.
  • Show that you have invested your own money and time in your business
  • Prove that you were not able to obtain financing from other lenders
Bad credit and need funds now? See top business credit cards available to you.

Because each CAPLine meets a specific need, there are some variations in the requirements for each distinct type. Here’s a quick look of what to expect for each below.

Working Capital Line Of Credit

To obtain a Working Capital Line of Credit, you must:

  • Generate accounts receivable or have inventory
  • Agree to a loan term of ten years or fewer

Collateral requirements are the first lien on accounts receivable and inventory.

Seasonal Line Of Credit

For a Seasonal CAPLine, you must:

  • Have been operational for at least one year
  • Demonstrate a predictable pattern of seasonal activity
  • Agree to a loan term of ten years or fewer

There are no specific collateral requirements for Seasonal CAPLines.

Contract Line Of Credit

If you want a Contract CAPLine, you must:

  • Have the ability to bid on and perform the identifiable type of work that the contract requires
  • Secure the financial capacity and expertise to finish the contract for a profit and on time
  • Demonstrate that you can operate at a profit based on the completion of your previous contracts

Collateral requirement is a first lien position on the contract and proceeds.

Builder’s Line Of Credit

To meet the requirements for a Builder’s CAPLine, you must:

  • Be a contractor or home builder in construction with demonstrable managerial and technical prowess
  • Have at least one of your supervisory employees on site or perform the work yourself
  • Demonstrate a plan for prompt and significant renovations (over a ⅓ of value)
  • Show that you have successfully bid and completed a comparable project

Collateral requirements are the first lien on accounts receivable and inventory

SBA Line of Credit Rates & Terms

The table below lays out what you can expect regarding CAPLine rates and terms for a loan through the SBA. You can also view current SBA loan rates to see the latest figures.

Term Rates/Fees

Maximum Borrowing Amount

$5 million

Maximum Term Length

  • 5 years for Builder’s CAPLines
  • 10 years for Seasonal, Working Capital, and Contract CAPLines

Percentage Guaranteed By The SBA

  • 85% for loans below $150,000
  • 75% for loans above $150,000

Interest Rates

Base rate + 2.75% to base rate + 4.75%

Fees

  • Guarantee fee of 0.25% – 3.75% of the portion of the loan guaranteed by the SBA
  • Other possible fees charged by the bank / partner lender

Some additional fees through the CAPLines program include packaging or service fees, late payment fees, and appraisal and environmental reports if applicable; renewal fees apply for a short-term loan that exceeds twelve months. Because these are revolving lines of credit, expect some differences as far as interest rates, too. Rates can be fixed or variable, so make sure you understand the terms before deciding what’s best for your business needs.

Alternatives To SBA CAPLines

For some businesses, a CAPLine just doesn’t fit. Whether it’s that you don’t meet the requirements, you need something faster, or you simply want to arm yourself with more knowledge, learning about non-traditional, online lines of credit can be an important step in the decision-making process.

Online lenders can provide an easier avenue to much-needed funds—not to mention that they don’t have as many requirements about how you can use the cash. When you’re considering whether a CAPLine or a private lender is best, consider that you’ll probably have to pay a little higher rates for that freedom. You’ll likely find that the borrowing amounts and terms for an online loan aren’t as good as they will be for CAPLine—but for some businesses, an online loan may still the right choice overall.

If you would like to see what is out there in the world of online lenders, take a look at our business line of credit comparison page. You can also find longer reviews on online lenders such as Kabbage, OnDeck, and BlueVine if you want to do even more research on your options.  It never hurts to shop around!

Quickly compare top traditional line of credit options:
Lender Borrowing Amount Draw Term Draw Fee APR Next Steps

$6K – $100K 6 months None Starts at 13.99% Apply Now

$2K – $5M Varies Varies Varies Apply Now

$5K – $5M 6 months 1.50% per draw 21% – 65% Apply Now

$1K – $100K 12 weeks None 12% – 54% Apply Now

Final Thoughts

While CAPLines may be among the more complex funding programs offered by the SBA, this form of financing can provide many benefits to businesses that meet requirements and would benefit from a revolving line of credit. Hopefully, now that you have more information at your disposal, choosing what type of small business loan to focus on should feel less overwhelming.

What’s Next
    • Calculate the cost of your loan
    • How to qualify for SBA loan
    • Latest SBA loan rates, updated monthly
Borrower requirements:
• Free loan aggregation service; requirements vary by area and lender.
Compare offers
Learn more about the Community of Lenders

The post What Are CAPLines? 4 SBA Lines of Credit You Need to Know About appeared first on Merchant Maverick.

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How To Set Up Gift Cards With ShopKeep

Ahh, the gift card. That classic capitalistic invention that makes every recipient say “Thanks?” Why give cash when you can give something that works exactly like cash…but only at one business (if you remember to bring it at all)?

But, in all seriousness, gift cards are an extremely valuable and important aspect for small businesses. It’s estimated that more than $100 billion is spent annually on gift cards, making it a quick and painless way to increase your profits and improve customer engagement.

ShopKeep, one of our highest-rated point of sale systems, has a highly intuitive gift card integration — one you should seriously consider adding if you’ve chosen ShopKeep as your POS.

Read on for a quick and easy guide to setting up your gift card integration with ShopKeep.

Get Started With Shopkeep

Why Use Gift Cards?

There are any number of reasons why you might want to offer gift cards in your retail store or restaurant. Maybe you want to increase engagement with your brand or make your store stand out from the competition. Or maybe you just want to demonstrate that there are concrete benefits to shopping at your business.

Whatever your justification for offering them, gift cards just make sense for most business models. According to ShopKeep, gift cards provide an easy way to attract new customers by serving as marketing tools. They are “mini billboards,” in essence.

How To Set Up Gift Cards With ShopKeep

You can call ShopKeep to set up gift cards and have someone talk you through their customization options. Please note that ShopKeep only offers gift cards with select pricing plans and they are currently only available in the United States.

Step 1: Activate Gift Cards for your POS

The first thing you’ll want to do once you’re ready is to add gift cards to your tender. To do this, you’ll need to log into your Back Office and click on Options. Then, select the Tenders tab on the left-hand side of the screen.

This will bring up a new page. Scroll down and check the box that says Gift Cards.

Next, you will want to create an item for gift cards that you can easily access from your POS system. Click on the Items option in the top left-hand corner and scroll down to select Items List. In the top right-hand area of the screen, there will be an option for you to add a new item. Give this new item a name (I would suggest Gift Cards or Loyalty). On the same screen, click on the Priced tab and switch the checkmark from Back Office to In Store. Also on this screen, you can switch the taxable tab to No. You will also want to make sure to check the box at the bottom beside Liability.

Right below that box will be a tab labeled Tender. Select Gift Card (or Loyalty, or whatever you may have named it). Make sure that you click the Save button at the bottom once you are finished with this process.

Step 2: Using the Gift Card Function

You should now be able to see a Gift Card button on your front screen, giving you the ability to sell gift cards or accept them for purchases. To add a gift card to someone’s ticket, simply click the button and then type in the desired amount.

Select the Cash button on the right-hand side of the screen when the customer is ready and swipe the physical gift card.

To accept a gift card as a method of payment, the process is simple. After the customer’s ticket is complete select More on the right-hand side by payment options, then select Gift Card. You or the customer will then swipe the card to apply the balance to the purchase. If the customer still owes money on their purchase, you will be prompted to take another method of payment to pay off the balance. If there is still money left on the gift card, the receipt will inform the customer of his or her balance.

If a customer would like to simply check his or her balance, open the Control Panel and click Gift Cards. Then swipe the customer card and you will be able to view the amount on the card.

It may seem like a slightly convoluted process — admittedly, there is a lot of button pushing required to set up ShopKeep’s otherwise convenient and intuitive gift card functionality. However, gift card setup should only take a couple minutes at the most. For more information, ShopKeep has created a helpful introductory video, as well as an FAQ page on its website specifically for gift cards.

Get Started With Shopkeep

The post How To Set Up Gift Cards With ShopKeep appeared first on Merchant Maverick.

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The 3 Types Of SBA Loans Business Owners Should Know About

Small businesses represent the American Dream. A successful small business doesn’t translate to success for just one person — small businesses fuel local economies and provide jobs. When small businesses have the chance to grow and thrive, everybody wins. And that’s why organizations like the Small Business Administration exist.

The Small Business Administration, or SBA, is a government agency that provides the tools and resources needed to help business owners succeed. From training sessions to educational materials, the SBA provides resources and serves as an advocate for small businesses. The SBA has also become known among entrepreneurs for one big piece of the small business puzzle: financing. Through its loan programs, the SBA provides affordable and flexible loan options for everything from expansions to new business acquisitions.

If you’re ready to take your small business to the next level and you need the capital to get there, you can’t go wrong obtaining funding through an SBA loan program. But where do you begin?

Let’s start by learning more about the different types of SBA loans. Once you have a good base of knowledge, you’ll be better able to select and apply for the program that’s right for you.

What Are SBA Loans?

The SBA doesn’t loan money directly to small businesses. Instead, the SBA works with intermediaries to provide low-interest loans with competitive terms to small businesses and startups. These intermediaries could be traditional banks, private lenders, credit unions, or even nonprofit organizations.

The SBA has created a set of standards upheld by its intermediaries to keep loans affordable for small businesses. This way, borrowers can expand and build their businesses without facing high interest rates, daily draws, or other drawbacks they might encounter with more expensive forms of credit. The SBA backs large percentages of the loans given through its programs — anywhere from 50-85% — lowering the risk involved and making lenders more apt to lend to small businesses.

The SBA offers several programs of interest for small business owners. Let’s explore the different types of SBA loans to determine which best fits the needs of your small business or startup.

The SBA 7(a) Loan Program

The SBA 7(a) program is the most well-known among SBA loans. SBA 7(a) loans are extremely popular because of the great terms and flexibility they provide. However, there are several different types to consider, each of which comes with different maximum loan amounts, interest rates, and terms. Read on to find out more about each type to determine which is the right fit.

Types Of 7(a) Loans

  • Standard 7(a) Loans: When most people refer to SBA 7(a) loans, this is the program that comes to mind. Through this program, small businesses can borrow up to $5 million. Interest rates are negotiable and maturity terms are typically 10 years or 25 years, depending on how the money is used. The SBA guarantees 75% to 85% of the total loan amount, putting less risk on lenders so they can feel confident in loaning money to small business owners.
  • SBA Express Loans: One of the drawbacks that many potential borrowers find with SBA Standard 7(a) loans is the length of the process from application to approval and funding. The entire process takes, at a minimum, 30 to 90 days. Borrowers who want a fast approval should consider SBA Express Loans. Within 36 hours, the applicant will know whether or not they’ve been approved. While actually receiving the money can still take weeks, it’s very reassuring to business owners to have an approval locked down so they can quit searching for loans and know that they’ve secured funding. The maximum loan amount is just $350,000 through this program, which could be a drawback for anyone seeking more financing. Because the SBA backs only 50% of each loan distributed through the Express program, these loans can be more difficult to obtain, especially for startup businesses.
  • Community Advantage Loans: These loans are very similar to the Standard 7(a) loans given by the SBA. The biggest difference is that the Community Advantage Loan program is reserved for borrowers in underserved communities. This doesn’t just mean small businesses in low-income areas, although those do qualify for this program. Community Advantage loans are also available to women, minorities, veterans, and startups. This program provides opportunities to businesses that may not qualify for traditional financing options. The maximum loan amount under this program is $250,000.
  • Veterans Advantage Loans: Veteran-owned small businesses can get the funding they need through the Veterans Advantage program. Through this program, veterans and service members get to enjoy the same great rates and benefits of the Standard 7(a) loans but with reduced fees. This program offers loans up to $5 million.
  • Export Express & Export Working Capital Loans: Exporters can get funding through the SBA’s Export Express and Export Working Capital programs. Through the Export Working Capital loan program, small businesses can receive up to $5 million in financing. Under the Export Express program, loans up to $500,000 are distributed. Though these loans are smaller, the benefit is that applications are approved within 24 hours.
  • SBA Lines of Credit (CAPLines): SBA CAPLines offer short-term and cyclical funding options for small businesses. Funding of up to $5 million is available with maximum repayment terms of 10 years. There are four different lines of credit available under this program. Seasonal CAPLines are used for accounts receivable and inventory that increase seasonally; Contract CAPLines are used to finance specific contracts; Builder’s CAPLines are used for the construction or renovation costs for commercial or residential buildings; Working CAPLines are a type of revolving line of credit used for recurring, cyclical, or short-term needs and is used by businesses that do not qualify for long-term credit programs.

SBA 7(a) Loan Uses

SBA 7(a) loans are so popular because there are very few limitations. With Standard Loans, Express Loans, Community Advantage Loans, and Veterans Advantage Loans, funds can be used for a variety of purposes, including the purchase of equipment, expansion, the acquisition of a business, or working capital. Export Express and Export Working Capital loans can also be used for just about any business purpose but are limited to usage only by companies that sell goods or services outside of the territorial United States.

As previously mentioned, SBA CAPLines do have limitations in how they are used. Builder’s CAPLines can only be used for direct expenses related to construction or “substantial renovation” to a residential or commercial building. Contract CAPLines can only be used for the costs of specific contracts and can’t be used to purchase fixed assets, pay back taxes, or refinance existing debt. Seasonal CAPLines are used to fund seasonal increases of inventory or accounts receivable, although in some cases it can be used for increased labor costs. Working Capital CAPLines are used for short-term needs and can’t be used for delinquent taxes or floor planning, and there are also limitations for acquiring fixed assets.

SBA 7(a) Loan Rates & Fees

The loan rates and fees for SBA 7(a) loans are extremely competitive with traditional loans. The rates and fees vary depending upon the type of loan selected. It’s also important to note that down payments, collateral, and personal guarantees are typically required for all SBA 7(a) loans. Here’s a look at SBA 7(a) loan base rates and markups:

Loan Amount Less Than Seven Years More Than 7 Years

Up to $25,000

Base rate + 4.25%

Base rate + 4.75%

$25,000 – $50,000

Base rate + 3.25%

Base rate + 3.75%

$50,000 or More

Base rate + 2.25%

Base rate + 2.75%

Standard 7(a) Loans:

The interest rates for SBA 7(a) loans are set by the lender, but all interest rates must fall below the maximum rates put in place by the SBA. For Standard 7(a) loans, the interest rate is based on the current prime rate. Lenders can add between 2.25% and 4.75% to the prime rate, depending upon the total loan amount taken and the repayment terms. For real estate, repayment terms up to 25 years are available. Business acquisitions and equipment financing come with terms up to 10 years. For working capital, the loan maturity is 7 years.

A one-time guarantee fee up to 3.75% may be passed on to the borrower. Additional fees may also be required by the lender, including but not limited to closing costs or referral fees. A prepayment penalty applies when the loan is paid within the first three years when the repayment terms are 15 years or longer.

SBA Express Loans:

The maximum interest rate for SBA Express loans is slightly higher. Lenders can charge the current prime rate plus an additional 4.5% to 6.5% based on the amount borrowed. Terms are the same for SBA Express loans as Standard 7(a) loans. A guarantee fee of up to 3% can be passed on by lenders to borrowers of Express loans, while additional fees including packaging fees and closing costs may also apply.

SBA Community Advantage Loans:

Community Advantage loans have a maximum rate set by the SBA as the prime rate plus 2.75% to 6%. Repayment terms for these loans are similar to Standard 7(a) loans – up to 25 years for real estate and up to 10 years for acquisitions, inventory, equipment financing, and other expenses. Closing costs and fees for appraisals, reports, and other costs may be passed on to the borrower.

Veterans Advantage Loans:

Veteran’s Advantage loans come with the same repayment terms and interest rates as Standard 7(a) loans. The difference is in the guarantee fee, which is reduced by 50% for loans from $125,001 to $350,000.

Export Express & Export Working Capital Loans:

Repayment terms remain the same as other 7(a) loans, while interest rates are set between 4.5% and 6.5% on top of current prime rates. A guarantee fee up to 3% will also be paid and varies based on the term length and amount borrowed.

CAPLines:

Repayment terms for CAPLines are up to 5 years. A maximum interest rate of the prime rate plus 2.25% to 4.75% has been set by the SBA. A one-time guarantee fee between 2% and 3.75% will also be charged, as well as additional expenses similar to other SBA 7(a) loans.

SBA 7(a) Loan Borrower Requirements

There are a few requirements set by the SBA that apply across the board for all SBA 7(a) loans. All businesses must be based in the United States and must be for-profit. All applicants must qualify as a small business with 500 or fewer employees and a net worth below $15 million. Businesses must not be engaged in illegal operations.

Borrowers must have a solid credit history, with a recommended score of 680 or higher. Borrowers should be prepared to offer adequate collateral, including personal real estate if needed. Personal guarantees are required. The applicant must also show a legitimate business need for the loan and must have exhausted other financial options before applying.

All applicants should be prepared to show documentation for ownership, personal and business credit, and financial outlooks. Startups are required to have a solid business plan prepared. Anyone applying for the Veterans Advantage program must have a business that is at least 51% owned and controlled by a veteran, servicemember, reservist, or National Guard member. A current or widowed spouse is also eligible to apply.

Think the SBA 7(a) loan program is right for you? Before you apply, find out everything you need to know about this popular small business financing option.

The SBA CDC/504 Loan Program

The SBA’s CDC/504 loan program is a bit different because instead of working with one intermediary, a borrower works with two: a participating lender and a Certified Development Company.

With these loans, the SBA provides up to 40% of the total cost of a project through a Certified Development Company. A traditional lender, such as a bank or credit union, provides 50% of the total project cost. The borrower is responsible for the remaining 10% of the total project cost. The maximum SBA loan amount distributed through this program is $5 million.

SBA 504 Loan Uses

While there are some limitations, the CDC/504 loan program can be used in a variety of ways to update, expand, or improve a small business. These loans can be used to purchase buildings or land, improve land, renovate facilities, or purchase long-term fixed assets. Debt can be refinanced using these funds provided that the debt is connected to the purchase or renovation of facilities or equipment.

Funds from these loans can’t be used for repaying or refinancing debt (other than the refinancing of debt as described above). It also can’t be used to purchase inventory or for use as working capital.

SBA 504 Loan Rates & Fees

The interest rates for 504 loans are based upon the market rate of 5-year and 10-year Treasury issues. The portion that is funded through a traditional lender will be subject to the lender’s own interest rates. Repayment terms of 10 years and 20 years are available for the SBA-funded portion of the loan. Funding fees, processing fees, and closing fees may also apply and can be financed with the loan.

SBA 504 Loans

Borrowing Amount

No maximum, but the SBA will only fund up to $5 million

Term Lengths

10 or 20 years

Interest Rates

Fixed rate based on US Treasury rates

Borrowing Fees

  • CDC servicing fee, CSA fee, guarantee fee, third party fees (however, most of these fees are rolled into the interest rate or cost of the loan)
  • Possible prepayment penalty

Personal Guarantee

Guarantee required from anybody who owns at least 20% of the business

Collateral

Collateral required; usually the real estate/equipment financed

Down Payment

10% – 30%

SBA 504 Loan Borrower Requirements

SBA 504 loan borrowers must meet all standard requirements set by the SBA. Borrowers must operate a for-profit business and should not be involved in nonprofit, speculative, or passive activities. Borrowers must show a legitimate need for the financing. They must also find a CDC and additional lender that operates in their area. Collateral is generally required, although typically the assets that are being financed serve as collateral. Personal guarantees are also needed from all applicants and owners of 20% or more. Read on to learn more about SBA 504 loans.

Should I Choose An SBA 504 Loan Or A 7(a) Loan?

Wondering which SBA loan is right for you? Here’s a quick comparison of the two.

504 VS 7(a) Loan Usage

SBA 7(a) Loans SBA 504 Loans
  • Working capital
  • Commercial real estate purchasing
  • Equipment purchasing
  • Purchasing a pre-existing business
  • Refinancing debt
  • Purchase an existing building
  • Purchase land and land improvements
  • Construct new facilities
  • Renovate existing facilities
  • Purchase machinery and equipment for long-term use
  • Refinance debt in connection with renovating facilities or equipment

504 VS 7(a) Rates & Terms

SBA 7(a) Loans SBA 504 Loans

Borrowing Amount

Max. $5 million

No maximum, but the SBA will only fund up to $5 million

Term Lengths

7 – 25 years

10 or 20 years

Interest Rates

Variable rate of a base rate plus a markup of 2.25% – 6.5%

Fixed rate based on US Treasury rates

Borrowing Fees

Guarantee fee, other fees from lending partners

CDC servicing fee, CSA fee, guarantee fee, third party fees (most fees are rolled into the interest rate or cost of the loan); possible prepayment penalty

Personal Guarantee

Guarantee required from anybody who owns at least 20% of the business

Guarantee required from anybody who owns at least 20% of the business

Collateral

Collateral required; specifics vary based on business and loan use

Collateral required; usually the real estate/equipment financed

Down Payment

10%

10% – 30%

504 VS 7(a) Borrower Requirements

SBA 7(a) Loans SBA 504 Loans
  • For-profit business considered “small” by the SBA
  • Engaged in business in the United States
  • Not in an ineligible industry
  • Strong personal and business credit
  • Strong business financials
  • Strong business plan
  • For-profit business
  • Tangible net worth less than $15 million
  • Average net income less than $5 million
  • Engaged in business in the United States
  • Not in an ineligible industry
  • Strong personal and business credit
  • Strong business financials
  • Strong business plan

The SBA Microloan Program

Small business owners looking for a smaller loan can apply for the SBA Microloan program. Through this program, borrowers can work with nonprofit intermediaries to receive up to $50,000 in low-interest funding.

SBA Microloan Uses

SBA Microloan funds can be used in almost any way to operate or expand a business. Purposes for these loans range from working capital to purchasing supplies and equipment. However, microloans can’t be used for purchasing real estate or refinancing debt.

SBA Microloan Rates & Fees

The interest rates for microloans are based primarily on the intermediary’s cost of funds. The intermediary may charge this rate plus a maximum of 7.75% on microloans exceeding $10,000, or up to 8.5% on loans that are $10,000 or less. The maximum maturity for microloans is six years.

Packaging fees between 2% and 3% may also be charged by intermediaries. Additional fees, including but not limited to credit reports, filing fees, recording fees, or other closing costs, may also apply. Find out more about the rates, terms, and fees of microloans before applying.

SBA 504 Loans

Borrowing Amount

$500 – $50,000

Term Lengths

Up to 6 years

Interest Rates

6.5% – 13%

Borrowing Fees

Possible fees from the loan issuer

Personal Guarantee

Guarantee required from anybody who owns at least 20% of the business

Collateral

Collateral normally required, but depends on the lender

Down Payment

  • No down payment for most businesses
  • Possible 20% down payment for startups
  • Possible 10% down payment for business acquisition loan

SBA Microloan Borrower Requirements

Microloans are subject to the same standard requirements set by the SBA, including qualifying as a small business. All businesses must be for-profit, although non-profit childcare centers also may apply.

Applicants seeking more than $20,000 must pass the SBA’s “no credit elsewhere” test. This simply means that any borrower must have sought other non-federal means of financing before applying. There must also be a legitimate need for the financing, and it should be proven that the small business is set up for a profitable and successful future.

Collateral may be required, but this decision falls upon the lender. The SBA simply requires the lender to use “prudent lending practices” when determining whether a microloan should be collateralized. Credit is also a consideration and scores should be at least 680 upon applying.

How To Apply For SBA-Backed Loans

business acquisition loan

With so many options, it’s easy to see why SBA loans are the ideal choice for any established small business or startup. Once you’ve found a loan that best suits the needs of your business, it’s time to take the next step and apply for funding.

Before reaching out to a lender, it’s important to make sure that you complete as much legwork on your end as possible. One of your first moves should be to make sure your credit is where it needs to be to qualify. As previously mentioned, a minimum score of 680 is ideal, although higher scores have higher chances of approval. You can easily obtain a free credit report and score online to see where you stand. You can also use your free report to check for any errors that need to be disputed. If there are any negative marks on your report that are accurate, you will need a reasonable explanation for each. Find out more about the requirements needed to obtain an SBA loan.

Once you’ve confirmed that your credit is up to par, the next step is to begin gathering documentation. Requirements vary by lender, but you should expect to provide a minimum of 2 years’ worth of personal and business tax returns, financial statements, business licenses, and financial projections. Startups should have a solid business plan prepared to replace financial documentation that may not be available.

The next step is to find an SBA-approved lender that services your area. Once you’ve found your lender, there is a strong possibility that you will be required to appear in their office. A list of documentation may be provided before your meeting. Some lenders may also allow you to start the application process online or over the phone.

Your lender will go over all required documentation, as well as their interest rates, terms, and other vital information such as down payments and collateral requirements. Make sure that you understand all terms before moving forward in the process. Once you’ve come to an agreement, your application is completed and sent off for approval and underwriting.

At this point, it’s important to understand that the funding process for SBA loans can be lengthy. On average, expect to wait a minimum of 30 to 90 days for your funding. Potential delays may further prolong the process. If you’ve applied for specific programs such as the SBA Express loan program, approval may be received in just days, but additional time will be required to close and fund the loan.

Where Do I Find SBA Loans?

To find an SBA loan in your area, you can visit the SBA’s website for more information. You can use the site’s Lender Match tool to be paired with a lender that can provide the loan you’re looking for. You can also ask for a referral for an SBA-approved lender from your financial institution. Make sure that the lender you choose is authorized to provide the specific type of loan that interests you.

Once approved, the loan will be closed and you’ll receive your funding. The final step is to use your funds responsibly. Remember to always pay your loan based on the agreed-upon terms and use all loan proceeds to further improve or expand your business to elevate your success.

The post The 3 Types Of SBA Loans Business Owners Should Know About appeared first on Merchant Maverick.

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Do High-Risk Merchant Accounts With Instant Approval Exist?

Instant approval

It all started with the telegraph. Invented in 1837, this technological advance enabled nearly-instantaneous communication across vast distances for the first time ever. Its introduction into commercial use disrupted a courier system that had been the only available method of communicating from one distant place to another for thousands of years. In 1861, the completion of a telegraph line connecting the west and east coasts of the United States rendered the fledgling Pony Express obsolete practically overnight.

Today, of course, we take instantaneous communication for granted. Thanks to computers and the internet (and the fiber optic cables that actually connect them), we can send huge amounts of data anywhere in the world in practically no time at all. Given all this wonderful technology, if you’re a high-risk merchant, you might be wondering why it takes so long to get approved for a merchant account. You might also be sorely tempted by claims of “instant approval” from merchant account providers who advertise directly to the high-risk community, especially if you’re running an eCommerce business and you absolutely need to be able to accept credit cards. In this post, we’ll explain what “instant approval” really means and why it’s usually not a good idea, no matter how desperate you are to get a merchant account. We’ll also delve into how the high-risk merchant account approval process works and what you can do to make it run a little smoother – and faster. Finally, we’ll recommend a few reputable high-risk specialists that can get you set up with a stable and fairly priced merchant account.

What Is “Instant Approval”?

We get it. It’s no fun trying to run your business with an “In God we trust; all others pay cash” sign posted next to your cash register because you can’t get a merchant account. It also means disappointed customers and lost sales. Under these circumstances, the temptation to sign up with the first provider who will actually accept your business can be pretty overwhelming. Unfortunately, it’s also a really bad idea.

The simple reality is that it always takes longer to obtain final approval for a high-risk merchant account than it does for a low-risk business. While traditional low-risk businesses can expect to be approved within a day or two, high-risk merchant accounts require a minimum of three to five business days to be approved, and this process can sometimes take as long as three to five weeks. Why so long? Approving a high-risk business requires a far more extensive investigation into the credit history of both the business and the business owner. Poor personal credit on the part of the owner is one of several reasons why a business might be classified as high-risk in the first place. You’ll have to submit far more documentation and wait far longer for this process to be completed than a low-risk business would.

So, how can some providers even claim to offer “instant approval”? Well, for one thing, it’s not really instantaneous at all. If you see a provider advertising “instant approval,” there’s usually some fine print included with the offer specifying that approval actually takes 24-48 hours. While that’s a lot faster than the normal time-frame, it’s still not exactly “instant.” What these providers aren’t telling you is that approval for your merchant account is actually a two-step process. First, you must be approved by your merchant account provider. Second, you must be approved by the acquiring bank or backend processor that is actually going to underwrite your account and process your transactions.

Getting approved by your merchant account provider is actually pretty easy, but not for good reasons. The truth is that your merchant account provider’s business model is based on signing up as many merchants as possible in order to generate a profit. They’re also quite eager to have you sign a long-term contract, guaranteeing that you’ll be on the hook for three years or even longer. And if you close your account or go out of business, they’ll usually collect a hefty early termination fee (ETF). Because these early termination fees can run into the hundreds of dollars, it’s possible in some circumstances that your provider will make more money from the ETF than they will from your processing fees. High-risk businesses tend to fail at a higher rate than low-risk enterprises, and most of these providers will not hesitate to charge you the full ETF even if you’re going out of business. Although more and more providers are now offering month-to-month billing with no early termination fees to low-risk businesses, it’s still very unusual not to be required to sign a long-term contract – with an ETF – if you’re a high-risk business. Even the most reputable high-risk specialists almost always impose these terms, so be prepared for it and be sure to review your contract documents very carefully before you sign up for an account, even with a reputable provider.

The second step of the approval process, getting your acquiring bank or processor to approve you, is where the delays and difficulties come into play. The risk departments at these institutions really don’t like to approve high-risk merchant accounts due to the increased chance that you’ll run into problems later on. Every processor has their own criteria for determining whether you’re high-risk, and their own documentation requirements you’ll need to meet before they’ll even consider approving you for an account. While your merchant account provider is highly motivated to approve your account, your processor has every reason in the world not to approve it. Getting approved for a high-risk merchant account is an uphill battle, and the chance of being turned down is very high. Fortunately, there are some really good providers out there who specialize in getting high-risk accounts approved, and they’ll work with you to get your paperwork in order and find a bank that can approve you for an account.

Unfortunately, providers offering “instant approval” sometimes take some shortcuts with this process so they can get you on the hook for that long-term contract (and usually that ETF as well). What they advertise as “instant approval” (or being “pre-approved”) in most cases really means that they’re approving your account – and getting you to sign your contract – before your acquiring bank or backend processor has completed all the necessary steps to determine whether to approve your account. In some cases, your merchant account provider won’t even complete a credit check before approving your account.

This practice is all fine and dandy as long as your processor eventually approves your account. However, there’s a high chance that they won’t approve you, and by the time they make that determination you may very well be up and running with your credit card terminal or payment gateway. If this happens, you may suddenly find your account frozen and your funds being withheld. Even worse, you may have your merchant account closed altogether. (Note that in this case, you usually won’t be liable for an early termination fee since you aren’t the party deciding to close the account). In some cases, depending on the reason for your processor closing your account, you may even find yourself being placed on the Terminated Merchant File (TMF, also known as the MATCH List). Getting put on this list is really bad news, as it can completely prevent you from getting approved for a merchant account, even with another provider, for up to five years.

If you haven’t guessed by now, we highly recommend that you avoid any merchant account provider claiming to offer “instant approval” of your high-risk merchant account. This approval process is incomplete and can easily lead to your account getting shut down shortly after you start using it. No matter how inconvenient it is to wait for the approval process to run its course, in the long run, it’s a worthwhile trade-off to get a fully-approved account that will be stable and reliable.

How To Expedite Approval Of Your High-Risk Merchant Account

Get your merchant funds fast. Image description: Clock with money underneath it

While the approval process is unavoidably a lengthy one, there are steps you can take as a merchant to move things along a little quicker. These actions mainly serve to avoid the kinds of problems that might lead to delays in getting your account approved. Here’s what you’ll want to do:

  • Work With A Reputable High-Risk Specialist: The signup process can be sped up by ensuring there is a good chance of approval beforehand. This means working with a partner that has a proven track record and experience in your industry. High-risk specialists such as Durango Merchant Services will work with you to ensure that your paperwork is in order and can also work with a network of acquiring banks and processors to find one that will approve your business.
  • Have Your Paperwork In Order: You’ll need to provide far more information when applying for a merchant account as a high-risk business owner. If you can present all of this information with your initial application, it will save a significant amount of time during the approval process. We recommend that you scan all required documents as PDF files so you can simply email everything you need to your provider as part of your application. See below for a discussion of specific documentation requirements.
  • Be Completely Honest About Your Business: Are you selling medical marijuana (in a jurisdiction where it’s legal)? Do you have a personal bankruptcy on your record? Have you previously had a merchant account shut down by your provider? High-risk merchants who are desperate to get approved for a merchant account are often tempted to misrepresent these and other facts that might lead to them being disapproved for an account. Don’t do it! Intentionally failing to disclose important information or getting caught in a lie will almost always lead to you being turned down for an account — or having your account closed immediately once the processor discovers your dishonesty. You’re much better off being completely honest about your background. In many cases, you can still be approved for an account despite a little negative information.

As we’ve mentioned above, there’s a lot of paperwork involved with getting approved for a high-risk merchant account. While specific requirements vary from one provider to the next, here’s a generic list of the most commonly requested information:

  • Completed Merchant Account Application (from your merchant account provider)
  • Résumé or CV of business owner
  • Photo ID or Passport
  • Business Plan
  • Personal Utility Bill (used to verify your address)
  • Processing statements for at least the last three months (if you’re switching providers)
  • Copies of supplier’s agreements (for retail merchants)
  • Copies of your personal banking statements (usually for the last three months)
  • Personal reference letter from your bank
  • Copies of your business bank account statements (usually for the last three months)
  • Articles of Incorporation (or sole proprietorship documentation)
  • Articles of Association (if applicable)
  • Screenshot of your business website’s home page (if applicable)

Final Thoughts

If you’re a high-risk merchant, we understand that merchant accounts are not easy for you. Okay, they’re not easy for anyone, but high-risk factors make them even more complicated (and expensive) than they are for everyone else. Unfortunately, it’s too easy to get turned down a few times and start feeling like you have to sign up with any provider who will take you. Also, the inevitable delays in getting your account approved can make the possibility of “instant approval” seem very tempting. Resist that temptation. Instant approval isn’t what its promoters claim it is, and it’s a good way to set yourself up for much more serious problems down the road.

The difficulties that high-risk merchants encounter in getting a merchant account have, unfortunately, created a market opportunity for unscrupulous providers who use the lure of “instant approval” (or, sometimes, “guaranteed approval”) to lock you into a prohibitively expensive long-term contract with high fees, high processing rates, and an onerous early termination fee to discourage you from canceling your account on your own. Do a Google search for “high risk merchant” account, and you’ll quickly find ads from plenty of predatory merchant account providers looking to take advantage of your desperation.

Fortunately, it doesn’t have to be this way. There are reputable providers who specialize in working with the high-risk community and will go out of their way to get you fully approved for an account. While their prices and contract terms won’t be as great as what a low-risk business could obtain, they’re still reasonable and backed up by top-notch customer support. We’d also note that none of the high-risk specialists we’ve found offer “instant approval.” Instead, they’ll work with you and help you to get your documentation squared away so you can be approved by one of their partner processors for a stable account that won’t get shut down the moment you actually try to use it.

Of all the high-risk specialists we’ve reviewed, we’ve found Durango Merchant Services and Easy Pay Direct to be among the best of the best. They both have strong track records of providing high-quality service at reasonable prices. For more recommendations, check out our post The Best High-Risk Merchant Account Providers or see the chart below.

Durango SMB Global Host Merchant Services Soar Payments

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Specialities International, Offshore, Credit Repair, Bad Credit, Vape/E-cigarettes, Fantasy Sports, Forex International, Offshore, Travel Businesses, Nutraceuticals, Multilevel Marketing, Kratom, CBD Oil Debt Collection, Life Coaching, Airlines, Loan Modification, SEO Services Antiques & Collectibles, Credit Repair, Debt Consolidation, Firearms & Ammunition, Precious Metals

The post Do High-Risk Merchant Accounts With Instant Approval Exist? appeared first on Merchant Maverick.

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How To Apply For An SBA Loan: A Complete Guide

You’re ready to take your business to the next level. Perhaps you want to add to your team of all-stars, or you want to upgrade your equipment with the latest and greatest technology. Maybe you’re a startup and you’re ready to bring that next great idea to life. No matter how you slice it, starting or upgrading your business hinges on one big question: how are you going to pay for it?

Most of us don’t have unlimited amounts of cash at our disposal, so we have to rely on outside help to fund new projects, renovations, and other expensive initiatives to launch and grow our businesses. When it comes to financing, smart small business owners know that you can’t go wrong with a loan from the Small Business Administration.

That’s why you’re here. You’ve heard about the benefits of SBA loans and now you’re ready to get funded. There’s just one problem: you don’t know how to begin when it comes to the application process.

While it may be intimidating, the SBA loan application process isn’t that much different from getting a loan from your bank. However, knowing what to expect before you get started can help the process go much more smoothly and eliminate the hassles and headaches that come with being unprepared.

Take a deep breath and read on to find out how to complete the SBA loan process from start to finish.

The Basic SBA Loan Application Process, Step-by-Step

1. Determine Whether You Meet The SBA’s Lending Requirements

Before you even fill out an application or talk to a lender, the first step to obtaining an SBA loan is to make sure that you’re qualified to receive one. In order to obtain a loan from the SBA, your business must qualify as a small business under the organization’s guidelines. Typically, this means that your business must have no more than 500 employees, although this number could rise based on your industry. Net annual income should not exceed $5 million, while the business’ net worth shouldn’t be more than $15 million.

To be eligible for an SBA loan, the business must also be operated and headquartered in the United States. The small business should be for-profit (although non-profit child care centers qualify for SBA Microloans) and not engaged in illegal activities. Businesses involved in lending, investing, and real estate rentals do not qualify for most programs.

Depending on which loan program you select, there may be additional requirements. For example, only veterans, service members, or the spouses or widows of veterans or service members can apply for the Veterans Advantage program. The Community Advantage program is limited to underserved areas, which include low-income communities and businesses owned by women, minorities, and veterans.

One of the most important factors in the SBA lending equation is your credit report and score. Because SBA loans offer such competitive terms, it should come as no surprise that you need a good credit score to qualify. In general, a minimum score of 680 is required to even be considered for these loans.

Your score isn’t all that comes into play, though. Your full credit report (both personal and business) will be evaluated by a lender to determine if you qualify. Defaults on previous government-backed loans will disqualify you from receiving an SBA loan. Foreclosures or bankruptcies may also prevent you from receiving an SBA-backed loan. Negative items on your report, such as collections or past due accounts, won’t necessarily bar you from receiving a loan, but a valid explanation for each negative item will be required by the lender.

This is why it’s so important to know your score and review your report before even starting the process. It’s easy to obtain a free credit score and report so that you can make sure you qualify and dispute any erroneous items. If you find that your credit score is low, you can begin taking steps toward improving your credit before you apply.

2. Choose An SBA Loan Program

You’ve determined that you fit all of the requirements for obtaining an SBA loan. Now, the next step is to understand the SBA loan programs that are available and which works best for you. Each program has specific rates, terms, and maximum loan amounts, as well as requirements for how the money is used.

You’ll need to evaluate your business needs to decide which program is the best fit.

Loan Program Description More

7(a) Loans

Small business loans that can be used for many many business purchases, such as working capital, business expansion, and equipment, inventory, and real estate purchasing.

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Microloans

Small loans, with a maximum of $50,000, which can be used for working capital, inventory, equipment, or other business projects.

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CDC/504 Loans

Large loans used to acquire fixed assets such as real estate or equipment. 504 Loans are offered in partnership with Community Development Companies (CDCs) and banks.

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Disaster Loans

Loans used to rebuild or maintain business following a disaster. 

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7(a) Loans

SBA 7(a) loans are the most popular among small business owners. This is primarily because of the extremely favorable terms and the flexibility with how funds can be used. With the 7(a) program, loan proceeds can be used toward just about any business expense. This includes purchasing equipment or inventory, acquiring a new business, renovating new facilities, working capital, or even refinancing old, high-interest debt. Standard 7(a) loans have a maximum loan amount of $5 million.

Through the Community Advantage program, underserved communities can receive financing when traditional lending isn’t a good fit. The Veterans Advantage program offers the same great benefits along with reduced guarantee fees. Express loans offer less funding but guarantee an approval response within 36 hours. It’s important to note that loans through the Express program come with a slightly higher but still competitive interest rate than other 7(a) loans.

In general, expect to pay between 7% to 9% interest on standard 7(a) loans. Repayment terms are up to 10 years for most purposes and 25 years for real estate purchases. Startups and established businesses are eligible to apply for 7(a) loans. This program is a good fit for almost any small business because these loans are the most flexible. SBA 7(a) loans are available through SBA-approved lenders, including banks and credit unions. Read more about SBA 7(a) loan programs.

Loan Amount Less Than Seven Years More Than 7 Years

Up to $25,000

Base rate + 4.25%

Base rate + 4.75%

$25,000 – $50,000

Base rate + 3.25%

Base rate + 3.75%

$50,000 or More

Base rate + 2.25%

Base rate + 2.75%

Microloans

Small businesses requiring smaller amounts can apply for an SBA Microloan. Microloans are available through participating nonprofit organizations. The maximum borrowing amount through this program is $50,000. This money can be used for a variety of purposes, including the purchase of supplies, materials, and equipment. It can also be used as working capital. Microloans can’t be used for the purchase of real estate or paying delinquent taxes.

Like other SBA loan programs, SBA Microloans come with competitive interest rates. These rates are based on the intermediary lender’s cost of funds. The average rate is about 7.5%.

These loans are best for startups and small businesses that need smaller loans. This is also an excellent choice for non-profit childcare centers that are ineligible to apply for loans through the 7(a) program. If a microloan program seems like the right fit for your business, read on to learn more.

SBA 504 Loans

Borrowing Amount

$500 – $50,000

Term Lengths

Up to 6 years

Interest Rates

6.5% – 13%

Borrowing Fees

Possible fees from the loan issuer

Personal Guarantee

Guarantee required from anybody who owns at least 20% of the business

Collateral

Collateral normally required, but depends on the lender

Down Payment

  • No down payment for most businesses
  • Possible 20% down payment for startups
  • Possible 10% down payment for business acquisition loan

504 Loans

The SBA’s 504 loan program is designed for businesses that want to expand or upgrade their facilities or equipment. Funding of up to $5 million is available through the SBA’s 504 program to purchase buildings or fixed assets, to build or update new facilities, or to purchase or improve land. Proceeds can also be used toward refinancing existing debt related to renovating, purchasing, or building new facilities or equipment.

Through the 504 program, the SBA will provide up to 40% of the total project cost through a Certified Development Company. Fifty percent of the project costs must be financed through a traditional lender. The remaining 10% of costs are the responsibility of the borrower. Interest rates for SBA 504 loans are based on 5-year and 10-year Treasury issues. Repayment terms are set at 10 years and 20 years.

Small business owners that wish to update or expand their facilities or equipment are the best candidates for this loan program. If this sounds like you, learn more about the terms, eligibility, and requirements of SBA 504 loans.

SBA 504 Loans

Borrowing Amount

No maximum, but the SBA will only fund up to $5 million

Term Lengths

10 or 20 years

Interest Rates

Fixed rate based on US Treasury rates

Borrowing Fees

  • CDC servicing fee, CSA fee, guarantee fee, third party fees (however, most of these fees are rolled into the interest rate or cost of the loan)
  • Possible prepayment penalty

Personal Guarantee

Guarantee required from anybody who owns at least 20% of the business

Collateral

Collateral required; usually the real estate/equipment financed

Down Payment

10% – 30%

SBA Disaster Loans

Sometimes, the unexpected happens. Whether it’s a sudden deployment, a natural disaster, or changes within the economy, these unforeseen events can have damaging effects on a business, even leading some owners to shut their doors for good.

The SBA understands these situations and offers various Disaster Loan programs designed to help small businesses weather the storm. These loans include Physical Disaster Loans, Economic Injury Disaster Loans, and Military Reservists Economic Injury Loans.

Through the Physical Disaster Loan program, businesses and nonprofit organizations can receive up to $2 million for the repair or replacement of damaged property. This includes real estate, fixtures, inventory, and equipment used to operate the business. Loan proceeds can be increased to offer protection from future disasters, covering losses that are uninsured or under-insured and providing business owners with an extra level of protection. Repayment terms can be set up to 30 years, and interest rates are set at 4% and 8%.

Through the Economic Injury Disaster Loan, businesses and nonprofit organizations can apply for up to $2 million if economic injury occurs. This money can be used to cover financial obligations that would have been paid by the business had it not been affected by the disaster. Repayment terms are up to 30 years with interest rates set by the SBA at 4% and 8%.

The Military Reservist Economic Injury Disaster Loan is designed for reservists who have been called for active duty. These loans are used for the working capital needed to pay business expenses until the employee returns from active duty and business operations recover. They cannot be used for refinancing debt, business expansions, or to cover income or profit losses. The total amount of the loan is based on the actual economic injury as determined by the SBA. Interest rates for these loans are set at 4% with a maximum repayment term of 30 years.

Term Rate/fee

Borrowing Amount

Maximum $2 million

Term Lengths

  • Max 30 years if no credit available elsewhere
  • Max 7 years if credit available elsewhere

Interest Rates

  • Maximum 4% if no credit available elsewhere
  • Maximum 8% if credit available elsewhere

Fees

None from the SBA; possible fees from outside agencies

3. Decide On An SBA Partner Lender

Once you’ve narrowed down your loan options and have selected the program that’s right for your business, you’ll need to find an intermediary. SBA loans do not come directly from the SBA to the borrower. Instead, these government-backed loans are provided through approved lenders including banks, credit unions, private lenders, CDCs, and nonprofits. Because the SBA guarantees at least 50% of loan proceeds (and in most cases, 85%), lenders are more willing to provide these loans to qualified small businesses.

This doesn’t mean that you can just walk into any bank and receive an SBA loan. You have to find an SBA lender partner that services your area. There are a few different ways that you can do this.

The first thing you can do is consult any financial institution with which you have a working relationship. Explain the type of SBA loan that you’re looking for and ask for a referral for local SBA intermediaries.

You can also visit the SBA website, which offers a Lender Match service. Simply input a small amount of personal information, and this tool will match you to a lender that services your area.

SmartBiz is another option you can consider. You can quickly and easily find, apply for, and receive an SBA loan through this service. This online loan marketplace can also match you up with other sources of funding if you don’t qualify for an SBA loan. There are also loan matching services and online brokers that can help you find a lender and offer support through the application process.

4. Compile An SBA Loan Application

Once you’ve found an SBA-approved lender, it’s time to dive into the actual application process. This process can be a little intimidating, but it doesn’t have to be difficult provided you know what to expect going in. The most important thing is to make sure you come prepared with the proper documentation.

SBA borrower information forms are required for every partner, director, managing member, or owner of the company. All owners with at least a 20% stake in the company should also be prepared to sign a personal guarantee and have their resumes available. Personal financial statements will also need to be provided.

For the business, an income statement, balance sheet, and federal income tax returns for the last three years must be provided. A cash flow projection for a period of one year will also need to be included with the application. Business and personal credit reports will also be used to determine your creditworthiness.

For collateral requirements, real estate appraisals, lease agreements, and environmental reports are required. Additional documentation including Articles of Organization, all business licenses, and information pertaining to judgments and lawsuits may also be needed. Affiliated and subsidiary business information will need to be provided during the application process.

Before meeting with the lender, you can inquire about any additional documentation that is needed so that it can all be compiled prior to filling out the application.

5. Be Available For Follow-Up Questions

Once the application has been submitted for your SBA loan, the next step is to wait for your approval. Depending on the loan you’ve applied for, approval can take several weeks, although some options — like SBA Express loans — will be approved within 36 hours.

During this time, you should communicate with your lender and make yourself available for any additional follow-up questions. More documentation may be required by the lender, so make sure that you deliver this in a timely manner to avoid delays in the application process. Typically, you should expect the entire process from application to funding to take 30 to 90 days.

How To Apply For An SBA 504 Loan

The SBA 504 loan process is a bit different than the standard SBA loan process. More documentation is required for these loans. This includes but is not limited to estimates, quotes, and costs from vendors and contractors that will be working on the funded project. For real estate purchases, an independent appraisal is required.

Because the borrower will also be working with another lender, a letter of intent from the lender will need to be submitted with the SBA application. The lender will also need to provide a reason for why it will not provide financing for the entire project.

If debt is to be refinanced using 504 loan proceeds, the borrower must provide information on the current debt, including lien instruments and account transcripts.

How To Apply For An SBA Loan To Buy A Business

When SBA loan proceeds are used to purchase a business, the process does not differ much from what it would be when applying for any other loan. Credit reports and financial documentation will be required to determine eligibility. However, there are a few additional documents needed for approval of the loan.

If real estate is being purchased using the loan, business, stock, and asset purchase agreements are required. A real estate purchase agreement is also needed and will be submitted along with other documentation and the SBA loan application.

A business plan is also typically required. The applicant must also show that they have experience in the industry of the business they plan to acquire.

How To Apply For An SBA Loan For A Startup

If you’re a startup business (defined by the SBA as a business that has been in operation for 2 years or less), there are a few different requirements for applying for an SBA-backed loan.

There are certain documents that startups simply won’t have, such as three years’ worth of business income tax returns. However, alternative documentation can be used to qualify a new business, including a detailed business plan, a cash flow analysis, and financial projections of at least one year.

To qualify for SBA loans, startups must be able to show through this documentation that they will be successful and profitable, despite their short operating history. The applicant must also show proof of industry experience.

How To Apply For An SBA Loan For A Franchise

SBA loans are available for franchises. In many cases, loans for a franchise are easier to obtain than for the purchase of other new businesses because the franchise has a proven business model.

The organization has its own SBA Franchise Directory. This directory has a listing of all brands that are eligible to receive financing from the SBA. This list includes everything from restaurants to dry cleaners and insurance agencies. All brands that meet the FTC definition of a franchise are included on the list.

Some franchises do not fit under the FTC’s definition of a franchise. In these cases, the SBA has the option to add brands to the directory if it meets other requirements.

Financing, including the 7(a) standard loan, can be obtained to purchase a franchise. The same documentation for other SBA loans applies. In addition, agreements between the franchisor and franchisee will also need to be produced, as well as other documentation.

SBA Loan Application Process FAQs

How long does it take to get an SBA loan approved?

The time it takes to get approval on your SBA loan varies. Gathering the needed documentation may take weeks, while the approval process itself can several weeks or even months, especially if more information is required.
Applicants who need approval in a hurry can turn to the SBA Express loan. Even though this provides lower maximum funding than other SBA loan options, approval is guaranteed within 36 hours. However, it’s important to note that the actual underwriting and funding of the loan will take additional time.

Where do I apply for an SBA loan?

To apply for an SBA loan, you will need to work with an SBA-approved lender. Use the SBA Lender Match tool, a loan broker like Lendio, or consult with your existing financial institution to find a lender near you.

You can also use the SmartBiz marketplace online to prequalify and apply for SBA loans. If you don’t qualify, other lending options are available through SmartBiz.

I have bad credit. Can I still be approved for an SBA loan?

Your creditworthiness is an important factor in getting approved for an SBA loan. If you have a credit score that falls below 680, it’s unlikely that you’ll be approved.

If you need a loan but don’t qualify for an SBA loan, don’t worry – you have options. The first thing to do is begin working on your credit. Obtain your free report and score, then follow these helpful hints for boosting your score.

In the meantime, you can also check out your other business loan options. Online small business loans can be obtained with credit scores as low as 500. While the terms may not be as favorable as with SBA loans, there are still some great options out there that will help you get the financing you need today.

What if I need assistance with my SBA loan application?

Navigating the SBA loan application process can be difficult, but you don’t have to do it alone. If you have questions about completing your loan application, you can always ask your SBA-approved lender. If you haven’t yet found a lender to work with, SCORE is a great resource. This nonprofit organization provides resources and services including free business mentors that can help you through every step of the process.

I don’t qualify for an SBA loan/my application was rejected. What are my options?

If you don’t qualify for an SBA loan or your application was rejected, you’re not alone. SBA loans are extremely competitive and getting this type of funding can be difficult. However, this doesn’t mean that you’re stuck without the financing you need. Instead, you can apply for a non-SBA business loan.

Online business loans have less stringent requirements. Terms vary depending on the lender you work with and your creditworthiness. Installment loans, short-term loans, lines of credit, credit cards, and other financing options are available through online business lenders. To find the loan that’s right for you, check out this comparison of the most popular small business loans.

Final Thoughts

SBA loans are a great option for small business owners, but the application process can be frustrating when you don’t know what to expect. Being prepared, gathering your documentation in advance, and knowing what to expect beforehand can help simplify the process, putting you on the path to financing for your small business.

The post How To Apply For An SBA Loan: A Complete Guide appeared first on Merchant Maverick.

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Best Credit Card Offers For Businesses: September 2018

When you’re dedicating most of your waking hours to running your own business, sorting and evaluating the plethora of credit card offers that come your way isn’t going to be high on your list of priorities. With new cards and new welcome offers being introduced with dizzying frequency, keeping track of the best business credit card deals out there requires time and effort.

Well, calm your weary soul, for we at Merchant Maverick are here to take the hassle out of the credit card hunt. Let us show you the best business credit card offers out there for whatever it is you’re looking for. Looking for a great business credit card with a lengthy 0% APR period? The card with the best rewards program? The card that’s best for cash back?

Whatever you’re looking for, we’ve got you covered. Let’s sort the wheat from the chaff to find the credit card offers that best suit your business needs, whatever those needs may be.

Best No Annual Fee

Chase Ink Business Cash



Apply Now

Annual Fee:


$0

 

Purchase APR:


14.99% – 20.99%, Variable

Why It’s Our Pick

The Chase Ink Business CashSM card is a remarkable value for a business credit card with no annual fee. You’ll earn 5% cash back on the first $25,000 a year spent at office supply stores and on internet, cable and phone services. These categories align nicely with the sort of everyday spending done by the average business owner. Additionally, you’ll get 2% cash back on the first $25,000 per year spent at gas stations and restaurants, along with 1% cash back on everything else (and on all purchases in these categories past the $25K/year higher earning limit).

Many cards with such generous bonus earning potential carry an annual fee, leaving you to weigh the benefits of the card against the annual fee. With the Ink Business Cash, no such calculations are necessary, as there is no annual fee. You’ll also be the recipient of a $500 bonus if you spend at least $3,000 on purchases within your first three months of card ownership.

This bonus, along with the cash back you earn in the course of your spending, can be converted to Chase Ultimate Rewards points if you also have a card that earns Ultimate Rewards points such as the Ink Business Preferred card or the Chase Sapphire Preferred card. Do this, and your points will be worth slightly more than twice their cash back amount — a remarkable value.

Runner-Up

Capital One Spark Classic For Business


 

Apply Now

Annual Fee:


$0

 

Purchase APR:


24.74%, Variable

Looking for a great business credit card with no annual fee, but lack the 690+ credit score needed to qualify for the card? Consider the Capital One® Spark® Classic for Business instead. While you’ll be earning cash back at the unsexy rate of 1% on all purchases, the Spark Classic for Business has one attractive aspect most business credit cards lack: you can qualify for the card with a credit score of just 630.

While the card does carry a relatively high 24.74% variable APR on purchases, that’s still a better deal for you than the sort of high-interest loan marketed to business owners with fair credit. Just try to pay the balance in full each month.

Best 0% APR

American Express Blue Business Plus



Compare

Annual Fee:


$0

 

Purchase APR:


12.99% – 20.99%, Variable

Why It’s Our Pick

American Express Blue BusinessSM Plus currently carries the most impressive introductory APR offered by any business card in this troubled land: 0% for 15 months. That’s 65 weeks. 1.25 years. You get the picture — the Blue Business Plus gives you a nice long stretch of time in which to make business purchases without racking up any interest charges. For this, we must doff our caps to the suits at Amex.

Thankfully for you, that’s not the only benefit of the Blue Business Plus.

The card’s primary benefit is the 2X points you’ll be earning on your first $50,000 worth of purchases per year. Most cash back credit cards offer around 1.5 points per dollar, so you’ll be making out like a bandit on your first $50K in purchases each year. If you exceed $50K in annual purchases, the points earning rate reverts to a more pedestrian 1 point per dollar, so if your needs dictate that your annual spending will exceed the $50K annual limit for earning 2X points, you’ll want to consider either getting a different card or pairing this card with another rewards card.

Your Amex Blue Business Plus rewards points can be redeemed for travel, shopping, or a statement credit.

Best Rewards Program

American Express SimplyCash Plus



Compare

Annual Fee:


$0

 

Purchase APR:


13.99% – 20.99%, Variable

Why It’s Our Pick

The American Express SimplyCash® Plus business card is our pick for best rewards program due to the customizable reward structure. With the SimplyCash Plus, you earn 5% cash back on your first $50K per year on charges at office supply stores and on wireless telephone services purchased directly from U.S. service providers. Now, here’s where the customization comes in.

The SimplyCash Plus card offers 3% cash back on your first $50K per year in purchases in a category of your choosing. You can choose from between one of the following eight categories:

  • Airfare purchased directly from airlines
  • Hotel rooms purchased directly from hotels
  • Car rentals purchased from select car rental companies
  • U.S. gas stations
  • U.S. restaurants
  • U.S. purchases for advertising in select media
  • U.S. purchases for shipping
  • U.S. computer hardware, software, and cloud computing purchases made directly from select providers

Here’s the chance for a business owner whose spending may not align with the bonus cash back categories provided by other cards to use a cash back card tailored to his or her specific needs. You’ll also earn 1% cash back on all other spending and on spending above $50K/year on the bonus categories. On the downside, this card currently has no welcome offer.

Runner-Up

Chase Ink Business Preferred



Apply Now 

Annual Fee:


$95

 

Purchase APR:


17.74% – 22.74%, Variable

Chase Ink Business PreferredSM is another card with a robust rewards program. Using this card will earn you 3 points per $1 on the first $150,000 per year spent on travel, shipping purchases, internet/cable/phone services, and advertising purchases made with social media and search engines (and 1 point per dollar on everything else). It’s a card meant to reward the business with a high volume of spending on many of the most common business spending categories, as the high-earning limit on spending of $150K/year vastly exceeds most such limits in the business rewards card space (typically $30-50K/year).

Another factor boosting the appeal of the Ink Business Preferred rewards program is the fact that if you redeem your points for travel via Chase Ultimate Rewards, your points will be worth 25% more than they would otherwise be worth. You can also transfer your points to certain other travel rewards programs (such as United MileagePlus and Marriott Rewards) on a 1:1 point basis.

Best For Points

Chase Ink Business Preferred



Apply Now 

Annual Fee:


$95

 

Purchase APR:


17.74% – 22.74%, Variable

Why It’s Our Pick

Chase Ink Business PreferredSM comes out on top for this category as well. It’s not only because of the points-earning potential of the card (earning 3 points per dollar spent on the first $150,000 spent on the bonus spending categories per year will earn you a whopping 450,000 points annually, and from there you can earn even more points at the 1 pt/$1 level). It’s due to the fact that your points are worth 25% more than the standard value of 1 cent per point if you redeem them for travel. It’s also due to the fact that you can transfer your points to other travel rewards programs on a 1:1 point basis.

Best For Travel

American Express Business Platinum


amex business platinum review
Compare

Annual Fee:


$450

 

Purchase APR:


N/A (This is a charge card)

Why It’s Our Pick

The American Express Business Platinum® card isn’t a card for the business owner who travels only infrequently. But if you’re a heavy-duty business traveler interested in fancy luxuries (like getting to hang out in exclusive airport lounges), this is the card for you!

First off, this card is a charge card, meaning you can’t carry a balance from month to month — your entire balance comes due on your statement date. Furthermore, the card carries a $450 annual fee. This is sure to put off all but the most prolific business travelers. For the rest of you, here’s where the card’s value lies: You’ll earn a juicy 5 points to the dollar on flights and prepaid hotels purchased on Amex’s travel website, amextravel.com.

You’ll also earn 1.5 points per dollar on eligible purchases of $5,000 or more (up to 1 million additional points per year) and one point per dollar on all other eligible purchases. However, the value doesn’t stop there. Here’s what else you’ll get with the Amex Business Platinum:

  • Get access to over 1,100 airport lounges worldwide via the American Express Global Lounge Collection
  • Receive a statement credit every 4 years after you apply for Global Entry ($100) or TSA PreCheck ($85)
  • Use Membership Rewards Pay with Points for a First or Business class flight with any airline available through Amex Travel and get 35% of the points back
  • Get $200 per year in statement credits for incidental fees with the qualifying airline of your choice
  • No foreign transaction fees

Not too shabby, eh?

Runner-Up

Bank of America Business Advantage Travel Rewards World Mastercard


bofa business advantage travel rewards
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Annual Fee:


$0

 

Purchase APR:


12.99% – 22.99%, Variable

 

Want a travel-oriented business credit card without an exorbitant annual fee? The Bank of America® Business Advantage Travel Rewards World Mastercard® may have an irritatingly long name, but it provides a solid set of travel perks and benefits, and there’s no annual fee at all.

With the BofA® Business Advantage Travel Rewards World Mastercard®, you’ll earn 1.5 points for every $1 spent on all purchases with no limits to the amount you can earn. But wait! It gets better. Earn 3 points per dollar spent when you book your travel (car, hotel, airline) through the Bank of America Travel Center (powered by Orbitz).

Here’s what else the Business Advantage Travel Rewards World Mastercard® gets you:

  • Redeem points for a statement credit to pay for flights, hotels, vacation packages, cruises, rental cars or baggage fees; option for cash back and gift cards
  • No blackout dates and no travel restrictions when booking your trip
  • Business Advantage Relationship Rewards clients get a 25% – 75% rewards bonus on the base earn of every purchase
  • No foreign transaction fee

When you enroll in the Business Advantage Relationships Rewards program to get that rewards bonus, you can earn up to 2.62 points to the dollar on your regular non-travel purchases if you play your cards right, which means all the more points you can redeem for statement credits to pay for your travel!

Best For Balance Transfers

Capital One Spark Cash For Business


capital one spark cash select
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Annual Fee:


$95 ($0 the first year)

 

Purchase APR:


18.74%, Variable

Why It’s Our Pick

The Capital One® Spark® Cash for Business card charges no fees on balance transfers, and beyond that, it’s a great cash back card as well.

The beauty of Spark Cash for Business is the fact that you’ll earn an unlimited 2% cash back on all purchases — one of the only cards offering such a high flat cash back rate. If you want to avoid extra charges for balance transfers while earning 2% cash back on everything you buy, this card has your number. However, there is a $95 annual fee after the first year, and there’s no introductory 0% APR for balance transfers. If a 0% intro APR for balance transfers is more important to you than fee-free balance transfers, check out Ink Business Cash, as its 12-month 0% APR period goes for balance transfers as well as purchases.

Best For Cash Back

Bank of America Business Advantage Cash Rewards Mastercard



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Annual Fee:


$0

 

Purchase APR:


12.99% – 22.99%, Variable

 

Why It’s Our Pick

For this section, we wanted to highlight the Bank of America® Business Advantage Cash Rewards Mastercard®. For no annual fee, you’ll get 3% cash back on your first $250,000 per year in purchases at gas stations and office supply stores (and 1% cash back afterwards), 2% cash back on purchases at restaurants, and 1% cash back on everything else.

The $250,000 limit on your highest earning categories goes well beyond the limit placed on the high earning categories of most cards, making this a great cash back business card choice for the business gearing up to do some truly heavy spending in the specified categories. What’s more, just as with the BofA Business Advantage Travel Rewards World Mastercard, Business Advantage Relationship Rewards clients get a 25% – 75% rewards bonus on the base earn of every purchase.

Best Sign-Up Bonus Offer

Chase Ink Business Preferred



Apply Now 

Annual Fee:


$95

 

Purchase APR:


17.74% – 22.74%, Variable

Why It’s Our Pick

We’ve gone over some of the reasons why we like the Chase Ink Business PreferredSM card so much. Here’s another reason: the card carries a sign-up bonus that is uniquely valuable for the industry. Sign up for the Ink Business Preferred and you’ll be in line to receive a bonus of 80,000 points if you spend at least $5,000 within the first three months of opening your account. This offer is worth about $800 under normal circumstances but is worth $1,000 if you redeem your points for travel via Chase Ultimate Rewards.

While you’ll have to balance out this uniquely valuable sign-up bonus with the fact that this card carries a $95 annual fee (not waived for the first year), the fact remains that few cards offer as generous of a bonus offer as the Ink Business Preferred — even if you subtract the annual fee from the bonus.

Now What?

We hope that this article has helped you find the business credit card that best suits your particular needs, whatever they may be. To learn more about the current business credit card scene, check out our post on the best business credit cards of 2018 or compare business credit cards.

The post Best Credit Card Offers For Businesses: September 2018 appeared first on Merchant Maverick.

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SBA Loans For Real Estate: Your Best Options

The SBA has several options for small business owners in need of a business loan for real estate. Of the six types of SBA loans, 7(a) Loans and 504 Loans are the two most viable options for real estate purchases. Other SBA loans (CAPLines, Export, Microloans, and Disaster) either prohibit borrowers directly from using funds for real estate or are not set up in a way to support such purchases.

Types Of SBA Loans For Real Estate: SBA 504 vs 7(a)

If you need an SBA loan to buy property, a 504 or 7(a) Loan is your best bet. While both can be used for real estate, the two do have differences that make some better for small business owners than others.

The main differences are in where the funding originates, the loan structure, and the SBA loan down payment. 504 loans are supported by both the SBA and CDCs (certified development companies) and have strict loan structures in which the borrower is only required to make a down payment of 10%.

A 7(a) loan is backed only by the SBA. The structure of the loan can vary dramatically depending on the risk involved with financing– 10% is the minimum down payment required.

504 loans offer fixed-rate financing, while 7(a) loan products offer lower but variable fees adjusted quarterly.

SBA CDC/504 Loans

The SBA 504 loan is a program backed by the SBA and Certified Development Companies. These selective loans are open to for-profit small businesses operated by United States citizens and resident aliens. They offer fixed interest rates, long-term financing, and smaller down payments.

The purpose of 504 Loans is to promote job creation through supporting small businesses. Recipients are connected with a CDC, a non-profit organization that is certified and regulated by the SBA. The CDC will then provide financing in partnership with the SBA.

Loan Usage

These loans can be used for fixed assets, like real estate, and a few soft costs.

There are strict policies on how the funds may be used– borrowers cannot use financing for working capital, inventory, or consolidation or repayment of debt.

Because of the focus on fixed assets, 504 Loans are often referred to as SBA Real Estate Loans or SBA Commercial Real Estate Loans. A 504 loan can be used for purchasing an existing building, land or land improvements, constructing or renovating facilities, purchasing equipment for long-term use, or refinancing debt connected to renovation or equipment. This policy makes a 504 Loan a great option for a real estate loan.

Rates & Terms

SBA real estate loan rates do vary depending on loan and lender. 504 loans are known for long-term fixed rates and fees, set by the current market rate for 5- or 10-year Treasury issues. Fees may include:

  • Interest rates
  • CDC servicing fees
  • Central servicing agent fees
  • SBA guarantee fees
  • Bank fees
  • Third-party fees
  • Prepayment fees

While no limit exists on project size for 504 loans, there is a maximum SBA loan amount of $5 million. This number may rise to $5.5 million if the recipient intends to use the money to finance an energy-related project.

How To Apply

If you intend to apply for a 504 loan, the SBA asks you to provide proof of:

  • Eligibility
  • Indebtedness
  • Creditworthiness

The 504 loan application guides potential recipients through the process of providing such material. It is a lengthy application — thirteen pages, to be exact. You can expect to provide information on your small business’s project costs, energy efficiency goals, debenture pricing, and more. The application can be completed and submitted to your area’s CDC, which will then partner with the SBA Loan Processing Center to determine eligibility. You can get connected with your regional CDC through the SBA’s online resource for small business owners.

SBA 7(a) Loans

7(a) loans are the most popular financing option for small business owners. They are backed by the SBA in amounts up to 85%, providing opportunities for businesses that may be ineligible for traditional loans. There are several types of 7(a) loans that provide versatility, long terms, favorable rates, and flexibility for small businesses.

Loan Usage

7(a) loans can be used for a wide variety of needs: working capital, building, renovating, business startups, construction, real estate, equipment, and more, depending on your lender and loan agreement. This versatility, of course, also includes fixed assets such as real estate purchases. 7(a) loans are flexible and can be negotiated depending on a particular business’s needs; this makes them a viable option for many small businesses purchasing real estate.

Rates & Terms

Rates and terms for 7(a) loans can vary depending on the specific loan agreement, lender, borrower, etc. The SBA Loan Calculator is a great way to better understand your specific loan’s rates and fees. We track the current SBA loan rates at merchant Maverick.

How to Apply

To apply for a 7(a) loan, you will need to fill out an online form that describes your business and its needs. The SBA uses this information to match you with a lender with whom you can negotiate a loan.

The documents you need will vary depending on which loan you apply for. Typical items you will need are:

  • Borrower Information Form
  • Statement of Personal History
  • Personal Financial Statement, Including Credit Score
  • Business Financial Statements
    • Profit and Loss Statement
    • Projected Financial Statements
  • Ownership and Affiliations
  • Business Certificate/License
  • Loan Application History
  • Income Tax Returns
  • Résumé
  • Business Overview and History
  • Business Lease

Do SBA Real Estate Loans Require A Down Payment?

While down payments do vary in size, there is usually a minimum 10% down payment required from SBA real estate loan recipients. You will also need collateral, which depending on your specific loan, can usually be any property or equity owned by the business. Some lenders will allow borrowers to use personal items, such as a personal home or vehicle, as collateral. Depending on the lender, an SBA loan of any kind may also require a personal guarantee from the borrower.

Final Thoughts

For real estate financing, SBA 7(a) Loans and SBA 504 Loans are the most viable options for small business owners. Both 7(a) and 504 loans offer reasonable rates and flexibility for business owners, so the best loan for your individual business will rely heavily on the specifics of your needs for real estate.

The post SBA Loans For Real Estate: Your Best Options appeared first on Merchant Maverick.

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Top Business Credit Card Balance Transfer Offers

Sometimes you’ll need to transfer a previous credit card balance when getting a new card. However, not every card is made equal when it comes to transferring in an old balance. Some add on extra transfer fees or put a cap on how much you can transfer. Others may even tack APR onto balance transfers. Unfortunately, it’s not always easy to figure out the best credit card options when it comes to transferring a balance.

That’s why we’ve picked out some of the top balance transfer credit card offers for business owners. Read on through to find out which card could be best for you.

Top Business Credit Cards For Balance Transfers

Best Overall Pick: American Express Blue Business Plus

American Express Blue Business Plus



Compare

Annual Fee:


$0

 

Purchase APR:


12.99% – 20.99%, Variable

With a 0% intro APR for the first 15 months on purchases and balance transfers, this card from American Express offers the longest introductory period currently available. That means you’ll have plenty of time to pay your balance without racking up interest charges. For rewards, it provides two points per $1 up to $50,000 spent, and then one point per $1 after you hit that cap. Those points are usually worth $0.01 but may wind up higher or lower depending on how they are redeemed. Keep in mind that the balance transfer fee sits at 3% (with a minimum fee of $5) although that’s relatively normal.

For an in-depth look, spend some time with Merchant Maverick’s complete review.

Best For Those With Fair Credit: Capital One Spark Classic for Business

Capital One Spark Classic For Business



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Annual Fee:


$0

 

Purchase APR:


24.74%, Variable

Because Capital One markets this card towards average credit applicants while packaging it with unlimited 1% cash back on all purchases, Spark Classic is a solid choice for those with fair credit. As long as you manage your account responsibly, you’ll help build up your credit score. Increasing your credit score could potentially allow you to switch to a card with better rewards. The Spark Classic for Business also comes with no balance transfer fee, no annual fee, and no foreign transaction fee.

Read our ultimate guide to learn more about improving your business credit score.

Best No Balance Transfer Fee: Capital One Spark Cash for Business

Capital One Spark Cash For Business


capital one spark cash select
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Annual Fee:


$95 ($0 the first year)

 

Purchase APR:


18.74%, Variable

With its unlimited 2% cash back on all purchases and no balance transfer fee, this card certainly appeals to those looking to transfer debt. Capital One also includes a welcome offer of $500 cash if you spend at least $4,500 in the first 3 months of opening your account. However, there is a $95 annual fee, although it is waived the first year. To qualify for this card, you’ll need to have excellent credit; you’re required to have had a loan or credit card for three-plus years with a credit limit in excess of $5,000 before getting a Spark Cash for Business card.

For a deep dive on Capital One’s card, take a look at Merchant Maverick’s full review.

Best Introductory APR Offer: American Express Blue Business Plus

American Express Blue Business Plus



Compare

Annual Fee:


$0

 

Purchase APR:


12.99% – 20.99%, Variable

While this card also made the list at best overall, its 0% APR for 15 months is hard to beat when looking at introductory APRs. Because that 0% intro APR is applicable to both purchases and balance transfers, this card is especially attractive for those with balance transfers. Do note, however, that American Express does attach a pretty normal balance transfer fee of 3% or $5—whichever is higher.

Get the full rundown on the American Express Blue Business Plus with our in-depth review.

Best For Cash Back: Chase Ink Business Cash

Chase Ink Business Cash



Apply Now

Annual Fee:


$0

 

Purchase APR:


14.99% – 20.99%, Variable

The Ink Business Cash card offers a 0% intro APR on both purchases and balance transfers for the first 12 months. On top of that, Chase really packs some hefty rewards into their Ink Business Cash credit card. These rewards include 5% back on purchases at office supply stores and on internet, cable, and phone purchases up to a combined $25,000 each account anniversary year. You can also earn 2% back at gas stations and restaurants up to a combined $25,000 each account anniversary year. For everything else, you’ll get 1% cash back.

Head on over to Merchant Maverick’s in-depth review for more details on Chase’s card.

Why Would I Need To Do A Balance Transfer?

Two worried friends having problems buying on line with credit card and a laptop sitting on a couch in the living room at home

The most obvious reason for doing a business credit card balance transfer is if you’ve found a card with a lower APR or better rewards. You may also only want to transfer a certain amount of your debt in order to lower your per-card utilization ratio—potentially increasing your credit score.

Can I Use A Personal Card For A Balance Transfer?

As we mentioned in our guide to using personal credit cards for business expenses, you’ll want to separate personal and business expenses when possible. However, if you’ve already accrued some business debt on a personal card, you can transfer that debt onto your new business card. Doing this will help completely separate your personal and business expenses.

What Do I Need To Qualify & Be Approved?

Approval is dependant on the card and the issuer. Each issuer has their own requirements, but they’ll primarily look at your debt service coverage ratio (DSCR) and—most importantly—credit score. Every financial institution has their own standards, but for the most part, a credit score of 600 – 670 is considered “fair”, 671 – 750 is considered “good” to “very good”, and a score of 751 – 850 is considered “excellent”.

Don’t know your credit score? Visit a comparison of our favorite sites to check your credit score for free. Unsure how to calculate your DSCR? Check out our calculation guide.

What If I Don’t Meet The Necessary Qualifications?

If you’re struggling with your credit score, visit the Merchant Maverick guide to improving your business credit score. Or head over to our do’s and don’ts of business credit cards if you still need to learn the basics. You may also be able to consolidate your debt with a short-term loan; read up on the merchant’s guide to short-term loans for more information.

The post Top Business Credit Card Balance Transfer Offers appeared first on Merchant Maverick.

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