Farm And Agriculture Loans: Your Best Options

Running a farm or agricultural business isn’t without its challenges. While the agricultural industry has its own unique hurdles to overcome, there’s one challenge farmers, ranchers, and other entrepreneurs in the industry face just like any other business owner: financial issues and the need for capital.

Owning and operating a farm, ranch, or agricultural business comes with hefty expenses — expenses that a business owner often can’t face alone. From purchasing heavy-duty farming equipment to buying land to hiring employees, these expenses can pile up quickly, leaving even the most prepared small business owner struggling to stay afloat.

If you’re in the agricultural industry and you’re facing a financial burden, know that there are options available to you. Read on to learn more about agriculture and farm financing options, how to qualify, and which type of financing is best for your financial needs.

Government Programs For Agriculture & Farm Financing

The United States Department of Agriculture, or USDA, is a federal government department that manages programs in the areas of food, nutrition, natural resources, rural development, and agriculture. The USDA has 29 different agencies, including the Farm Services Agency, which provides resources for business owners in agricultural and farming industries. One of the primary resources provided by the FSA is low-cost loan programs.

There are several loan programs available to fit the needs of new and established farming and agriculture businesses.

The FSA’s Direct Farm Operating loan program provides loans for starting or operating a farm or ranch. This program provides up to $300,000 for reorganizing a farm, purchasing livestock, buying farm equipment, and paying for operating expenses. Proceeds can also be used toward the improvement or repair of buildings, land and water development, and refinancing farm-related debt.

The FSA also has microloan programs targeted at beginning farmers and farmers that operate non-traditional farms. The Direct Farm Ownership Microloan provides up to $50,000 for down payments on land, soil and water conservation projects, and the construction, repair, or improvements of farm and service buildings and dwellings.

Direct Farm Operating Microloans provide up to $50,000 for use toward tools, fencing, equipment, irrigation systems, and other operating expenses.

The FSA’s Direct Farm Ownership loan is another option for farmers. This loan is available up to $300,000. Through this program, the FSA provides up to 100% financing for the purchase or expansion of farms.

There are two additional loans available through the FSA’s Direct Farm Ownership program. The Direct Farm Ownership Joint Financing loan gives up to 50% of the cost or value of purchased properties, with maximum borrowing amounts capped at $300,000. The remaining balance is financed by a traditional lender, state programs, or the seller of the property.

The Direct Farm Ownership Down Payment loan is available to new farmers and ranchers, women, and minorities. Through this program, borrowers receive up to 45% of either the purchase price, appraised value, or $667,000. Borrowing limitations are based on the lesser amount of the three options. All borrowers must pay 5% of the purchase price to receive this loan.

The FSA also has Guaranteed Farm Loan programs that make it easier for farmers and ranchers to receive loans through commercial lenders. Through these programs, the FSA will guarantee up to 95% of a loan, putting less risk on the lender and increasing the borrower’s chances for approval. The FSA guarantees up to $1.429 million for farm ownership, conservation, and operating loans. For land contracts, up to $500,000 is guaranteed.

Finally, the FSA offers the Emergency loan program. Through this program, up to $500,000 is available to cover expenses following a disaster such as a flood, tornado, or drought. Loan proceeds are used toward the restoration or replacement of property, covering production costs or living expenses, reorganization of operations, and refinancing of non-real estate debt.

Government Farm Loan Rates & Fees

The rates and fees associated with receiving a government farm loan vary based on the type of loan selected.

For the Direct Farm Operating loan, terms range from 12 months for general operating and living expenses up to 7 years for repairs, equipment, or livestock purchases. Interest rates are set by the FSA, which posts updated rates on the first day of each month. As of November 2018, rates for Direct Farm Operating loans are 3.75%.

Direct Farm Operating Microloan repayment terms are based on the purpose of the loan. Operating and living expenses are repaid within 12 months, while equipment or livestock purchases come with repayment terms of 7 years. Interest rates are 3.75%.

Direct Ownership Microloans have maximum repayment terms of 25 years and interest rates of 4.125%.

The Direct Farm Ownership loan and the Direct Farm Joint Financing loan each have maximum repayment terms of 40 years. Interest rates for both loans are 2.5%. For the Direct Farm Ownership Down Payment loan, repayment terms are 20 years. The portion of the loan not financed by the FSA is required to have a minimum 30-year repayment period. The interest rate is 1.5%.

The repayment terms for FSA Emergency loans are based on the loss and the borrower’s ability to repay. At least one payment per year must be made by the borrower. If funds are used for operating expenses, repayment terms are 12 months, but an 18-month extended repayment period is available. The interest rate for these loans is 3.75%.

If a borrower receives a Guaranteed loan through an FSA-approved commercial lender, repayment terms are based on the type of loan, collateral, and the borrower’s ability to repay. Generally, Operating loans have a 7-year repayment term, while maximum terms for Farm Ownership loans max out at 50 years. Interest rates are set by the lender but may not exceed the FSA’s maximum rates.

What You Need To Qualify For A Government Farm Loan

For all government farm loans, borrowers must be a citizen, non-citizen national, or legal resident alien in the U.S. and specific U.S. territories. All borrowers must be unable to obtain credit from other lenders before applying for an FSA loan. Borrowers must not be delinquent on federal debt, with the exception of IRS tax debt.

All borrowers must also have no previous debt forgiveness from the FSA. Potential borrowers with Federal Crop Insurance violations are not eligible for FSA loans.

All borrowers must also have sufficient credit history. The FSA does not use credit scores but instead looks at a borrower’s past repayment history with creditors and the federal government. A lack of credit history, isolated incidents of slow payments, or adverse issues that were out of the borrower’s control will not automatically disqualify the borrower.

To qualify for an FSA Microloan, all borrowers must have 3 years of farm management experience acquired within 10 years of the date of applying for the loan.

For some loans, collateral is required. For FSA Operating Microloans, a lien on farm property or agricultural projects totaling 100% to 150% of the loan amount is required. For Direct Farm Ownership Microloans, the real estate that is purchased or improved with loan proceeds serves as the collateral.

To receive an emergency loan, additional information is required. Borrowers must apply within 8 months of the date the disaster was declared, submit declinations of credit from commercial lenders, and obtain crop insurance for the coming year to receive the loan.

Grants For Farm & Agriculture Businesses

startup grants

A grant is money given — not loaned — by the government or other organizations to fund a project, start a business, and provide other benefits to farm and agriculture businesses.

The USDA offers Farm Labor Housing Direct Loans & Grants. Funding from this program is used to develop housing for farm laborers when commercial credit can’t be obtained. Funds can be used to construct, improve, repair, or buy housing for domestic laborers. Funds can also be used to buy and improve land, purchase furnishings, or pay construction loan interest. Eligible applicants can receive a need-based grant that pays up to 90% of project costs. Applicants can apply through the USDA website.

The USDA also offers Value Added Producer Grants, which are used to expand marketing opportunities, create new products, and boost income. This program has working capital grants up to $250,000 and planning grants up to $75,000. Beginning or socially-disadvantaged farmers and ranchers and small- or medium-sized farms may receive priority for these grants. Applicants can apply through the USDA website.

Sustainable Agriculture Research & Education, or SARE, offers sustainable agriculture grants nationwide. Farmers and ranchers can submit a grant proposal to receive thousands of dollars in funding for their project. Grants have been awarded in the past surrounding topics including pest management, livestock production, soil quality, marketing, and energy. Applications can be submitted through the SARE website.

Grants are also available at the state level. Applicants can visit their state’s Department of Agriculture website to learn more about grant opportunities, how to apply, and eligibility requirements.

Alternative Loans & Financing For Agriculture Businesses

If you don’t qualify for a government loan or grant, there are financing options available for you. If you need money quickly, have a low credit score, or have specific needs that aren’t met with government grants and loans, alternative lenders provide several loan options for farmers and ranchers.

Equipment Loans

Best For…

Purchasing equipment

To keep your farm, ranch, or agriculture business running smoothly, you need the right tools and equipment. Backhoes, bailers, tractors, and other heavy equipment come at an expensive price – a cost that isn’t financially feasible for most farmers or ranchers. Whether you’re upgrading old equipment or adding more to keep up with your expanding business, an equipment loan makes these purchases more affordable.

An equipment loan is used to purchase equipment and tools needed for your business. With an equipment loan, you can buy the equipment you need and put it into use immediately without having to pay the full price up-front. Instead, you’ll pay through affordable scheduled payments spread out over time.

Depending on your creditworthiness, a down payment of 10% to 20% of the full purchase price is required. Borrowers with high credit scores may qualify for $0 down payment options. Once the down payment is paid, the lender provides the remaining funds. A weekly or monthly payment is made toward the balance, plus any interest charged by the lender. The equipment purchased with loan proceeds is typically your collateral. In most cases, you don’t need additional collateral, but a blanket lien or personal guarantee is usually required.

Our Top Pick: Lendio

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Lendio is a loan aggregator that connects borrowers with multiple lenders via a single application. Equipment financing is just one loan product offered through Lendio. Through Lendio, you can apply for $5,000 to $5 million to purchase equipment. Loan terms are between 1 and 5 years. Interest rates for the most creditworthy borrowers are 7.5%.

The application process takes about 15 minutes, and you can receive funding in as little as 24 hours. Loans can be used to purchase heavy equipment, office furniture, software, vehicles, and more. To qualify through Lendio, you need at least $50,000 in annual revenue, a credit score of at least 650, and a time in business of at least 12 months. If your credit score is below 650, you may qualify with a lender based on cash flow and revenue from the last 3 to 6 months.

Business Credit Cards

Best For…

Recurring monthly expenses or emergencies

A business credit card is always a good financial resource to have on hand. With a business credit card, you’ll be able to purchase supplies, pay operating expenses, or cover an emergency expense without waiting for a loan approval. Once approved, you’ll be able to use your card immediately anywhere credit cards are accepted.

After using your card, you’ll make payments each month toward your balance and interest. As you repay your balance, these funds are available to use again. Many business credit cards also have rewards programs. By responsibly borrowing and paying your balance off as quickly as possible, you can rack up points to use toward cash back, flights, hotels, and other rewards.

Our Top Pick: Chase Ink Business Unlimited

Chase Ink Business Unlimited


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Annual Fee:


$0

 

Purchase APR:


15.24% – 21.24%, Variable

Chase Ink Business Unlimited is a business credit card for borrowers with good to excellent credit history. This card boasts multiple benefits, including no annual fee and introductory APR of 0% for the first 12 months.

The Chase Ink Business Unlimited card also has a rewards program that gives you 1.5% cash back on all purchases. The card has variable APR of 15.24% to 21.24% and has a bonus offer of $500 cash back after spending $3,000 within the first 3 months of opening your account.

Installment Loans

Best For…

Purchasing supplies or inventory

With an installment loan, you receive a lump sum of money that is repaid through scheduled installments. Repayments may be daily, weekly, or monthly based on the lender you select. Loan proceeds can be used for any business purpose, including purchasing supplies or inventory, buying livestock, or using the funds as working capital. Installment loans are best if you know the specific cost of your expense. If you are unsure of how much money you need, consider a more flexible option like a line of credit or business credit card.

The repayment terms, interest rates, and fees vary by lender. The most creditworthy borrowers typically receive the lowest rates and best repayment terms.

Our Top Pick: Fundation

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Fundation provides installment loans of between $20,000 and $500,000 for qualified borrowers. Repayment terms are between 1 and 4 years with interest rates between 7.99% and 29.99%. Payments toward the loan and interest are made monthly.

To qualify for a Fundation installment loan, you must be in business for at least 2 years. Your annual revenue must be at least $100,000, and you need a credit score of at least 660 to receive this loan.

Short-Term Loans

Best For…

Working capital needs and seasonal gaps in revenue

When you apply for a short-term loan, you’ll receive one lump sum that will be repaid back over a shorter period of time. While most short-term loans have repayment terms of one year or less, some alternative lenders offer terms up to 3 years.

Short-term loans are repaid through daily, weekly, or monthly payments. In addition to paying off the principal balance, you’ll also pay what is known as a factor rate instead of interest. This fee is calculated into the cost of the loan.

Short-term loans are a good choice for farmers, ranchers, and other business owners because they are quick and easy to receive. Short-term loans are available for any business purpose, but because they can be funded quickly, they work well for working capital, to fill seasonal revenue gaps, or to cover an emergency expense. Alternative lenders offer more options than ever, so you can find the financing you need regardless of credit score, annual revenue, or other challenges.

Our Top Pick: OnDeck

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OnDeck offers short-term loans up to $500,000. The factor rate for OnDeck loans is between 1.003 to 1.04 per month. A one-time origination fee between 2.5% and 4% of the total loan amount is charged.

To qualify for an OnDeck loan, you must be in business for at least 1 year and have annual revenue of at least $100,000. The minimum credit score required is 500, but the lender reports that most business owners have credit scores of 660 or higher.

If an OnDeck short-term loan doesn’t fit your needs, the lender also offers lines of credit up to $100,000 with APRs as low as 13.99%.

Lines Of Credit

Best For…

Businesses that need a flexible financing option

Sometimes, you need money and you need it right away. In these situations, waiting days or even weeks can be a struggle. Instead of pursuing a loan that requires lengthy application and underwriting processes, apply for a line of credit that you can access whenever you need extra money.

A line of credit is a type of revolving credit that allows you to make multiple draws as needed. Once approved for a line of credit, you’ll receive a credit limit. You can request any amount of money up to and including this credit limit. Funds are then deposited to your business bank account – often within one business day. Interest or fees apply to the funds that have been used. As you pay down your balance, the funds are available for you to use again, similar to a credit card.

Our Top Pick: FundBox

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FundBox offers lines of credit up to $100,000. Repayment terms are 12 or 24 weeks. Fees begin at 4.66% and are paid along with your balance through weekly payments. There are no prepayment penalties, and paying off your loan early helps you save on fees.

Approval and credit limits are determined by the health of your business. The application process takes about 10 minutes, during which you’ll connect your business bank account and accounting software. Once approved, funds are available immediately and can be deposited into your bank account as soon as the next business day.

Real Estate Loans

Best For…

The purchase of commercial real estate property or land

Your farm or ranch is prospering, and it’s time for an expansion. The only problem is you don’t have the funds to purchase real estate or land. Instead of taking on this financial burden yourself, make the smart move and apply for a commercial real estate loan.

A commercial real estate loan is used for commercial property or land. After paying a down payment that is typically 10% to 20% of the total purchase price, your lender provides the remaining funds. You can use the land or property immediately while repaying the principal balance and interest over several years. The real estate purchased with loan funds is the collateral for the loan.

Our Top Pick: SmartBiz

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The Small Business Administration offers affordable and flexible loan options for entrepreneurs and business owners, but navigating the application process is difficult for many. SmartBiz is a lender that takes the guesswork out of SBA loans.

Through SmartBiz, you can apply for an affordable SBA 7(a) loan to purchase commercial real estate. Loan amounts of $500,000 to $5 million are available. SmartBiz offers fixed and variable interest rates between 6.75% to 8% with repayment terms up to 25 years. Loans can be closed as soon as 30 days after approval.

To qualify, at least 51% of the property must be owner-occupied. You must be in business for over 2 years and have a minimum credit score of 675. You must sign a personal guarantee and pay fees including a guarantee fee, packaging fee, and closing costs. A down payment of 10% to 20% is required.

What To Consider When Choosing A Lender

Choosing a lender and the right loan product for your farm, ranch, or agriculture business doesn’t have to be complicated. Ask yourself a few important questions to narrow down which lender to select.

How Much Money Do I Need?

Before you apply for a loan, calculate how much money you need. Your lender will want to know how much you are requesting, and this will also help you choose which lender to work with. If you need $250,000, a lender with maximum loan amounts of $100,000 won’t be a good fit. Understand how much you need — and how much you can afford — before choosing your lender.

How Will I Use The Loan?

How you plan to use your loan proceeds can help you determine the best lender for your situation. Some lenders have restrictions on how loans are used. For example, an equipment loan can only be used for the purchase of tools or equipment. If you need money to use as working capital, another loan option — such as a short-term loan or line of credit — would best fit your financial needs.

Do I Meet All Lender Requirements?

All lenders have different requirements based on their own policies as well as the types of loans offered. Understand a lender’s requirements before applying, and make sure you meet all of them. Remember, many lenders consider time in business, creditworthiness, and annual revenues. Evaluate your revenue and time in business and pull your free credit score online before applying for a loan.

What You’ll Need To Apply For A Farm Loan

The documentation and information requirements for a farm loan are based on the type of loan you’re pursuing. For all loans, you will provide basic information about yourself and your business, such as your legal name, business name, address, phone number, social security number, and federal tax ID.

You will also need to prove that you are creditworthy and have the means to pay back the loan. Additional documentation to receive a farm loan may include:

  • Business & Personal Bank Statements
  • Income Statements
  • Business & Personal Tax Returns
  • Balance Sheets
  • Profit & Loss Statements
  • Business & Personal Credit Scores

An application and all information and documentation must be submitted to your chosen lender. Underwriting and approval times vary based on the loan selected. Real estate loans and government farm loans may take several weeks or longer, while some alternative loans are approved instantly. To make the loan process more efficient, make yourself available to answer questions or provide additional information as needed. Learn more about the requirements for receiving a business loan.

Final Thoughts

Running a farm, ranch, or agriculture business is never easy, but it’s nearly impossible without adequate capital. The great news is that with so many government loan, alternative loan, and grant options, there is funding available for any purpose. As a responsible business owner, it’s your job to understand how much you need and can afford, do your research, and shop for the most affordable funding options. Once you do, you’ll be on the path to receiving the funding you need to help your business prosper.

The post Farm And Agriculture Loans: Your Best Options appeared first on Merchant Maverick.

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Loans For Childcare Businesses

Like other small businesses, a childcare business has many expenses. Incoming cash flow should cover most of your expenses, in theory, but sometimes there’s a situation where you need a financial boost. Maybe it’s an emergency expense or a lack of cash flow due to a seasonal lull. On the other hand, business could be booming … so much so that you need to expand your facilities. All of these scenarios have one big factor in common: you need money.

To operate a successful childcare business, you have to cover all of your expenses, planned and unexpected. Whether your bank account is running a little low or you don’t want to tie up all of your funds in one huge expense, there are options available to you. Small business loans are the perfect way to expand your business or to help operations run smoothly through tough financial times.

Ready to learn more? Read on to find out more about loans for childcare businesses, including the types of loans available, how to choose a lender, and the steps you need to take before submitting your loan application.

Financing Need Best Loan Type Recommended Lender
Marketing & Advertising Short-Term Loans LoanBuilder
Supplies & Inventory Lines Of Credit OnDeck
Equipment Purchasing Equipment Loans Lendio
Working Capital Working Capital Loans Credibly
Covering Payroll Installment Loans Fundation
Emergency Funds Business Credit Cards Chase Ink Unlimited
Business Expansion/Remodeling SBA Loans SmartBiz
Cash Flow Shortages Cash Flow Loans BlueVine

Marketing & Advertising Loans

You know that your business is the best. Your current clients know that you run an exceptional child care facility. But how many people don’t know about your child care services?

The key to growing your child care business is to bring in new clients. The best way to do this is by marketing and advertising to parents in your area. Whether you go with old-school methods like business cards and flyers or pay for sponsored ads on social media, you have to advertise your business to maximize your client base. No matter which methods you choose, all marketing and advertising campaigns have associated costs.

Instead of draining your bank account, consider a loan option for your next ad campaign. One of the best options is a short-term loan that breaks down your expenses into smaller payments.

Short-Term Loans

With a short-term loan, you’ll receive a specific amount of money in one lump sum. You’ll then be able to pay back the loan (and fees charged by the lender) over a longer period of time. Many short-term loans have repayment terms of one year or less, although some lenders offer terms up to 3 years. Borrowers typically repay the loan via weekly or monthly payments.

Most short-term loans use a factor rate instead of an interest rate. The factor rate is a multiplier that is used to calculate a one-time fee that is added to the cost of the loan. Similar to interest rates, the lowest factor rates are typically reserved for the most creditworthy borrowers.

Short-term loans work for marketing and advertising expenses because this type of financing allows you to pay over time without paying all costs up front. Since a short-term loan must be for a specific amount, it’s important that you carefully plan out your campaign and research costs to determine how much money you need.

Recommended Option: LoanBuilder

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PayPal’s LoanBuilder provides short-term loans in amounts from $5,000 to $500,000. Repayment terms are set between 13 and 52 weeks based on the amount borrowed. Payments are withdrawn from the borrower’s business bank account on a weekly basis.

It’s easy to qualify for a LoanBuilder loan. Your business must be in operations for at least 9 months. A personal credit score of 550 is required, and you must have at least $42,000 in annual revenue.

Supplies & Inventory Loans

A child care center requires supplies and inventory to keep operations on track and to best serve customers. From office supplies to art supplies, diapers, and toys, your child care center always needs to be stocked, and these expenses can really add up.

When you need extra money to replenish stock and inventory, a line of credit can be a smart option.

Lines Of Credit

A line of credit is a type of revolving credit. With a line of credit, you can make multiple draws of funds up to the credit limit set by the lender.

Payments are typically made on a weekly or monthly basis and are applied toward the principal balance, as well as toward interest or fees charged by the lender. (Fees and interest only apply to borrowed funds.)

A line of credit allows you to have instant access to extra funding whenever it’s needed. If your business runs out of supplies, you can make a draw on your line of credit to purchase what you need. Money that you withdraw is typically transferred immediately and is available in your checking account the next business day.

Recommended Option: OnDeck

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OnDeck offers lines of credit up to $100,000. The most qualified borrowers can receive interest rates as low as 13.99%, although the average borrower receives an interest rate of 32.6%. Repayments are made through weekly automatic withdrawals from your business bank account.

To qualify, your time in business must be at least one year. Annual revenue of at least $100,000 is required, and your personal credit score must be at least 600.

Equipment Purchasing Loans

In addition to supplies, your business also requires long-term, more expensive equipment. This could include computers for your office area, a commercial van for afterschool pickups, furniture, appliances, or security systems.

With an equipment loan, you can get the equipment you need for your business and pay for it over time with affordable scheduled payments.

Equipment Loans

An equipment loan is a lump sum of money provided by a lender for the purchase of equipment. With a loan of this type, the total cost of your purchase will be spread out over time, providing you with an affordable way to purchase expensive equipment. Payments are typically made monthly and are applied to the total amount of the loan plus interest.

With this type of financing, a down payment may be required based on the amount of the loan and your creditworthiness. The equipment being financed is typically the only collateral required, and you’re able to take possession of and use the equipment immediately. Once the loan has been paid off, you become the owner of the equipment.

Recommended Option: Lendio

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Lendio is a business loan aggregator that connects you with multiple lenders with just one application. Lendio has many loan products available for small business owners, including equipment loans.

Equipment loans are available in amounts from $5,000 to $5 million. Loan terms of up to 5 years are available. Interest rates for the most qualified borrowers are as low as 7.5%. Repayment schedules, collateral, and down payment requirements vary by lender.

To qualify, your time in business must be at least 12 months. You need a minimum credit score of 650 and at least $50,000 in annual revenue. If your credit score falls below 650, you may be approved with proof of solid cash flow and revenue for the last 3 to 6 months.

Working Capital Loans

Working capital is needed to keep your business operational. Without working capital, you won’t be able to pay your day-to-day financial expenses.

While a business owner would typically pay these expenses from a checking account, a slow period or unexpected expenses may cause issues with cash flow. When this occurs, you can receive the financing you need with a working capital loan.

Working Capital Loans

A working capital loan can be used to cover the daily expenses of your business. With a working capital loan, you can keep up with your expenses without falling behind. There are many different types of working capital loans, from credit lines to P2P loans.

Depending on the type of loan you select, you will either receive a lump sum or revolving credit. After receiving funds, you will pay back the balance, along with any fees or interest charged by the lender.

Because there are so many options, borrowers with poor credit or a short time in business may qualify for these loans. Some lenders even consider the performance of the business as the most important factor.

Recommended Option: Credibly

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Credibly is a lender that provides working capital loans to businesses with steady revenue. Loans of up to $250,000 are available with repayment terms as long as 17 months. Factor rates start at 1.15. Payments are made daily or weekly.

Even borrowers with low credit scores can qualify for a loan from Credibly. To qualify, borrowers must have a credit score of at least 500, time in business of 6 months, and at least $15,000 in monthly bank deposits.

Payroll Loans

Employee payroll is one of your most important expenses. If a situation occurs and you’re unable to make payroll, this puts you in a bad position. Not only will your employee be unpaid for their hard work, but you’ve created a breach of trust.

For those times when making payroll is a struggle, consider applying for an installment loan to cover your expenses.

Installment Loans

With an installment loan, you receive a lump sum payment that you pay through regular installments. If you receive a loan of this type, you’ll receive the money you need for payroll or other expenses upfront, and you can pay it back over time.

Rates, terms, borrowing amounts, and requirements vary by lender. Depending on your credit history and the type of loans offered by your lender, you may be eligible for short-term or long-term options.

Recommended Option: Fundation

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Fundation provides term loans of $20,000 to $500,000 with repayment terms of 1 to 4 years. Interest rates are between 7.99% and 29.99%. These loans do not require collateral but do require a personal guarantee for all borrowers and a blanket lien for most.

Qualified borrowers must be in business for at least one year and have at least three employees. You must have at least $100,000 in annual revenue and a credit score of at least 660. Although qualifying for a Fundation loan is more difficult than qualifying for other options, it’s a more affordable option for borrowers with good credit than other products (such as short-term loans).

Emergency Loans

 

Your business is doing well. Money is coming in and all of your expenses are covered. Then, it happens: an unexpected emergency.

An emergency expense can completely throw a wrench in your business finances. When tapping into your emergency fund or shuffling around your finances to make everything work just isn’t enough, a business credit card can help you get through this tough situation.

Business Credit Cards

A business credit card is a type of revolving credit that is used to cover business expenses. When a lender approves you for a credit card, you’re given a set credit limit. You can use the card up to this limit for any business purpose.

The great thing about a business credit card is that you won’t have to wait to receive funding. Once you’ve been approved for the card, you can use it as needed to cover your emergency or other expenses.

You can even be rewarded for using your card. Sign up for a card with a rewards program and receive cash back and bonuses each time you use your card for qualifying purchases.

Recommended Option: Chase Ink Unlimited

Chase Ink Business Unlimited


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Annual Fee:


$0

 

Purchase APR:


15.24% – 21.24%, Variable

If you have good to excellent credit, the Chase Ink Unlimited card is a top pick in business credit cards. This credit card comes with an introductory APR of 0% for the first 12 months. After that period, the variable APR is 15.24% to 21.24%.

If you spend $3,000 or more within the first 3 months, you’ll receive $500 cash back. You can also receive unlimited 1.5% cash back rewards on every purchase. Employee cards are also available at no charge.

Business Expansion & Remodeling Loans

Your business is growing and flourishing, and it’s time for an upgrade. Whether you want to remodel your existing space, open a second location, or move your business into a new building, one thing’s for certain: it takes money to expand your business.

Most of us aren’t in a position to foot the bill to expand a business, but with Small Business Administration loans, you won’t have to tackle this financial hurdle alone.

Small Business Administration Loans

The Small Business Administration provides many useful resources to small business owners, including low-cost, flexible business loans.

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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The SBA offers several loan programs through intermediary lenders. The 7(a) program provides up to $5 million for 10 to 25 years at low interest rates for qualified borrowers. The drawback is that it can take weeks — or in some cases, months — to get funded.

With an SBA Express loan, you’ll receive an approval decision within 72 hours, but loan limits are capped at $350,000.

The SBA CDC/504 loan is used for commercial real estate purchases and improvements. The SBA will provide up to $5 million toward 40% of project costs. A traditional lender will provide 50%, while the borrower is responsible for the remaining 10%.

SBA loans require credit scores in the high 600s with no bankruptcies, foreclosures, or past defaults on government loans. All businesses must also meet the standards of a small business as defined by the SBA.

Recommended Option: SmartBiz

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SmartBiz makes applying for an SBA loan easier than ever. Through this lender, you can apply for commercial real estate loans and working capital loans.

Commercial real estate loans are available in amounts from $500,000 to $5 million and come with interest rates between 6.75% and 8%. Working capital loans are available for $30,000 to $350,000 with interest rates from 8% to 9%.

SmartBiz charges fees for SBA loans, including packaging fees, referral fees, guarantee fees, and closing costs.

To qualify for either loan, your business must be in operations for at least 2 years. Credit score requirements are at least 650 for working capital loans and 660 for commercial real estate loans. To qualify for a commercial real estate loan, your business must use at least 51% of the property that you’re purchasing.

Cash Flow Loans

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Every business encounters situations where there’s a shortage of cash flow. Your child care center is no exception. From a slowdown in business after school begins to parents becoming stay-at-home moms and dads, there are many different scenarios that could lead to a cash flow shortage.

A lack of cash flow can cause financial troubles to pile up. Before a minor issue becomes a huge problem, look to a cash flow loan to help you push through.

Cash Flow Loans

A cash flow loan is used specifically to address gaps in cash flow. There isn’t just one type of cash flow loan. You can resolve cash flow shortages with short-term loans, installment loans, lines of credit, or invoice financing.

Because you have so many options, finding a cash flow loan isn’t too difficult, even if you’re a newer business or have a poor credit history. Loan options are available to business owners with scores as low as 500. Some lenders may approve you based on the strength of your business and not just your credit score. Revenue and time in business requirements vary by lender.

Recommended Option: BlueVine

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BlueVine provides lines of credit up to $250,000 that can be used to resolve cash flow shortages. The lender offers repayment terms of 6 or 12 months. BlueVine charges up to 1.5% interest per week, along with a draw fee up to 2.5% per draw.

To qualify, you must have a minimum credit score of 600. Your time in business must be at least 6 months, and you must bring in at least $100,000 in annual revenue. Payments are withdrawn from your business checking account on a weekly basis.

Financing Options For Starting A Child Care Business

All of these financial solutions address existing businesses, but what if you haven’t yet started your child care business? If you need money to start a new business, there are several loan options open to you.

One of the most popular options is the SBA Microloan. Through this program, you can receive up to $50,000 that can be repaid over 6 years. Rates are generally between 8% and 13%.

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 Microloans can be used for working capital, fixtures, furniture, inventory, supplies, equipment, or machinery. SBA Microloans can’t be used for the purchase of real estate.

Microloans are also available through non-profit organizations.

If you don’t qualify for an SBA microloan, you have other options. If you have a good credit score, you can receive a personal loan to cover startup costs. Crowdfunding, equipment loans, and business credit cards can also be used to pay expenses related to starting your business.

Can I Get Grants For Starting A Child Care Business?

It is possible to receive a grant to start your childcare business, but be aware that you will have to take the time to research your options. You can search startup grants in your local area, by niche, or even at the federal level. You may hit a few dead ends before you find a grant that you qualify for, and once you find one, competition can be stiff. Learn more about how to find startup grants.

If you don’t qualify for a startup grant, don’t give up hope. There are plenty of lending options available that can help you get your childcare business off of the ground.

What To Consider When Choosing A Lender

business loan reasons

With a better understanding of the types of loans available for your child care business, you’re one step closer to applying for financing. However, there’s one more critical step before you reach the application process: choosing your lender.

With so many lenders willing to give out small business loans, how do you decide which to choose? By asking yourself a few key questions, you can narrow down your choices and find the best lender for your financial needs.

Why Do I Need A Loan?

Before applying for a loan, you’ll need to know how you plan to use the loan proceeds. Not only will your lender want to know why you want the loan, but knowing this can help you determine what type of loan to pursue and what lender offers this loan.

For example, if you want a line of credit, you want to select a lender that offers a line of credit. If you want to expand your business with an SBA loan, you need to select an SBA intermediary that can help you through every step of the process.

How Much Money Do I Need?

To cover your expenses, how much money will you need? Again, this is information that your lender will also need to know. Determining the amount of money that you need will also help you select a lender. After all, if you need $250,000, a lender that has maximum borrowing limits of $100,000 does not offer the financing you need.

Unsure of how much money you need? If you don’t have a specific number in mind, you’ll want to work with a lender that offers flexible financing options such as lines of credit and business credit cards.

Am I Qualified?

Applying for a loan that you’re not even qualified to receive is a waste of time – and can put an unnecessary inquiry on your credit report. When choosing your lender, evaluate all requirements, including time in business, annual revenues, and how loan proceeds can be used. Pull your free credit score to make sure you meet credit requirements. Some lenders even put restrictions on what industries they lend to, so make sure that you meet all qualifications before submitting your application.

Do The Rates & Terms Meet My Needs?

When shopping around for loans, you want to make sure the rates and terms of the lender best fit your business needs. The purpose of a loan is to help you expand your business and keep it operating as smoothly as possible.

Getting a loan that will just drag your business into unmanageable debt could spell disaster. Make sure that you’re getting the best rates and terms that provide you with a loan payment your business can afford.

What You Need To Apply For Childcare Business Loans

Applying for childcare business loans is easier than ever now that lenders have made their applications available online. To apply for a loan, you’ll have to provide basic business and personal information, such as contact information, your federal tax ID, and your social security number.

Documentation requirements vary based on the type of loan you select and your selected lender’s policies. Documents and information that you can compile for your application include:

  • Child Care License Information
  • Personal & Business Credit Scores
  • Personal Financial Statements
  • Personal & Business Tax Returns
  • Profit & Loss Statements
  • Balance Sheets
  • Income Statements
  • Copy Of Driver’s License

Once you’ve filled out the application and have submitted all information, you may receive an instant approval decision depending on the type of loan. For other loans, the process may take several days or weeks. Make yourself available to your lender to provide additional information and documentation to move through the process and receive the loan you need. Learn more about small business loan requirements.

Final Thoughts

It’s completely normal to encounter financial challenges while operating your child care business. It’s simply the nature of the beast. The key to conquering these financial challenges is to know your financing options and to be a responsible borrower when the need arises.

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How To Finance Holiday And Seasonal Expenses

The holiday season is approaching, and with it comes colder weather, hot cocoa … and additional holiday expenses. We aren’t talking about your gift budget, either. If you’re a business owner, you know that while the holiday season brings more customers, this seasonal rush also leads to additional expenses.

Holiday and seasonal periods leave many business owners scrambling for cash. Whether you need to purchase additional inventory to keep up with the influx of orders or you need to hire more employees to keep your business running like a well-oiled machine, you can get the extra cash you need with a business loan.

Just as all businesses are different and unique, so are business loans. While it may be tempting to just start applying for loans, you want to make sure that you’re making a wise business decision by selecting the most affordable loan that best fits your seasonal needs. In this post, we’ll review the different types of financing available to help you fill those seasonal gaps, what you need to qualify for a small business loan, and our top lender picks.

Read on to learn more before applying for seasonal business financing.

Business Lines Of Credit

A business line of credit is a type of revolving credit from which you can make multiple draws. A lender assigns you a credit limit. You can make draws from your account up to and including the assigned credit limit.

With business lines of credit, you pay interest or fees only on the portion of funds that have been used. If your line of credit is $100,000 and you have only spent $10,000, you will only pay interest or fees on $10,000. As you pay off your balance, these funds will again be available to use.

A business line of credit is a great way to fund seasonal expenses because this type of financing offers so much flexibility. Traditional loans are great if you know specifically how much money is needed. With a business line of credit, you can withdraw money as needed to fund any expense. Business lines of credit can also be used toward any business expense, including the purchase of inventory or equipment, hiring employees, or working capital needs.

Repayment schedules vary by lender and may be made weekly or monthly. Most lenders set repayment terms between 3 and 18 months, and these terms are typically based on the amount drawn.

Who Is Qualified?

Qualifying for a business line of credit is fairly simple. While requirements vary by lender, most require that you have been in business for a minimum of one year. Annual revenue for your business should be at least $50,000, although some lenders require revenues of $100,000 or more.

Depending on the lender you select, your personal credit score could be a factor in qualifying for the loan and the amount that you’ll receive. For these lenders, credit score requirements are typically low at around 600.

However, there are lines of credit available that are based more on the performance of your business than on your personal credit history. With this type of financing, the lender will give the most weight to things like your business checking account, accounting software, and PayPal account. This allows the lender to analyze the performance of your business, determine if you’re eligible for a line of credit, and set a reasonable credit limit.

Our Top Pick

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Kabbage offers lines of credit up to $250,000 for qualified businesses. Qualifying for a Kabbage line of credit is easy, and the application process takes just 10 minutes.

To qualify, you must have been in business for at least one year. Revenue requirements are as follows: either $50,000 in annual revenue or $4,200 per month for each of the last three months.

One of the benefits of working with Kabbage is that it does not have minimum credit score requirements. Instead, you connect your business accounts from services including QuickBooks, Amazon, Stripe, and Etsy, along with your business bank account, to qualify for funding. However, it’s important to note that Kabbage does pull your credit score when determining your eligibility for a loan.

The fee rates for Kabbage lines of credit are between 1.5% and 10% based on business performance. Fees are only charged on the amount withdrawn, and there are no hidden charges. There are no prepayment penalties, and you can save on fees by paying off your loan early. Repayments are made each month through ACH withdrawals from your business bank account. Repayment terms are set at 6 months or 12 months based on the amount drawn.

Short-Term Loans

A short-term loan is a type of business loan that provides you with a specific amount of money that is typically repaid over one year or less. Some lenders offer short-term loans with longer repayment terms (up to 3 years).

A short-term loan is different from other types of financing because lenders charge a one-time factor rate instead of an interest rate. The factor rate is used as a multiplier to determine your total repayment amount. For example, if you have taken out a $5,000 short-term loan with a factor rate of 1.1, the total amount you will repay is $5,500.

Payments on a short-term loan may be made daily, weekly, or monthly depending on the lender’s policies. Additional fees may be added into your loan, including but not limited to origination fees and maintenance fees.

A short-term loan is a good option for your seasonal expenses when you know exactly how much money you need. If you know how many employees you need to hire (and the associated expenses that come with hiring) or the amount of inventory you will require, a short-term loan is a financing option you should consider.

Many short-term loans have lower borrowing requirements than long-term options, so more business owners are eligible. Short-term loans are also easier to apply for and can be funded quickly — sometimes within 24 hours. This is ideal if you’re in a cash crunch and need financing quickly to keep operations rolling.

Who Is Qualified?

Most business owners will qualify to receive a short-term loan provided they meet a few requirements. Borrowers with credit scores as low as 500 can qualify for a short-term loan. Other requirements include owning a business that has been in operations for at least 3 months, although time in business requirements may be higher with some lenders.

Cash flow is also an important factor in qualifying for a short-term loan. Lenders want to see consistent cash flow before approving borrowers for a loan.

Even though lenders set minimum requirements, you’ll qualify for higher loan amounts and lower rates and fees with a strong credit profile and business history.

Our Top Pick

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PayPal’s LoanBuilder provides short-term loans for any business purpose. Through this lender, you can receive between $5,000 and $500,000. Repayment terms are between 13 and 52 weeks and are based on the amount of the loan. Automatic payments are made weekly.

LoanBuilder charges a one-time fee between 2.9% and 18.72% of the loan amount. There are no origination fees or prepayment penalties with this short-term loan.

Borrowing requirements for this loan are simple. You must be in business for a minimum of 9 months and have at least $42,000 in annual revenue. Your business must be in a qualified industry in the United States. A credit score of at least 550 is required, and you must not have any active bankruptcies on your credit report.

Business Credit Cards

business credit cards fair credit

A business credit card is a financing option that provides you instant access to capital. A business credit card works just like a personal credit card. Once you’re approved for a card, the lender provides you with a credit limit. You can use the credit card online, in stores, or to pay your vendors up to and including your credit limit.

Each month, you’ll make a payment on your card, which will be applied to the principal balance and the interest at the rate charged by the issuer. Interest is only applied to borrowed funds.

Credit cards can be used for any business expense. You can use a business credit card to purchase inventory, to pay for normal operating expenses, or for equipment or supplies. Because you can access funds immediately, business credit cards can be used for unexpected emergency expenses as well.

Best of all, many business credit cards feature rewards programs. With qualifying purchases, you can earn points to use toward airline miles, hotel stays, cash back, and other perks.

Who Is Qualified?

Most business owners will qualify for a business credit card. However, as with other types of funding, borrowers with the best credit history will qualify for lower interest rates and higher credit limits.

For the best business credit cards, a good or excellent credit score is needed. Borrowers with fair credit may also qualify for unsecured cards with higher rates and lower credit limits. Borrowers with bad credit also have options. High-risk borrowers can apply for a secured credit card that requires a cash deposit. Credit limits may be increased with on-time payments, and paying your bill every month can help rebuild your credit.

Our Top Pick

Chase Ink Business Unlimited


chase ink business unlimited
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Annual Fee:


$0

 

Purchase APR:


15.24% – 21.24%, Variable

The Chase Ink Business Unlimited card is a top choice among business owners with good to excellent credit.
This card features unlimited 1.5% cash back on every purchase. An introductory rate of 0% is available for the first 12 months. After the introductory period, the Chase Ink Business Unlimited card has a variable APR of 15.24% to 21.24%.

This card has no annual fee, and employee cards are available at no charge. New account holders can receive $500 cash back by spending just $3,000 within 3 months of opening the account.

Purchase Order Financing

purchase order financing po financing

If you are unable to pay your vendors for goods and services that your business needs to fulfill customer orders, there’s a financing option for you. If you can’t receive credit through your vendor and don’t have the funds to pay immediately, purchase order financing may work in your favor.

Purchase order financing provides funds you can use to pay your vendors. In essence, the lender pays for the goods and services that you need from your vendor. Some lenders will pay your vendors and allow you to set up your own repayment schedule. You — not the lender –will invoice your customers and repay the loan and applicable fees. You can receive longer, more flexible repayment terms. This allows you to purchase the goods and services that you need right now without having to pay the entire balance up front, with costs spread out through manageable weekly or monthly payments.

Who Is Qualified?

Most businesses with verifiable purchase orders from creditworthy customers will qualify for this type of financing.
Based on the lender that you select, there may also be requirements in terms of transaction volume and profit margins.

Most lenders will perform a credit check. However, your personal credit is often not the most important factor in qualifying for these loans, but this varies by lender.

Our Top Pick

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If purchase order financing would fulfill your financial needs, consider working with Behalf. Behalf provides purchase order financing up to $50,000. You can choose to repay the loan on a weekly or monthly basis for a period up to 6 months.

The application process is quick and easy. There are no minimum requirements for credit score or time in business, although a hard pull will be performed on your credit.

Behalf charges fees of 1% to 3% every 30 days. Borrowers that repay their loans on a weekly basis will receive a discount off of their borrowing fees.

Inventory Loans

An inventory loan is a loan that can be used to purchase inventory. You’ll receive the money you need to restock your business while spreading your payment out with affordable weekly or monthly payments.

Who Is Qualified?

Borrowing requirements for inventory loans vary by lender. Most lenders require a minimum credit score of 600, although borrowers with scores as low as 500 may qualify with certain lenders.

Time in business required is typically one year, while annual revenue requirements may be as low as $25,000. Most lenders require annual revenue of at least $100,000.

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OnDeck business loans can be used to purchase inventory or for any other business purpose. OnDeck’s term loans are available up to $500,000. OnDeck has short-term loan options up to 12 months or long-term options up to 36 months for larger inventory purchases.

OnDeck’s short-term loans have a simple interest rate as low as 9%, while long-term options have annual interest rates as low as 9.99%. Rates are based on your business profile and your personal and business credit scores. Origination fees for OnDeck loans are 2.5% to 4% of the total loan amount, and fees are reduced with each subsequent loan.

To qualify, all borrowers must have a time in business of at least one year. At least $100,000 in annual revenue and a personal credit score of 500 are required to receive an OnDeck loan.

Cash Flow Loans

How To Calculate And Analyze Business Cash Flow

Consistent cash flow is key to operating a business. But what happens when cash flow is running low? It can be a struggle to not only meet your regular operating expenses but an upcoming busy season can spell trouble for your business.

Before you panic, know that you have options. A cash flow loan can help you fill in the gaps and keep your business operating smoothly, even when business picks up. Cash flow loans can be used to help pay your operating expenses, cover payroll, or pay for any other recurring expense that’s critical to your business.

Many lenders offer multiple options that will help resolve cash flow shortages, including term loans, lines of credit, and invoice financing.

Who Is Qualified?

Like the other types of financing already discussed, most business owners have options when it comes to cash flow loans.

To qualify, a business should be in operations for a minimum of 6 months to 1 year, depending on the lender selected. Borrowers with credit scores as low as 500 may qualify for a cash flow loan, although a better credit profile results in more options and a more affordable loan.

Annual revenue requirements vary across lenders, but minimum requirements may be as low as $25,000. Most lenders, however, require annual revenue of at least $100,000.

There may be other requirements for cash flow loans depending on the type of loan you’re seeking. For example, the quantity and quality of your unpaid invoices will be considered when applying for invoice financing.

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StreetShares offers three different types of loans that can help you resolve your cash flow shortage. One product is term loans up to $250,000 for qualified businesses. Terms up to 36 months are available. There are no prepayment penalties, and you can receive your funds immediately.

StreetShares also offers the Patriot Express Line of Credit. Credit lines up to $250,000 are available to qualified borrowers. Terms up to 36 months are available. There are no prepayment penalties, and you only pay interest on the portion of the funds that you withdraw.

To qualify for a loan or line of credit, borrowers should have annual revenues of at least $25,000. A minimum credit score of 620 is required to qualify. The time in business requirement is just one year. For loans and lines of credit, expect an interest rate between 6% and 14%.

StreetShares also has contract financing, a loan that is similar to invoice financing. If your cash flow shortage is due to unpaid invoices, this is a good choice for you. You’ll receive up to 90% of the amount of your unpaid invoices (up to $500,000 per invoice). The discount rate (or fees) you pay for this service vary based on factors including your industry and the number of invoices you have.

Qualifying for contract financing is easy. You must operate a B2B or B2G business. There are no credit or revenue requirements. The quantity and quality of your invoices are most important for this type of loan.

Which Type Of Holiday Financing Is Right For My Business?

Now that you’re familiar with the types of loans available, it’s time to select the loan that’s right for you. It isn’t uncommon to be stuck between two or more different options, so how do you decide which loan to pursue?

First, consider why you need the money. If you need a cash flow loan due to unpaid invoices, invoice or contract financing would be your best option. If you need a specific amount of money, consider a short-term loan. If you need to pay your vendors, apply for purchase order financing. If you don’t have a specific number in mind and just need fast access to funding, consider a business credit card or line of credit.

To make it easier to select your loan, also keep in mind how much money you need and how much you are eligible to receive. Compare the borrower requirements of lenders to make sure that you qualify based on your revenue, time in business, and credit profile. You can pull your free credit score online to get an idea of the loans, terms, and rates that may be available to you.

Finally, make sure that the return on investment outweighs the cost of the loan. Sure, it’s tempting to accept the first offer that comes your way, especially when you need to act quickly to get the money you need. However, you want to make sure that you’re getting the most affordable loan for your business.

Tips To Manage Your Cash Flow & Expenses During the Holiday Season

Getting a loan during the holiday season can get you out of a bind, but mismanaging your cash flow and expenses can lead to further financial issues. With a few simple steps, you can stay on top of your cash flow and expenses for a profitable holiday season.

One way to keep your business running smoothly is to invest in inventory management software. With these apps, you’ll be able to track inventory, sales, orders, and deliveries, which is especially helpful during the holiday rush.

To prepare in advance, you can create a cash flow forecast. This forecast will allow you to predict funds that will be coming in and going out of your business at a future time. By analyzing and calculating your cash flow, you can get an accurate picture of what to expect in the future.

Finally, know that unexpected emergencies pop up, usually when we least expect them. Be prepared for these emergencies by saving money in a special fund or applying for a credit card or line of credit before it’s needed.

Final Thoughts

The holidays can be extremely profitable for your business, but if you’re not prepared, this busy season can quickly turn into a nightmare. Be proactive in handling the holiday rush by preparing in advance and knowing what loan options are available to you when you need them the most. With planning and responsible borrowing, you’ll leave behind the stress of the holidays and be able to focus on your profits and further building your business.

Top Ways To Finance Your Holiday Business Needs:

Type of Financing Top Pick
Business Line of Credit Kabbage
Short-Term Loan LoanBuilder
Business Credit Card Chase Ink Business Unlimited
Purchase Order Financing Behalf
Inventory Loan OnDeck
Cash Flow Loan StreetShares

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Small Business Loans For Beauty And Nail Salons

Whether you’re the owner of an established beauty salon or it’s your dream to open your own nail spa, one thing is clear: your business needs money. As the old saying goes, it takes money to make money, but what happens when the money’s just not there?

If you’re the owner of a beauty or nail salon and you need money to grow your business (or you’re ready to get your business off the ground), consider a small business loan as one of your best resources. With a small business loan, you can pay your business expenses, tackle that unexpected emergency, or expand your customer base with a new marketing campaign.

No matter what your needs, a small business loan has you covered. Before diving into the application process, know what to expect, the kinds of loans you’ll encounter, and which type of loan works best for your business. Read on to learn more about the options available to you to start or expand your beauty or nail salon.

Financing Need Best Loan Type Recommended Lender
Equipment Purchasing Equipment Financing Lendio
Business Expansion SBA 7(a) Loans SmartBiz
Supplies & Inventory Line Of Credit Fundbox
Emergency Funding Business Credit Cards Chase Ink Business Cash
Marketing & Advertising Short Term Loans Credibly
Cash Flow Cash Flow Loans StreetShares
Starting A Salon Startup Loans BlueVine

Equipment Purchasing

Your beauty salon equipment is outdated and desperately needs to be upgraded. Your nail salon is booming, and you need to purchase more stations and equipment to better serve your customers.

This equipment comes at a cost — a cost that your business may not be able to afford.

If you need to purchase equipment but don’t have the money to buy it outright, there’s a financing option. Instead of draining your bank account, consider equipment financing.

Equipment Financing

Equipment financing is a simple concept. A lender provides you with the money you need to purchase equipment. This allows you to take possession and put the equipment into use immediately. Because the lender provided the funds, you don’t have to pay the full equipment costs out-of-pocket. Instead, you’ll be able to pay back the loan through affordable scheduled payments.

Equipment financing can only be used toward the purchase of equipment for your business. For beauty and nail salons, this could include hair dryers, stylist chairs, or a point-of-sale system. Rates, terms, down payments, and loan amounts are based on creditworthiness. Most lenders look for credit scores in the high 600s, although some will accept lower credit scores. High-risk borrowers may be required to put more money down or pay higher interest rates.

Recommended Option: Lendio

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Lendio is a loan-matching service that connects you to over 75 business lenders. Through Lendio, you can receive offers from multiple lenders with just one application. This cuts down on the amount of time you’ll spend shopping for a loan while ensuring you receive the best offers.

Lendio offers equipment financing for business owners. Other loan products offered through Lendio’s network include term loans, SBA loans, lines of credit, and business credit cards.

For Lendio’s equipment financing programs, all borrowers must be in business for at least 12 months, bring in at least $10,000 per month in revenue, and have a credit score of 650.

Equipment loans of up to $5 million are available, with repayment terms between 1 and 5 years. Interest rates start at 7.5% for the most qualified borrowers. Fees vary by lender, and the equipment being financed typically serves as the collateral.

Business Expansion

Your business and customer base are growing so much, it’s time for your salon to expand. Maybe you want to build an addition to your existing salon, or you want to purchase commercial real estate to open a new location. While business expansion means that your business is growing, it also means additional expenses.

Most business owners don’t have the means to fund expansion expenses out-of-pocket. Even if they do, tying up such a large amount of their capital isn’t always the wisest move. Luckily, you don’t have to worry about taking on this burden by yourself. With a Small Business Administration loan, you’ll be able to break large expenses into smaller, more manageable monthly payments.

SBA 7(a) Loans

The Small Business Administration offers multiple loan programs, but the 7(a) loan is one of the most popular. With high loan limits, flexible repayment terms, and low interest rates, it’s easy to see why this is a top choice for qualified business owners.

The SBA 7(a) loan can be used for almost any business purpose, including business expansion. You can update your existing salon, purchase commercial real estate, or fund any other business expense with this loan.

SBA 7(a) loans are available in amounts up to $5 million. Repayment terms are 10 years for most purposes and maximum terms of 25 years are available for commercial real estate purchases. Interest rates are set at the prime rate plus a maximum of 4.75% based on the amount of your loan and repayment terms.

SBA 7(a) loans are typically reserved for the most qualified borrowers. To qualify for SBA loans, you must have a credit score in the high 600s and meet the SBA’s definition of a small business. Your credit report must be free of liens, collections, recent bankruptcies, and foreclosures. If you’ve previously defaulted on a government loan, you will not be eligible. Your business must be in an approved industry, based in the U.S., and have a time in business of at least 2 years.

Recommended Option: SmartBiz

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The process for receiving an SBA loan is notoriously long. Some borrowers wait months just to get the funding they need. SmartBiz is a lender that simplifies the process.

SmartBiz offers SBA commercial real estate loans from $500,000 up to $5 million. Interest rates are 6.75% to 8% with repayment terms up to 25 years. Working capital loans up to $350,000 are available with fees between 8% and 9% and repayment terms of 10 years.

SmartBiz charges several fees for obtaining an SBA loan, including referral fees, packaging fees, guarantee fees, and closing costs. Collateral may be required to receive your loan. Loans can be funded in as quickly as seven days through SmartBiz.

Supplies & Inventory Purchasing

POS systems for spas

There are critical supplies you need for daily business operations, not to mention customer inventory — like shampoo, hair brushes, nail polish, etc. — that helps bring in additional revenue. When you don’t have the supplies you need, you’re unable to perform the services that customers seek. When your inventory is depleted, you’re missing out on this additional revenue stream.

Whether you’re running low on supplies and inventory or you forecast a seasonal increase in the near future, there comes a time when you need to replenish your stock. If you’re not in a financial position to pay cash for supplies and inventory, consider applying for a business line of credit.

Business Line Of Credit

A business line of credit is a type of revolving credit that can be accessed as needed. Once approved by a lender, you’ll be given a credit limit. You can make multiple draws on your account, so you can receive the money you need right when you need it.

With a business line of credit, interest or fees will be charged only on the used portion of funds. As you repay your loan through weekly or monthly payments, these funds will become available for you to use again.

Lines of credit are available for most salon owners, regardless of credit score. While some lenders have credit score requirements, others base their approval decision on the performance of the business. Most lenders have time in business limits typically between 6 and 12 months, but there are some lenders that do not have minimum requirements. Annual revenue requirements are between $50,000 and $100,000 to qualify for most business lines of credit, but again, certain lenders do not have requirements in place.

Recommended Option: Fundbox

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Fundbox is a lender that provides lines of credit up to $100,000. To qualify, a borrower must have at least two months of activity in an accounting software app supported by Fundbox. If the borrower is unable to meet this requirement, bank statements showing transactions over the last three months can be submitted.

There are no credit limit requirements to qualify for a Fundbox line of credit. The application process is quick and easy, and an approval can be given in just minutes. Once approved, funds are available for immediate withdrawal and are typically transferred as soon as the next business day.

Fees for using Fundbox begin at 4.66%. Repayment terms are set at 12 or 24 weeks, and there are no prepayment penalties.

Emergency Funding

It happens to the best of us: an unexpected expense. If an emergency arises, even the most financially responsible salon owner can be taken by surprise.

If you’re facing a financial emergency, don’t panic. Take a deep breath and know that there are options for getting over this financial hurdle. Read on to learn why a business credit card can be a critical resource in these stressful situations.

Business Credit Cards

A business credit card is just like a personal credit card, except it is used to cover business expenses. Once you’re approved for a credit card, the lender will set a credit limit. You can use the card as often as you wish anywhere credit cards are accepted, up to your assigned credit limit.

Credit card payments are due each month and will be applied toward the principal balance and the interest charged by the lender. As you pay back borrowed funds, they become available to use again.

A credit card is helpful during emergencies because you don’t have to wait for approval from the lender. If you’ve already received your card, you can use it as needed for any business expense, from covering operating costs to purchasing supplies. Credit cards can even be used for recurring expenses month after month.

With responsible use, a credit card can not only help you cover unexpected expenses but can also lead to great rewards. Many lenders offer rewards programs with their credit cards. Just by using your card, you can earn points with every qualified purchase that can be redeemed for cash or other perks.

Recommended Option: Chase Ink Business Cash

Chase Ink Business Cash



Apply Now

Annual Fee:


$0

 

Purchase APR:


15.24% – 21.24%, Variable

If you have good to excellent credit, you can qualify for the Chase Ink Business Cash card. This card comes with no annual fee, an introductory APR of 0% for the first year, and variable APRs of 15.24% to 21.24% after the introductory period.

With this card, you can receive 5% cash back on the first $25,000 spent toward internet, cable, and phone purchases, as well as office supply store purchases. You’ll receive 2% on the first $25,000 spent at restaurants and gas stations and 1% cash back for all other purchases.

When you sign up for this credit card, you can receive $500 cash back just by spending $3,000 or more within 3 months of opening your account.

Unsure if this is the right card for you? Learn more about other Chase Ink credit cards for your business.

Marketing & Advertising

Customers are critical to the success of your beauty or nail salon. Without customers, you don’t have a business. While you may already have clientele, a growing business always needs more customers. To bring in these customers, marketing and advertising is critical.

Sure, you could rely on your social media presence alone, but if you really want to expand your business, you’ll need to launch a marketing and advertising campaign. If the cost of marketing and advertising is holding you back from growing your business, consider applying for a short-term loan to make this expense more manageable.

Short-Term Loans

A short-term loan is a loan for a specific amount of money that is paid back through smaller scheduled payments over a set period of time. While most short-term loans have repayment terms of one year or less, some lenders offer terms up to three years.

Most short-term loans don’t have an interest rate. Instead, these loans have a fee known as a factor rate. This multiplier is used to determine a one-time cost that is added to your loan.

Because short-term loans are for a specific amount, it’s important that you plan out your expenses to make sure you receive enough money. Do your research, calculate pricing, and form a plan for your marketing and advertising campaign before applying for a short-term loan.

Short-term loan requirements for time in business and annual revenue vary by lender. Your personal credit score will be considered, but scores in the 500s are accepted by some lenders. Borrowers with the best credit scores will be approved for higher loan amounts with lower fees and rates and better terms.

Recommended Option: Credibly

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Credibly provides short-term loans of up to $250,000 for eligible borrowers. Repayment terms are available for 6 to 17 months. Factor rates for the most qualified borrowers are as low as 1.15. A one-time origination fee of 2.5% of the total loan amount is charged by the lender. Credibly payments are made daily or weekly.

To qualify, borrowers must have a minimum credit score of 500. All borrowers must have been in business for at least 6 months and have at least $15,000 per month deposited to their bank accounts.

In addition to its short-term working capital loans, Credibly also provides business expansion loans and merchant cash advances.

Cash Flow

As a salon owner, it’s not uncommon to experience periods where business is slower than usual. Even when your cash flow slows down, you still have expenses … and this can be a problem.

Fortunately, a cash flow loan can provide you with the money you need to fill in these gaps. Whether you need funds to meet payroll or money for daily operating expenses, a cash flow loan can provide you with the capital you need when business slows down.

Cash Flow Loans

A cash flow loan provides you with the money you need when your cash flow has slowed. These funds are used to pay your expenses to keep your business running as it should.

There are several types of cash flow loans available. If you know the specific amount of money that you need, a term loan is a good choice. With this type of financing, you receive a lump sum and repay the loan, plus interest, through regular installments.

A line of credit is another type of cash flow loan. These loans are best for businesses that may have recurring expenses that require multiple draws.

Qualifying for a cash flow loan requires a minimum credit score of 500. Time in business and annual revenue requirements vary by lender.

Recommended Option: StreetShares

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StreetShares is a lender that offers multiple loan options to small- and medium-sized businesses. Term loans and lines of credit are available in amounts up to $250,000 with repayment terms up to 36 months. Contract financing is also available.

To qualify for a StreetShares loan, a business must be in operations for at least one year with minimum revenue of $25,000 per year. A credit score of at least 620 is required for all borrowers.

Starting A Salon

While we’ve addressed common financial challenges you’ll face when expanding your salon, what if you aren’t yet at that point? What if you’re the new business on the block, and you need extra money to really get your endeavor off the ground?

If you’re looking for money to start your own beauty or nail salon, qualifying for business loans can be difficult. However, it’s not impossible to receive the money you need to open your own salon if you know where to look. The first place to start is with a startup loan.

Startup Loans

A startup loan is a loan that is used to pay the expenses associated with starting a business, such as hiring employees, buying or leasing real estate, or purchasing equipment like POS systems and software.

For most startup loans from alternative lenders, a minimum credit score of around 600 is required. Interest rates are based on the borrower’s personal creditworthiness.

Some lenders require a minimum time in business. If this is a requirement, another option that can be considered is a personal loan. A personal loan can be used to fund startup costs and may come with a lower interest rate for borrowers with a solid credit profile.

Recommended Option: BlueVine

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BlueVine is an alternative lender that provides lines of credit up to $5 million for new businesses. Repayment terms of 6 months are available through BlueVine. The APR for receiving this financing is 15% to 78%.

To qualify, borrowers must be in business for at least 6 months. A minimum credit score of 600 and $120,000 in annual revenue is required to receive BlueVine’s line of credit. The application process is easy, there are no hidden fees, and lines of credit are funded quickly.

Bad Credit? Your Best Financing Options

The best business loans require high credit scores, so does that mean you’re left out in the cold if your credit history isn’t where it needs to be? Actually, there are financing options available for you if you have bad credit, but you should be aware that these loans come with higher interest rates, lower borrowing amounts, and a possible need for collateral.

Before applying for a loan, you should always know your credit score. You can obtain your free credit score quickly and easily online. Once you have your score, you can get a better idea of the types of loans available to you.

The best options for borrowers with bad credit are lines of credit, equipment financing, and short-term loans. These financing options typically have lower borrower requirements — including credit scores — than other loans.

Business credit cards are also a great choice for borrowers with poor credit. There are unsecured options available to borrowers with lower scores. Anyone that doesn’t qualify for an unsecured card can receive a secured card backed by a security deposit. After making several on-time payments, the borrower can build their credit and qualify for better financing options.

Bad credit limits your lending options and results in a higher overall cost for loans. If your funding need isn’t immediate, your best move is to take steps to raise your personal credit score. Although this option takes time, you’ll receive better loan offers that are more affordable for your business.

If you need financing urgently before you can build up your credit, consider applying for the Capital One Spark Classic business credit card. This credit card is available to borrowers with scores as low as 580.

Capital One Spark Classic For Business


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Annual Fee:


$0

 

Purchase APR:


24.74%, Variable

With this credit card, you’ll be able to receive unlimited 1% cash back rewards on all purchases. Because this card is designed for borrowers with lower credit scores, the APR is fairly high at 24.74%. However, there is no annual fee, and Capital One reports to multiple credit agencies, allowing you to build your credit (provided you make your payment on time each month). As your credit score rises, you’ll be qualified to apply for business credit cards and other loan options with lower interest rates and better terms.

What You Need To Apply For Beauty & Nail Salon Business Loans

What you need to apply for a beauty or nail salon business loan varies based on the lender you work with and the type of loan you’re seeking. For example, a business credit card application typically requires some basic information, including your business name, federal tax ID number, annual revenue, social security number, and contact information.

For other financial products, such as SBA loans and startup loans, more extensive documentation is required. This includes but is not limited to:

  • Personal Financial Statements
  • Business & Personal Tax Returns
  • Balance Sheets
  • Income Statements
  • Profit & Loss Statements
  • Bank Statements
  • Future Financial Projections
  • Owner Resumes
  • Business Licenses

Requirements vary by lender, so once you’ve chosen a lender, make sure you discuss what documentation and information are required. Make yourself available throughout the lending process to provide more information as needed. Learn more about small business loan requirements before you apply.

Final Thoughts

It’s common to encounter financial hurdles while growing your salon, which is when taking out a loan just makes sense. By doing your research and becoming a responsible borrower, you’ll be able to boost and expand your business without clearing out your checking account. That’s the beauty of small business loans.

The post Small Business Loans For Beauty And Nail Salons appeared first on Merchant Maverick.

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Payoff Personal Loan Review: Is A Payoff Loan Right For You?

Pros

  • Suited for consolidating and paying off credit card debt
  • Competitive rates
  • No late fees or early payment fees
  • Good customer support
  • Time to funding: 2 to 5 business days

Cons

  • Minimum credit score of 640
  • High borrower requirements
  • Origination fees of 0-5%

Overview

payoff personal loan review

Unlike many online vendors of personal loans, Payoff’s loans are tailored for one specific type of borrower: Those looking to consolidate and pay off their credit card debt.

Payoff offers fixed-rate personal loans for debt consolidation as well as continuing financial guidance and support via Member Advocates. Payoff describes Member Advocates thusly:

Member Advocates are the people who make up our dedicated, local team working with you one-on-one to support your personal journey toward financial wellness. As a company, we’re heavily invested in our Members’ success, and we only succeed when you make positive steps toward financial wellness.

By consolidating your credit card bills into one monthly payment, you can improve your credit score. You’ll be making one payment to pay down your debt instead of several, which helps to simplify your finances and improve your credit utilization ratio. According to Payoff, those who use their loans to eliminate at least $5,000 of credit card balances “see an average FICO® Score boost of 40 points.” Payoff Loan Members will also get a free monthly update of their FICO® Score so they can track their progress.

Payoff loans are well-suited to consolidating and paying down debt. If, on the other hand, you’re looking for a personal loan to fund a startup business, you should instead check out the options listed in our comparison of the top personal loans for funding a business.

Read on to see if Payoff’s personal loans are right for you.

Services Offered

Payoff offers fixed-rate installment loans for paying off credit card debt.

Borrower Qualifications

The requirements for getting a personal loan from Payoff are as follows:

Column Heading Data

Time in business:

N/A

Personal credit score:

640 or higher

Business revenue:

N/A

Payoff is particularly clear in laying out the eligibility requirements for a loan. The primary requirement is that your FICO® Score must be at least 640. However, there are additional benchmarks you must meet.

For one thing, you must have a debt-to-income ratio of 50% or less. As for your annual income, it must be at least $40,000. You must also have at least three years’ worth of credit history as well as two open and satisfactory trades, meaning you have at least two credit lines on which you’ve been up-to-date on your payments. You cannot have any current delinquencies, nor can you have had any delinquencies longer than 90 days over the past year.

You must also be a US citizen or permanent resident. Another factor to consider: Payoff loans are not currently available to residents of Massachusetts, Mississippi, Nebraska, Nevada, or West Virginia.

Terms & Fees

These are the terms and fees for Payoff’s personal loans:

Column Heading Data

Borrowing amount:

$5,000 – $35,000

Term length: 

2 to 5 years

Interest rate:

5.65% – 22.59%

Origination fee:

0% – 5%

APR:

5.99% – 24.99% (fixed)

Collateral:

None (Unsecured)

According to Payoff, “Your repayment terms will depend on your APR and loan term. Example: A loan of $16,000 at 10.99% APR will have a monthly payment of $407 for 48 months.” Your payments will be withdrawn directly from your designated checking account each month.

Because Payoff loans come with fixed rates, your monthly payments will always be the same amount, which should help simplify your budget. Furthermore, if you miss a payment, you won’t be charged a late fee. Instead, a company representative will work with you to formulate a plan to get you back on track. You may get the option to defer or skip your payment or to change your payment date. Payoff gives the borrower a greater degree of flexibility than most personal lenders.

While Payoff does charge an origination fee of between 0% and 5%, that’s the only fee you’ll face. There are no application fees, early/extra payment fees, or check processing fees.

Application Process

The application process for a Payoff debt consolidation loan is conducted online. The documents Payoff asks to see will vary depending on the individual applicant, but Payoff asks that you be prepared to provide the following:

  • A bank statement or bank credentials to securely link your bank account
  • A driver’s license, passport or state issued ID to verify your identity
  • Your two most recent paystubs (or most recent tax return if you’re self-employed) to confirm your income

According to Payoff, after the verification process is completed, most approved loans are funded within two to five business days.

Sales & Advertising Transparency

Payoff is more transparent than most lenders when it comes to its loan products. Along with an FAQ and a comprehensive support page, Payoff also provides a “document upload guide” to walk you through preparing the documents you’ll need to submit with your application.

Customer Service & Technical Support

Payoff provides customer support via live chat for basic questions. For more thorough support, Member Advocates are available to help you set financial goals and develop a plan for paying back your loan.

Negative Reviews & Complaints

The professional reviews of Payoff I’ve come across are all rather favorable, with the only caveat being that the requirements for borrowers to qualify are rather high. Accordingly, some commenters report being rejected for a Payoff loan despite having favorable financial circumstances.

Positive Reviews & Testimonials

Most professional and customer reviews of Payoff’s loan products are positive. Payoff loans have been praised for having competitive rates, a lack of extraneous fees (the absence of late fees is particularly nice), a solid reputation as a lender, and a high degree of customer support and guidance.

Payoff currently has an A+ rating from the BBB.

Final Verdict

Payoff may be a specialized lender, but if you fall into Payoff’s target audience (someone with a solid credit history and decent income who nonetheless needs help consolidating and paying off credit card debt), the company is a good choice for a lender. Payoff’s high degree of transparency and lack of extraneous fees lends credibility to the company, as does the lender’s great reputation in the industry. The worst thing one can say about Payoff’s loans is that the high eligibility requirements may put them out of reach for many of the people who might stand to benefit from a debt consolidation loan. But for those who qualify, you could do a lot worse than a Payoff loan.

As ever, make sure to comparison shop when seeking a personal loan. Only through doing your due diligence will you find the best rates and terms available to someone in your precise financial situation.

The post Payoff Personal Loan Review: Is A Payoff Loan Right For You? appeared first on Merchant Maverick.

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Retail Business Loans And Financing Options

Owning a retail business isn’t without its challenges. Whether you’re growing rapidly and need extra money for expansion or you’re in the middle of a slow season that’s impacted your cash flow, one thing is clear: you need money for your business to operate smoothly.

Sure, pulling the money you need from your own bank account is ideal, but this isn’t always possible. Maybe the money’s not there … or maybe you don’t want to put yourself in a bind by tying up your funds. In these situations, what do you do when you need a financial helping hand? Take a cue from other smart retailers and find a retail business loan that’s right for you.

There comes a time when most small businesses have to take out a loan, and retail businesses are no exception. The key is to understand your options to find the best, most affordable loan that you can use to take your store to the next level, cover an unexpected emergency, or even get your business off the ground. Read on to learn more about the retail business loan and financing options available for any situation.

The Best Loans For Retail Businesses

Financing Need Best Loan Type Recommended Lender
Business Expansion SBA Loan SmartBiz
Purchasing Equipment Equipment Financing Lendio
Emergency Funding Short-Term Loan LoanBuilder & IOU Financial
Cash Flow Shortages Business Credit Cards Ink Business Preferred from Chase
Purchasing Inventory Line of Credit OnDeck
Purchasing a Point of Sale System POS Financing CDGcommerce

1. Business Expansion

Business is booming, and you’re ready for an expansion. Maybe you’re an online retailer and you’ve decided it’s time to open your first brick-and-mortar store. Perhaps you want to open an additional location, or you want to do a complete overhaul of your facilities. No matter what the situation, your retail business is growing, which is exciting … but also very expensive.

Instead of hindering your growth by draining your checking account, consider applying for a loan that provides the funds you need, but spread out into affordable monthly payments.

Small Business Administration 7(a) Loans

The Small Business Administration is a government organization that provides resources to small business owners just like you. One of the most popular resources the SBA offers small business owners is low-cost loan options. Although there are several great programs to consider, the SBA 7(a) loan is one of the most popular among small business owners.

The SBA 7(a) loan is a loan that can be used for essentially any business purpose. This includes business expansion, the purchase of equipment, to use as working capital, or to even save money by paying off high-interest debt.

Through the 7(a) program, you can receive up to $5 million. Because up to 85% of the loan proceeds are backed by the government, SBA-approved lenders (known as intermediaries) are more willing to give these loans out. This is ideal if you’ve been unable to qualify for traditional loan options.

SBA 7(a) loans have low interest rates capped at a maximum of 4.75% — added to the prime rate — based on the loan amount and your repayment terms. Repayment terms are available up to 10 years for most uses, while loan proceeds being used for commercial real estate come with maximum terms of 25 years. SBA 7(a) loans are available to qualified borrowers with a credit score in the high 600s.

Recommended Option: SmartBiz

The SBA 7(a) loan sounds pretty great, doesn’t it? If you’re interested in this loan, you could visit an intermediary lender in your area, such as a bank or credit union. However, this process can often be a hassle for the busy retail business owner. Simplify the process of applying for an SBA 7(a) loan by working with SmartBiz.

With SmartBiz, you can fill out an easy online questionnaire to find out if you’re qualified for an SBA loan. Once you’re prequalified, the service will match you with a lender and assign a relationship manager to help you through the application process.

Getting approved and funded takes several weeks for most applicants. Other times, the process may drag out over several months if more information is needed by your lender. Even though the waiting time to receive this type of loan exceeds that of other financing options, the low overall cost and the flexibility that comes with the 7(a) loan is often worth the wait for many small business owners.

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2. Purchasing Equipment

Your technology and equipment are seriously outdated. Or maybe your business is growing so fast that your problem is not replacing equipment, but adding more. Instead of spending thousands out of pocket, there’s a more affordable solution when you need to replace or purchase long-term equipment: equipment financing.

Equipment Financing

Equipment financing is a type of business financing used to purchase new equipment for your business. With equipment financing, you’ll be able to take possession of much-needed new equipment immediately without paying the entire cost up front.

With an equipment loan, you’ll pay a down payment that is usually 10% to 20% of the total cost of the equipment. The remaining amount, along with interest and fees charged by the lender, will be loaned to you and is paid back through scheduled payments over a longer period of time. At the end of your repayment period, you will own the equipment. This makes the purchase of new or replacement equipment much more affordable.

Equipment leases are another form of equipment financing. With equipment leasing, you’re essentially paying to use the equipment. At the end of your lease, you can return the equipment and take out another lease on the latest model. Unlike a loan, you will never own the equipment unless you pay a lump sum at the end of the lease. However, if you upgrade equipment frequently or want a lower down payment, a lease may be the right option for you.

Recommended Option: Lendio

If equipment financing sounds like the right loan option for your business, find a lender using Lendio. Lendio is a loan-matching service that connects you with the right lender that offers loans to best fit your needs.

Equipment financing through Lendio lenders is available in amounts from $5,000 up to $5 million. Terms of up to 5 years are available. Interest rates for the most qualified buyers start at 7.5%.

Column Heading Data

Credit limit:

$5,000 – $5,000,000

Term length:

1 – 5 years

Interest rate:

7.5%+

Origination fee:

By lender

Collateral:

Usually the equipment being financed

When using Lendio, you’ll fill out an application and within 72 hours, you’ll receive loan offers from multiple lenders. This allows you to review your options to find the most affordable loan with the best repayment terms.

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3. Emergency Funding

Even if you’re on top of your business and finances, there may come a time when an unexpected emergency arises. It happens to the best of us, usually when we are least prepared for it. If an emergency pops up and you need extra cash immediately, a short-term loan could offer just what you’re looking for.

Short-Term Loans

A short-term loan is exactly what the name suggests: a loan that comes with short terms of 1 year or less. These loans have their benefits for small business owners. Borrowers with low credit scores, a short time in business, or with low annual revenues often qualify. However, the biggest benefit is how quickly you can receive the money with a short-term loan. With some lenders, you can apply, be approved, and have the money in your bank account in just 24 hours.

However, short-term loans don’t come without their drawbacks. This fast form of financing comes at a cost. Short-term loans do not have interest rates, but instead, use something called a factor rate. This fee is paid back along with the principal balance over a short period of time. Often, this factor fee, along with other costs such as origination fees, can make these loans more expensive than long-term options. However, when you’re in a financial bind and need money quickly to keep your retail business running smoothly, a short-term loan may be your best option.

Recommended Options: PayPal LoanBuilder & IOU Financial

PayPal’s LoanBuilder provides short-term funding up to $500,000, which can be repaid over a period of 13 to 52 weeks based on the amount of the loan received. The LoanBuilder application takes just 10 minutes to complete. Once approved, you can receive your funds as soon as the next business day.

Qualified borrowers must be in business for 9 months and have at least $42,000 in annual revenue. All borrowers must have a minimum credit score of 550.

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Another short-term loan option is IOU Financial. This lender offers loans up to $300,000. Requirements include being in business for a minimum of one year, bringing in revenue of at least $100,000, and making at least 10 deposits per month into your business bank account.

Repayment terms are available from 6 to 18 months, and once your loan is 40% paid off, you can renew if additional funding is needed. Repayments are made through fixed daily or weekly payments.

4. Cash Flow Shortages

From time to time, a retail business may face cash flow shortages due to a slow season or other challenges. When this happens, daily operations may be affected. You have the same expenses, but your revenues are down, posing a financial challenge for your business. You don’t have to sit back and let these situations drag your business down. Instead, a business credit card can help you fill in these gaps.

Business Credit Cards

A business credit card provides you with a revolving line of credit that you can use to pay your suppliers, vendors, and other expenses. The issuer of the credit card will provide you with a credit limit. You can spend up to and including that limit, using the card as often as you need.

A business credit card allows you to make an instant purchase without having to wait for approval from the lender. You’ll only pay interest on the amount of the credit line that has been used. Payments are made monthly and are applied to the interest and the balance on your card.

One great feature about business credit cards is that many offer rewards programs. With qualifying business purchases, you can earn cash back or points that can be redeemed toward rewards.

Recommended Option: Ink Business Preferred from Chase

The Chase Ink Business Preferred credit card is a top choice among retailers and other business owners because of its great rewards program. If you spend $5,000 within three months of opening your account, you receive 80,000 bonus points. For every purchase, you’ll continue to rack up points.

This credit card also offers additional benefits not offered by other credit card issuers, such as cell phone protection. This card comes with a variable APR of 17.99% to 22.99% with a $95 annual fee.

This credit card is reserved for borrowers with good to excellent credit. Check out our other top picks in business credit cards.

Chase Ink Business Preferred



Apply Now 

Annual Fee:


$95

 

Purchase APR:


17.99% – 22.99%, Variable

5. Purchasing Inventory

You need inventory, and you need it now. If you need to purchase inventory to keep your business running and time is of the essence, a business line of credit may be just what you need out of a small business loan.

Line Of Credit

With a line of credit, a lender issues you a credit limit. You can make multiple draws up to and including this limit whenever you want. The funds will typically be in your account within a few business days, although some lenders offer immediate transfers.

Interest is only applied to the portion of the funds that have been withdrawn. Interest rates vary by creditworthiness, with the most qualified borrowers receiving rates around 6% while high-risk borrowers may see rates of 20% or more.

Payments are made on a scheduled basis and are applied toward the principal and interest. Repayment terms and schedules vary by lender.

Recommended Option: OnDeck

OnDeck is an alternative lender that provides lines of credit to business owners. Lines of credit up to $100,000 are available to eligible borrowers. Repayment terms up to 12 months are available. Rates are as low as 13.99%, and weekly payments are automatically deducted from your business bank account.

OnDeck is known for its fast application process and low borrower requirements. Borrowers of this loan must have a credit score of at least 600, have been in business for at least 1 year, and have a minimum revenue of $100,000 per year.

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6. Purchasing A Point Of Sale System

POS hardware

 

If you own a retail business, you already know the importance of a point of sale system. This centralized system allows you to keep track of inventory, receive payments, and provide receipts for purchases.

Whether you’ve opened a new store or you want to upgrade your outdated system, you can receive a new POS system without paying a lot of money up front with POS financing options.

POS Financing

POS financing allows you to purchase or lease a POS system without paying the full amount up front. Depending on the company you work with, full financing options for all hardware and software may be available.

In addition to POS financing, you may also consider a credit card processing app. These are usually more affordable, are less complicated, and don’t require lengthy contracts. This option is best for smaller retail businesses, while larger businesses should stick with a full POS system.

Recommended Option: CDGcommerce

CDGCommerce is a retail credit card processing company that offers affordable point of sale systems. The company offers the Harbortouch Echo featuring the CDG POS+ app that can be rented for just $49.00 per month. An annual equipment insurance fee is also required at a cost of $79.00, but compared to the costs of purchasing a system, these fees are quite affordable.

Ready to upgrade but unsure of which POS is right for you? Read on to learn more about choosing the right retail POS system for your business.

When You Want To Start A Retail Business

All of these options are great for established retail businesses, but what if you haven’t even gotten your business off the ground yet? For most aspiring business owners, financing is the barrier that is holding them back.

It may be difficult to qualify for a startup loan. After all, you don’t have the sales, revenues, and financial documents to back up your success. When you want to start a business, you have to get creative with your funding options.

If you want to apply for a business loan, you can look to options such as the SBA Microloan program, which provides up to $50,000 to small business owners. These low-cost loans aren’t easy to obtain, though. You’ll need to make sure that you’re prepared for the lengthy application process by preparing your personal financial documents, creating a detailed business plan, and outlining future projections. Your score must be in the high 600s to qualify.

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

Other startup loan options are available, such as online lenders like Fundwise Capital. For borrowers with a poor credit history, there are other alternative loan options but these often come at a much higher cost.

If you have a high personal credit score, you can also consider taking out a personal loan to fund your startup costs. With a personal loan, your income and personal credit score will be considered. This could potentially help you score a lower cost loan that can be used to start your retail business.

Lender Borrowing Amount Term Interest Rate Min. Credit Score Next Steps

$2K – $25K 2 – 4 years 15.49% to 30% 600 Apply Now

$1K – $50K 3 or 5 years 8.16% – 27.99% 620 Apply Now

$2K – $35K 3 or 5 years 6.95% – 35.99% APR 640 Apply Now

lending club logo

$1K – $40K 3 or 5 years 5.32% – 30.99% 640 Compare

Ways To Improve Your Chances Of A Successful Application

Improve Business Loan Application

Once you’re ready to apply for your business loan, you can do some prep work in advance to expedite the process. Before you even start filling out an application, the first step is to know your credit score and determine whether it is high enough to qualify for the loan you’re seeking.

You can receive your free credit score online to find out where you stand. Review your credit report carefully for any errors. If there are any negative items on your report, be prepared to explain those to your lender.

If your credit score is low and your funding need isn’t urgent, you may consider taking a few easy steps to raise your credit score. You’ll be rewarded with lower interest rates, better terms, and more financing options.

You can also prepare your paperwork and documentation in advance. Although requirements vary by lender and the type of loan you’ve selected, you’ll generally need a few items, including:

  • Bank Statements
  • Personal Financial Statements
  • Business Balance Sheet
  • Profit & Loss Statement
  • Income Statements
  • Business Licenses
  • Articles Of Incorporation

When the time comes to apply for your loan, you’ll need to know exactly how much you need and why you need the loan. It’s also important to remember that most loans require a blanket lien or personal guarantee. Most lenders require a personal guarantee to be signed by anyone with at least 20% ownership in the business, so be prepared to have all owners ready to sign the contract as needed.

Finally, when you do apply for your loan, be sure to make yourself available to the lender. Sometimes, lenders require additional documentation or have questions about your application. Taking the time to work with your lender will help you finish the process smoothly.

Final Thoughts

Getting a business loan can be tough, whether you’re an established retail business owner or just getting started. However, there are plenty of options available if you take the time to do your research, go into the application process prepared, and have a good reason for taking out the loan which will improve the return on investment for your business.

The post Retail Business Loans And Financing Options appeared first on Merchant Maverick.

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Square Loyalty Program Review

Square Loyalty Promotional Image

The concept of a punch card is nothing new; coffee shops the world over have been slinging their punched out business cards alongside foamy espresso beverages for decades. Likewise, the concept of companies offering rewards to returning companies goes way back into the annals of entrepreneurship. But as the business sector dives further into the capabilities of digital tools, loyalty programs have come along for the ride.

Square has been tinkering with loyalty features since 2012. About two years ago, they stopped offering a free add-on to the basic Square POS, creating a paid-for loyalty product instead. After some concerns about that initial re-launch, Square Loyalty is back again with a new pricing scheme and feature list.

Square has consistently expanded its business products and generally does a decent job at creating useful tools that people feel confident implementing in their businesses. How well does the new version of Square Loyalty measure up? Let’s find out!

Reader eCommerce Retail Food Service
Free App & Reader Square eCommerce Square for Retail Square for Restaurants
Get Started Get Started Get Started Get Started
Free, general-purpose POS software and reader for iOS and Android Easy integration with popular platforms plus API for customization Specialized software for more complex retail stores Specialized software for full-service restaurants
$0/month $0/month $60/month $60/month
Always Free Always Free Free Trial Free Trial

Pricing

The price of Square Loyalty is determined by how many “loyalty visits” you get in a given month. A loyalty visit is exactly what it sounds like: whenever a customer signs up for or returns to your loyalty program, that counts as one visit. Square tracks your visits, then charges you based on the following pricing scheme:

Loyalty Visits Price Per Month
1-50 $25
50-100 $35
101-200 $50
201-500 $75
501-1,000 $125
1,001-2,500 $175
2,501-5,000 $250
5,001-10,000 $500

If you think you will require more than 10,000 loyalty visits in a single month, you will need to get in touch with Square for more information on exact pricing.

Ease Of Use

The team at Square has built their brand on the simplicity of their software; just about anyone can pick Square up and use it with little-to-no training. Not surprisingly, the loyalty rewards program operates with the same simplistic design. This is a system designed for intuitive use on both sides of the register for customers and employees alike. As long as you already use Square products for payment processing and point of sale, this will work just fine for you.

Setting up your rewards account is as simple as determining the economy of your rewards points (how many should customers get after a visit?) and creating the rewards themselves (how will customers spend their points once they have accumulated?). From there, you can refine your system as time goes on, making adjustments as needed–you will want to be clear with your customers about what is going on, though!

On the customer side, simply have new program members enter their phone numbers to sign up. From then on, your Square Register will remember the customer and apportion their points on subsequent views. Speaking as one who has encountered Square loyalty rewards in the wild, I can report that the system works well, and is even a little exciting!

Features

Square Loyalty comes with the following features:

  • Points System: You get to pick between three different loyalty schemes: by visit, by amount spent, or by item. Customers will get text message updates on the number of points they have built up. Basically, your decision for which system to use will come down to your industry and business model. Selling beverages or baked goods? Visit-based rewards might be best. Working retail? Amount-based might be best. Selling niche products? You might want to go by item.
  • Customer Rewards: You can select three different kinds of rewards that align vaguely with the three different loyalty schemes: free item, discount on the entire sale, or discount on a product category. Obviously, some business types will find one of these systems more useful than others; it’s up to you to determine which will be best for you.
  • Customer Data: Once your customers sign up for loyalty rewards, you can begin tracking information about them. In some industries — coffee shops, for example — you get to know repeat customers quickly as a matter of course. In others, it may be valuable indeed to know a bit more about your clientele, particularly things like their most purchased items and how often they visit your shop.
  • Analytics: Square gives you a bird’s eye view of how your loyalty program is helping your business, showing data on all your customers and how often they visit your shop. You can see how many people use your loyalty rewards, how many points they have, and more. This is the feature that will tell you how well your loyalty program is working, so I definitely recommend checking this out.

Final Thoughts

Square boasts that customers who enroll in their loyalty programs spend 37% more than non-enrolled customers. A cynical person might point out that the kind of person who signs up for a loyalty program would be automatically more likely to spend more at a particular store than other, but at the same time, 37% is difficult to argue with.

But is Square’s loyalty feature ultimately worth the price? I definitely found the monthly cost a bit prohibitive; $50 for just over 50 loyalty visits is a lot. It is possible that at higher subscription levels the price comes down and makes more economic sense, but in order for that to be true, you will need more customers to sign up.

On the other hand, from what I can tell, the feature set works reasonably well — especially when you consider how closely it plays with Square’s flagship POS product. That right there might make it worth it to stop and consider coughing up the cash, especially if you are using one of those snazzy new Square Registers. I suspect many Square Loyalty users hop on board the hype train for this very reason; they are already using some kind of Square product in the first place. In fact, one of the biggest caveats to Square Loyalty (apart from price) is the fact that in order to use it, you will have to already be using Square POS (at the very least); if you have a different system, this is not the loyalty program you have been looking for.

As usual, the final decision comes down to you. Are you using a Square product? Is the touted increase in customer engagement worth what might be an excessive price? Fortunately, you can give it a try before deciding for sure. Be warned though! Though Square provides a generous 30-day trial, your customers may feel less than generous if they discover that your rewards program has up and disappeared just as they were about to redeem one of their rewards. Tread carefully then, and make sure you are confident in your decisions before committing even to the free trial.

Reader eCommerce Retail Food Service
Free App & Reader Square eCommerce Square for Retail Square for Restaurants
Get Started Get Started Get Started Get Started
Free, general-purpose POS software and reader for iOS and Android Easy integration with popular platforms plus API for customization Specialized software for more complex retail stores Specialized software for full-service restaurants
$0/month $0/month $60/month $60/month
Always Free Always Free Free Trial Free Trial

The post Square Loyalty Program Review appeared first on Merchant Maverick.

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The Best Business Loans For Trucking Companies

You’re the owner of a trucking company, and it’s time for expansion through the purchase of new equipment, hiring of new employees, or improvements to your facilities. The good news is that this means your business is growing. The bad news? That growth comes at a price, and the costs may be too much for your bank account.

Or maybe your situation is different. An unexpected emergency has cropped up, and you feel trapped. You’ve crunched the numbers, and it looks like you’re facing a major financial hurdle. How do you handle this financial crisis?

Whether you’re growing quickly or life has thrown a curveball your way, you need extra money. Instead of clearing out your checking account, it’s time to consider a financial option that many smart business owners take advantage of every day: a business loan.

A business loan is a great way to expand your trucking business or get you out of a financial bind. The key is to know what type of loan best fits your needs, is the most affordable, and provides the greatest return on investment. Whether you own a large trucking business with multiple drivers or you’re an owner-operator with one vehicle, read on to learn more about the loan options available for your business.

Loan Type What Is It?

SBA Loans

Low-cost loans offered by the Small Business Administration in partnership with financial institutions. Can be used for most business financing purposes.

Equipment Loans

Loans used to purchase equipment such as semi-trucks.

Medium-Term Installment Loans

Traditional term loans that can be used for most business financing purposes.

Business Lines of Credit

Credit lines from which the business can draw funds at any time, without going through an application process. Used for working capital or other short-term needs.

Short-Term Business Loans

Quick business loans used for working capital or other short-term needs.

Business Credit Cards

Small business credit lines used for everyday business expenses such as fuel and maintenance costs.

Small Business Administration (SBA) Loans

Best for…

Business owners with high credit scores who need to make a large purchase with affordable monthly payments.

Types Of Loans Offered By The SBA

The Small Business Administration offers several programs that provide funding for trucking companies. SBA loans are backed by the government, opening up new financing opportunities for small businesses that don’t qualify for conventional business loans.

The SBA 7(a) loan program is one of the SBA’s most popular offerings. With a 7(a) loan, borrowers can receive up to $5 million to be used for almost any business purpose, including the purchase of equipment or machinery, real estate or land purchases, or even acquiring another business.

If you run a smaller trucking operation or you’re an owner-operator and you have an expense that requires $50,000 or less, the SBA microloans program may be an option for you. The average loan distributed through this program is $13,000. Funds can be used toward the purchase of machinery or equipment, working capital, or supplies.

SBA Loan Terms & Fees

Interest rates for the 7(a) loan program are set at the prime rate plus a maximum markup of 4.75% based on the amount of the loan and the repayment terms. Currently, interest rates fall between 7.5% and 10%. Interest rates can be fixed or variable. Repayment terms are up to 10 years or 25 years for real estate purchases. A down payment of 10% to 20% is typically required.

Intermediary lenders can charge various fees for a 7(a) loan, including origination fees, loan packaging fees, and guarantee fees up to 3.5%. Veteran-owned small businesses can apply for the Veterans Advantage loan, which offers the same rates and terms as the 7(a) program but with reduced guarantee fees.

On average, interest rates for SBA Microloans fall between 8% and 13%. The maximum repayment term for this type of loan is 6 years. Lenders may charge fees for a microloan such as application fees, loan processing fees, and closing costs.

SBA Loan Borrower Eligibility

To qualify for an SBA loan, a borrower should have a credit score of at least 680. The borrower’s credit report should be free of bankruptcies, foreclosures, and past defaults on government loans.

The borrower must be an owner of a for-profit business that is based in the United States. All borrowers must also meet the guidelines for a small business as defined by the SBA. This limits the number of employees, net worth, and annual revenues of the business.

Borrowers must have a legitimate purpose for taking the loan, and they must have exhausted all other options before applying for an SBA loan. Both startups and established businesses are eligible for SBA loans. All borrowers will be required to sign a personal guarantee.

Where To Find SBA Loans

SBA 7(a) loans are available through SBA intermediary lenders. These lenders could be banks, credit unions, or private lenders. The SBA offers its Lender Match tool which matches you with a lender in your area. You can also apply online through a service like SmartBiz.

Review

Visit Site

Streamlines SBA loan process for:

  • Debt refinancing
  • Working capital
  • Commercial real-estate

Highlights:

  • Suited for small and large businesses
  • Excellent terms and fees
  • No prepayment penalty

SBA microloans are available through participating non-profit organizations.

Equipment Loans

Best for…

Businesses that need to purchase expensive equipment (including a new or used truck) but don’t have the money to buy it outright.

Equipment Loan Uses

An equipment loan is exactly what it sounds like: a loan that is used to purchase equipment. In the trucking industry, this could mean the purchase of a new or used truck, a trailer, or other long-term physical assets that are necessary for operations. This type of loan allows you to break down the cost of expensive equipment into smaller payments that are easier to manage.

Equipment Loan Terms, Fees, & Down Payment

Equipment loan terms and rates vary based on the lender selected, the amount of the loan, and the creditworthiness of the buyer. The most qualified buyers may be eligible for interest rates as low as 5%. However, applicants that face challenges, such as a low credit score, may be stuck with an interest rate of 24% or higher. The average repayment terms are between 3 and 7 years.

Fees that may be associated with taking out an equipment loan include origination fees and administrative fees. Down payment requirements also vary. Borrowers with very high credit scores and a long time in business may qualify for 100% financing with $0 down. Other borrowers may have to pay an average down payment of 10% to 20%.

Even if you qualify for 100% financing, it’s usually a smart move to put some money down for your loan. This will reduce your amount of debt immediately and can also help prevent a situation where the equipment becomes obsolete before you’ve fully repaid the loan.

There is typically no additional collateral required, as the equipment being purchased with the loan serves as the collateral.

Borrower Eligibility For Equipment Loans

One of the benefits of equipment loans is that there are options available for everyone, even if you have a low credit score or haven’t been in business for very long. It should be noted that borrowers with these challenges will face higher interest rates, increased down payments, and an overall more expensive loan.

Equipment loans are available to borrowers with credit scores as low as the mid-500s. Time in business requirements vary, but most lenders require at least 6 months in business, although there are other options for startups and new businesses.

Borrowers must use the loan funds to purchase eligible equipment. As previously discussed, a down payment may also be required in order to receive the loan.

Equipment Loans VS Leases

There are two types of equipment financing you may consider: equipment loans and equipment leases. The type you choose is based on the specific needs of your business.

With a loan, you’ll make scheduled payments that go toward the principal balance and interest. This is a smart option if you need equipment but don’t want to foot the entire bill immediately. Although this ultimately costs more than an outright purchase, it allows you to make lower, more affordable payments. Once all payments have been made, the equipment is yours. If you plan to keep your equipment for many years, this is the best option for you.

When you lease equipment, you’re essentially renting from the lender. You make payments each month to be able to use the equipment. Once your lease is over, you’ll return the equipment and can upgrade to the latest model. In some cases, you may be able to pay the remaining balance if you’d like to own the equipment outright.

With leases, monthly payments may be more affordable and it’s possible to find leases that don’t require a down payment. However, the total cost of the lease typically winds up being more expensive than loans due to higher interest rates.

Leases are a good choice for you if you need to upgrade your equipment frequently to have the latest and greatest model. It may also be an option if you don’t have the down payment required for an equipment loan.

Where To Find Equipment Loans

There are several options for finding equipment loans. Many banks and credit unions offer equipment financing programs. There are also lenders that specialize in equipment financing. Some equipment manufacturers even have their own finance programs in place. Check out our comparison of equipment financing to find the best rates and terms for your business. Or get the process started with one of the lenders below:

Lender Borrowing Amount Term Interest/Factor Rate Additional Fees Next Steps

$2K – $5M Varies As low as 2% Varies Visit Site

$5K – $500K 24 – 72 months Starts at 5% Yes Compare

Up to $250K 1 – 72 months Starts at 5.49% Varies Compare

Medium-Term Installment Loans

Best for…

Businesses that need funds to purchase equipment, refinancing existing debt, or use as working capital.

Medium-Term Installment Loan Uses

A medium-term installment loan is a loan that is paid off over a period of 1 to 5 years. With this type of loan, you can break down the cost of a purchase or receive working capital while repaying with low monthly payments.

Medium-term installment loans can be used for any business purpose. These loans can be used for the purchase of new equipment. You can use the funds for working capital. Loan proceeds can be used for business expansion or acquisitions. You can even use these loans to refinance existing debt.

Medium-Term Loan Terms & Fees

Loan terms and fees vary by lender and creditworthiness. Borrowers with the highest credit scores can receive loans with rates of about 6%. Borrowers with lower credit scores may receive interest rates up to 30%.

Typical fees you may be required to pay to receive a medium-term loan include application fees and origination fees. Collateral may be required based on your credit score and the amount of the loan. A personal guarantee or blanket lien is typically required.

Borrower Eligibility For Medium-Term Loans

Although medium-term loans may have higher interest rates and be more expensive than long-term options, qualifying is not as difficult. To qualify, you should have a minimum credit score of 600 with at least $100,000 in annual revenue, although these requirements may vary by lender.

Where To Find Medium-Term Loans

Some banks and credit unions offer medium-term loans, but these loans require high revenues and credit scores. If you don’t qualify, you can seek out an alternative lender that provides medium-term loans for less-qualified borrowers or try your luck with one of the online lenders below:

Lender Borrowing Amount Term Interest/Factor Rate Req. Time in Business Min. Credit Score Next Steps

$5K – $500K 13 – 52 weeks x1.029 – x1.1872 9 months 550 Apply Now

$5K – $500K 3 – 36 months x1.003 – x1.04/mo 12 months 500 Apply Now

$2K – $5M Varies As low as 2% 6 months 550 Apply Now

$20K – $500K 1 – 4 years 7.99% – 29.99% APR 2 years 660 Apply Now

Business Lines Of Credit

Best merchant online credit card processing companies image

Best for…

Businesses that want access to capital on demand.

Business Line Of Credit Uses

A business line of credit is similar to a credit card. A borrower has a credit limit set by the lender and can make multiple draws as needed up to and including the credit limit. The money can be used for any business expense, from unexpected emergencies to covering operational expenses or purchasing equipment.

Business Line Of Credit Terms & Fees

With a business line of credit, you only pay interest and fees on the borrowed amount. For example, if you have a total credit line of $200,000 but have only spent $50,000, you’ll only pay interest or fees on the $50,000. Fees and interest vary by lender and range from 1% to over 30%. The more creditworthy you are, the better rates you will receive.

Repayment terms also vary, but most lenders offer terms of 6 months or 12 months depending on the amount borrowed. Some lenders may offer longer repayment terms. However, it’s wise to pay off your balance as quickly as possible to avoid unnecessary fees and interest and lower the overall cost of your loan.

Borrower Eligibility For Business Lines Of Credit

Eligibility for lines of credit varies by lender. Some lenders, such as banks, may require credit scores in the 600s to qualify for a line of credit. Alternative lenders typically have much lower requirements. Some of these lenders do not have credit score requirements at all, and instead, look at the performance of the business to determine eligibility and maximum credit limits.

Time in business requirements may be as low as three months, while annual revenue requirements may be $50,000 or less, depending on the lender’s policies.

Where To Find Business Lines Of Credit

Some banks offer business lines of credit to borrowers with high credit scores. Alternative online lenders also have lines of credit available for borrowers with poor scores or who are looking for immediate funding. Read our full reviews of line of credit providers or get the ball rolling with one of the lenders below:

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

Short-Term Business Loans

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

Best for…

Business owners that are forced to cover emergency expenses.

Short-Term Business Loan Uses

Short-term business loans are loans that are paid back over a very short period of time. This period of time varies, but it will not exceed one year.

Short-term loans are one of the most expensive forms of credit, so it is best to only use these loans when absolutely necessary. Because funding is fast (potentially as short as 24 hours), a short-term loan is best for emergency situations when time is of the essence.

Borrowers that have not been in business long or have low personal or business credit scores may have no other options than to seek a short-term loan. If this is the case, the return on investment should be calculated to determine if the loan is worth the high cost.

Short-Term Loan Terms & Fees

Terms and fees for short-term loans vary by lender and creditworthiness. Most short-term loans come with a factor rate that determines the total amount that will be repaid. Learn more about factor rates for short-term loans and how to calculate repayments.

With other short-term options, borrowers with high credit scores may find short-term options with interest rates below 10%. However, borrowers that are viewed as “risky” by the lender may be hit with interest rates up to 80%.

Repayment terms vary. For some short-term loans, the full loan is repaid within a few weeks. For other loans, the amount is repaid up to a year. Repayment schedules may be daily, weekly, or monthly.

For short-term loans, some fees may be required, including origination fees and maintenance fees. A personal guarantee or blanket lien is typically required.

Borrower Eligibility For Short-Term Loans

Qualifying for a short-term loan isn’t difficult. There are loans available to borrowers with credit scores as low as 500. Some lenders also have very low monthly or annual revenue requirements, as well as shorter time in business requirements.

Where To Find Short-Term Loans

You can receive a short-term loan by applying with online alternative lenders or one of the lenders below:

Lender Borrowing Amount Term Interest/Factor Rate Req. Time in Business Min. Credit Score Next Steps

$5K – $500K 13 – 52 weeks x1.029 – x1.1872 9 months 550 Apply Now

$5K – $500K 3 – 36 months x1.003 – x1.04/mo 12 months 500 Apply Now

$2K – $5M Varies As low as 2% 6 months 550 Apply Now

$20K – $500K 1 – 4 years 7.99% – 29.99% APR 2 years 660 Apply Now

Business Credit Cards

Best for…

Covering emergencies that require immediate funding or for recurring expenses, like fuel purchases.

Business Credit Card Uses

When used responsibly, a business credit card can be an enormous asset to a trucking business. A business credit card offers a revolving line of credit that can be used any time it’s needed. This is especially helpful when an emergency arises.

Business credit cards can also be used to earn rewards on your business’s recurring expenses, such as gas to fuel your rigs.

However, even though you can use your credit card whenever you want doesn’t mean that you should. The interest rates on credit cards can really stack up, and you could end up paying hundreds (or thousands) of dollars in interest over time. Keeping high balances can even lower your credit score due to high credit utilization.

However, with responsible use that includes paying off (or paying down) your card each month, you’ll even be able to boost your credit score while having access to extra capital when you need it. In addition, many credit cards offer rewards programs that allow you to earn points or cash back after every qualifying purchase.

Business Credit Card Terms & Fees

Like other types of loans, terms and fees vary based on the lender and creditworthiness of the borrower. Interest rates typically start around 14% and rise to over 25%. Many cards have introductory APR offers of 0% for qualified borrowers.

You may have to pay fees based on the card that you select, including annual fees, foreign transaction fees, cash advance fees, and balance transfer fees. Some lenders may also charge fees to issue employee cards.

Borrower Eligibility For Business Credit Cards

To qualify for the best interest rates, borrowers should have a credit score at least in the high 600s. Lenders will evaluate your income and your business revenue to determine your credit limit. You will also need a federal tax ID. If you’re a sole proprietor, you will be required to give your social security number.

If you have bad credit or revenue challenges, you may qualify for a card with a higher APR or a secured card. A secured card will require a refundable cash deposit before it is issued. As you use your secured card responsibly, your credit limit will increase and you may become eligible for an unsecured card.

Where To Find Business Credit Cards

The first place to look for a business credit card is at your own bank or credit union. However, if your financial institution does not offer this product or you fail to qualify, you can apply online with other credit card issuers. Learn more about the top business credit cards or check out the cards below, which are perfect for new business owners.

Card Name Best For Next Steps

SimplyCash Plus Business Credit Card from American Express

Cash back

Compare

Chase Ink Business Preferred

Travel rewards

Apply Now

Chase Ink Business Cash

No annual fee

Apply Now

Blue Business Plus Credit Card from American Express

0% introductory rate

Compare

Capital One Spark Classic For Business

Fair credit

Compare

Wells Fargo Business Secured Credit Card

Bad credit

Compare

Trucking Business Loan FAQs

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

If you have a lower credit score due to past mistakes, there are still loan options available to you. While higher credit scores are required for SBA loans, borrowers with poor credit can qualify for other loans, including short-term options, lines of credit, and business credit cards.

In order to get the most affordable loan and the best repayment terms, it’s best to go into the application process with a solid credit score. If possible, take steps to rebuild your credit before applying to lower your financing costs.

I am an owner-operator. What are my best business loan options?

As an owner-operator, there are several business loan options available for you. For the purchase of a truck, you should consider equipment financing. You may also be able to qualify for the SBA Microloans program, which provides up to $50,000 in financing for expenses.

Short-term loans, lines of credit, and business credit cards are also available to you, but these typically come at a higher cost.

I’m starting a trucking company. Am I eligible for a trucking startup loan? What are my best options?

There are many options available for trucking startup companies. The best option for borrowers with credit scores in the high 600s are loans from the SBA. SBA loans provide low interest rates and flexible repayment terms for startups and established businesses.

Because you won’t have traditional documentation like business tax returns and financial statements, your application will need to include a detailed business plan and future financial projections. You’ll also need to prove that you have industry experience in order to qualify.

If you have a good credit score, you could also consider taking out a personal loan. With a personal loan, qualifying will be based on your own income and credit score, with no requirements for annual revenues, business credit score, or time in business. This is another affordable loan for borrowers that want to start their own business.

Can I get a grant for my trucking company?

Most businesses do not qualify for grants. If you find a grant that you are eligible for, it’s important to note that competition will be stiff. The process for receiving a grant also doesn’t happen overnight, so if you need money for your trucking company fast, you’ll want to explore other options, including the loans mentioned in this post or other options, such as P2P lending or crowdfunding.

Final Thoughts

No matter what your financial needs, there’s a loan available to help you start or expand your trucking business. The key is to understand your options, shop around, and determine if the return on investment exceeds the cost of the loan. Even if your funding needs are urgent, it’s critical to borrow responsibly to put your trucking business on the road to success.

The post The Best Business Loans For Trucking Companies appeared first on Merchant Maverick.

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Commercial Construction Loans: The Ultimate Guide

You’ve reached the point in your business when it’s time to expand. Maybe you’re renting your office space and you’ve decided that it’s time to build your own office building. Perhaps you’ve outgrown your property and you want to add on to your existing space. Your scenario could be completely different: you’re a new business just getting off the ground and you want to build your property from the ground up.

No matter what the circumstances, many businesses face a situation where real estate construction or improvements are the next steps for business expansion. Of course, this expansion comes at a very high cost – a cost that many businesses can’t afford to pay up front. This is when it’s time to consider taking out a commercial construction loan.

As with any other type of financing, it’s important to understand the mechanics behind a commercial construction loan. Read on to learn more about commercial loans, when you should consider applying, and what to expect throughout the application process.

What Is A Commercial Construction Loan?

A commercial construction loan is a type of loan that is used to finance the costs associated with the construction or renovation of a commercial building. The funds from a construction loan can be used to pay for labor and materials for the construction of a new property, the purchase and development of land for a new commercial property, or the renovations of existing properties.

Why Take Out A Commercial Construction Loan?

Business owners that plan to purchase existing commercial properties can get a loan known as a commercial mortgage. However, if you plan to renovate your existing space or construct a new building from the ground up, you’ll need to apply for a commercial construction loan.

New construction and renovations can be expensive — think hundreds of thousands or even millions of dollars. Most growing businesses don’t have this type of cash on hand, so instead, they turn to a commercial construction loan. With commercial construction loans, lenders provide funds throughout the construction process to pay for labor, materials, and land development so you don’t have to cover the costs yourself.

How Commercial Construction Loans Work

Commercial construction loans are different from other loans. Most loans are structured so that the borrower receives the full amount of the loan as one lump sum. Once the loan is received, the borrower begins to pay back the loan through scheduled payments over a set period of time. Commercial mortgages, for example, often have a monthly repayment schedule over 10 years or longer.

With commercial construction loans, the full amount of the loan is not received up front. Instead, the borrower will work with the lender to create a draw schedule. This means that partial amounts of the loan will be released as the project hits new milestones. For example, the first draw will be for the clearing and development of land. The next draw may then occur when the foundation is poured. Another draw will be released when the building has been framed, and so on.

As each milestone is completed, a lender will typically require an inspector to confirm that the work is completed before releasing the next draw. This will continue until all milestones have been completed and the full amount of the loan has been distributed.

With a commercial construction loan, you will only pay interest on the portion of the loan proceeds that have been received. If the total cost of your new construction is $500,000 but the lender has released just $100,000, you will pay interest on $100,000.

Typically, a commercial construction loan is structured so that the borrower pays only the interest until the loan has been fully dispersed. Borrowers can then pay off the principle in one lump sum at the end of the construction project.

But once the project is done and the full amount of the loan is due, what does a borrower do next? Instead of having to make one large payment, the borrower now can receive a commercial mortgage. The property will serve as collateral, and the borrower will use the funds from the commercial mortgage to pay back the commercial construction loan. With the new mortgage, the lender will now be locked into more affordable monthly payments over a longer period of time.

Other commercial construction loans like the Small Business Administration CDC/504 loan provides more long-term options so an additional loan following the completion of the project will not be needed.

Interest Rates

For commercial construction loans, borrowers should expect to pay interest rates between 4% and 12%. Borrowers with the best credit scores will receive the lowest interest rates. The type of lender you work with is also a factor. A commercial construction loan from a bank will typically have the lowest interest rate, while hard money lenders charge more interest for their loans.

Fees

There are several fees that may be associated with taking out a commercial construction loan. The fee types and amounts vary by lender. Some fees you may have to pay for this type of loan include:

  • Guarantee Fees
  • Processing Fees
  • Documentation Fees
  • Project review Fees
  • Fund control Fees

Down Payment

Because a commercial construction loan is a high-risk loan, a down payment is required. By paying a down payment, the borrower takes some of the risk off of the lender. Typically, down payment requirements are 10% to 30% of the total project cost. Rarely will a lender fund 100% of the costs of a commercial construction project.

Conventional lenders use a calculation known as loan-to-cost for commercial construction loans. The loan-to-cost ratio is calculated by dividing the total amount of the loan requested by the total project cost. Let’s say, for example, a business is requesting a loan of $190,000 for a project with a total cost of $200,000. The loan-to-cost in this example would be 95%.

Though requirements vary by lender, most require a loan-to-cost of 80% to 85%. For the example above, the lender would loan $160,000 at 80% and $170,000 at 85%.

If this occurs, what does the borrower do? While they may be forced to come up with the remaining costs out-of-pocket, there is another option — mezzanine loans — which we’ll discuss a little later.

Borrower Requirements: How Commercial Lenders Evaluate Eligibility

Not all construction projects are eligible for a commercial construction loan. There are several factors that a lender will consider in order to determine eligibility.

One of the first things that a lender will look at is your credit score. Because these are high-risk loans, lenders want to work with low-risk borrowers with high credit scores. Though credit requirements vary by lender, you should have a credit score at least in the high 600s before applying to qualify for loans such as the SBA CDC/504 loan. Other lenders may require a minimum score in the 700s. Business credit scores will also be evaluated.

The lender will also consider your debt-to-income ratio, also known as DTI. This ratio shows the relationship between the income and the debt of your business on a monthly basis. Typically, lenders look for a debt to income ratio of 43% or less, although some lenders may have stricter requirements. The lower your DTI, the higher your chances for approval. To calculate your DTI, use the following formula:

Total Monthly Debt Payments / Gross Monthly Income = DTI

Learn more about how to calculate and lower your DTI before applying for a loan.

Lenders will also consider your debt service coverage ratio, or DSCR. This shows the relationship between the income and debt of your business on an annual basis. To calculate for yourself, use the following formula:

Net Operating Income / Current Annual Debt Obligations = DSCR

The DSCR is a bit different from DTI because you want this number to be higher. This shows that your business is bringing in enough income to cover new debts. Most lenders look for a DSCR of 1.25 or higher, but again, requirements vary by lender. Learn more about calculating your DSCR.

The lender will also look at your industry experience and your current business financials to determine if you qualify for a loan. You’ll need to submit detailed construction plans for approval before a loan can be issued. In some cases, the plans may need to be altered based on any risks spotted by the lender, so your ability to be flexible in your plans is key.

Types Of Commercial Construction Loans

Now that you know more about the commercial construction loan process, it’s time to explore the different types of loans available.

SBA CDC/504 Loan Program

The Small Business Administration (SBA) CDC/504 loan is one of the most popular commercial construction loans. This is because these loans come with low down payments, competitive interest rates, and credit score requirements in the high 600s.

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%

With this loan, an SBA-approved Certified Development Company will fund 40% of the costs to renovate existing facilities, build new facilities, or purchase/improve land. Up to $5 million is available for borrowers.

Another lender will need to provide 50% of the project costs, while the borrower will be responsible for the remaining 10%. In some cases, borrowers may be required to pay 20%. Repayment terms are available up to 20 years, and interest rates are based on the market rates of U.S. Treasury issues.

SBA 7(a) Loan Program

The SBA also has the 7(a) program, which can be used for the purchase or construction of commercial real estate.

Through this program, borrowers can receive up to $5 million with repayment terms up to 25 years. Interest rates are based on the prime rate plus a maximum of 2.75%. To qualify, borrowers should have a credit score in the high 600s and a down payment of 10% to 20%.

Here are the base rates and markups for a 7(a) loan from the SBA:

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%

Bank Loans

A traditional commercial construction loan from a bank is another option for business owners. Rates, repayment terms, and down payment requirements vary. Generally, a minimum down payment of 10% is required, maximum repayment terms of 25 years are standard, and fixed and variable rates are available. You can start your lender search by talking to your current financial institution about your financing needs. See our post on the best bank loans for small business if you’re interested in specific recommendations.

Mezzanine Loans

Earlier in this post, we discussed loan-to-cost ratios. When a loan-to-cost ratio is lower and the borrower needs to come up with additional money, a mezzanine loan may be an option. This type of loan is secured with stock. If the borrower defaults, the lender can convert to an equity stake. With a mezzanine loan, the borrower has more leverage and can achieve a loan-to-cost ratio of up to 95%.

Where To Find Commercial Construction Loans

You know about the types of loans available to you, so where do you find a lender? This all depends on the type of loan you’re seeking.

An SBA-approved intermediary lender (which includes banks, credit unions, and private lenders) distributes 7(a) loans. For CDC/504 loans, an SBA-approved non-profit CDC provides this funding, although you’ll also have to find another lender to finance 50% of your project costs.

Banks and credit unions provide many commercial construction loan options, including SBA loans, traditional loans, and mezzanine loans.

Finally, commercial construction loans can be obtained through hard money lenders. These are private money lenders that provide short-term funding options for commercial construction projects. While there are a few benefits to working with these lenders, including minimal upfront costs and faster funding, these loans typically come with higher interest rates and fees than options from other lenders.

How To Apply For A Commercial Construction Loan

Once you’ve found a lender for your commercial construction loan, the next step is to begin the application process. During this process, the lender will evaluate your personal and business financials, your credit score, and other factors that will determine both whether you’re approved and what your interest rates and terms will be.

Because construction loans are considered high-risk, you will need to provide the lender with a detailed business plan. This should include an overview of what your business does, its financials to date, details about your current operations, and future projections.

You will also need to provide your lender with details about the project. This includes a complete plan with specs and designs. An expected project cost, including estimates for contractors, materials, and other expenses, must be provided with your application.

Personal and business financial documents will also need to be submitted during the application process. These include, but are not limited to, personal and business tax returns, profit and loss statements, balance sheets, bank statements, income statements, and debt schedules showing current debt obligations. Documentation requirements will vary by lender.

The lender will pull your credit score during the process. Remember, lenders are looking for scores in the high 600s. With some lenders, negative items such as bankruptcies, foreclosures, and past defaults on loans may automatically disqualify you from receiving a loan. For negative items on your credit report, an explanation to the lender may be required.

Because this is such a high-risk loan product, lenders will typically take at least a minimum of several weeks to go over your information. During this time, more documentation may be required or your lender may have questions, so make sure to make yourself available to expedite the process.

Once the lender underwrites and approves your loan, you’ll move into the closing process. This entails going over the loan agreement, which will include all dates and milestones throughout the process. Once all paperwork has been signed and the closing process is complete, you’ll be ready to begin the expansion of your business.

Final Thoughts

It’s always exciting to reach a point in your business when it’s time to expand, but getting the financing you need can be a challenge. If your future plans include constructing new facilities or upgrading your current building, getting a commercial construction loan doesn’t have to be stressful.

If you understand the types of loans and requirements and do some prep work ahead of time, you’ll be able to approach your lender with confidence and get through the lending process with ease.

The post Commercial Construction Loans: The Ultimate Guide appeared first on Merchant Maverick.

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Small Business Startup Loans: Your 8 Best Options

Getting a small business loan can be tough. As a business owner, you have to prove to a lender that you’re worth taking an investment risk. You have to demonstrate that both you and your business are creditworthy and provide evidence that your business is bringing in enough revenue to cover the cost of the loan. For an established business, the process is time-consuming but not too difficult. For startups, however, this can be more than a little tricky.

Unless you’re independently wealthy, you need capital to get your startup business off the ground. Chances are, though, you keep hitting brick wall after brick wall when it comes to financing. You don’t have the required time in business to work with this lender, and you don’t have the documentation required by that one. You need money for your startup, but you can’t seem to find it.

Don’t worry — there are loan options for startup businesses. In this post, we’ll review eight of the best options, including the benefits, drawbacks, and what to know before you apply.

Loan Type What Are They?
Microloans Installment loans of $50,000 or less.
Personal Loans Loans in which the borrower’s eligibility is based on their personal profile, not the business profile.
Equipment Loans Loans used to purchase equipment.
Business Credit Cards Credit lines for everyday business expenses.
SBA Loans Low-cost loans offered by the Small Business Administration and its partners.
Crowdfunding Financing in which the funds are sourced from a pool of investors or backers.
Invoice Financing Financing in which the business’s unpaid invoices are leveraged to obtain working capital.
Friends & Family Financing sourced from the borrowers friends and family.

1) Microloans

Microloans are smaller loans that provide up to $50,000 for small businesses and startups. This type of financing is best for companies with smaller capital needs.

Microloans can generally be used for any business purpose, although specific lenders may have their own restrictions in place. Generally, microloans can be used to purchase supplies or inventory, equipment, or can be used as working capital.

The Small Business Administration’s Microloans program is a very popular choice for small business owners. This program is open to any startup or business that fits the definition of a small business set by the SBA, which limits the number of employees, annual revenues, and net worth of a business. For-profit businesses and non-profit childcare centers located in the U.S. are eligible to apply. Loans of up to $50,000 with repayment terms of up to 6 years are available through non-profit intermediary lenders. The average microloan given by SBA intermediaries is $13,000.

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

Other non-profit organizations also offer microloans. Repayment terms and maximum borrowing amounts vary by lender.

One of the biggest benefits of microloans is that they typically come with very low interest rates and are more affordable than other startup loans. Non-profit organizations and SBA intermediary lenders that offer microloans may also provide additional resources for small businesses owners, including training, workshops, and mentorships.

The biggest drawback of microloans is the low maximum borrowing amount, which could be limiting for businesses that have larger expenses, like the need to purchase commercial real estate. Another drawback is the length of time it takes to receive a loan. From application to funding, getting a microloan can take several weeks or longer.

The availability of microloans may also be limited. Many non-profit organizations get their money through government grant programs, limiting the number of new borrowers that are accepted.

2) Personal Loans

When applying for a business loan through a bank or other conventional lender, both personal and business information will be considered, including personal credit score, business credit score, and annual business revenues. For new businesses that don’t meet these qualifications, getting a bank loan is out of the question, right?

Not necessarily. Business owners with high personal credit scores can apply for a personal loan from a bank or credit union. The credit history and income of the applicant — not the business — will be considered when applying for a personal loan.

Even businesses that don’t meet the credit and income qualifications of banks and credit unions can get a personal loan to use for business expenses. This can be accomplished through alternative lenders that have fewer requirements for qualifying for a loan.

A personal loan is a good choice for a startup business because the history of the business is not a consideration for approval. For personal loans, the borrower will just need to prove their personal creditworthiness and show that they are financially able to pay back the loan.

Many personal loans can be used for most business purposes, but some may have restrictions on how the proceeds are used based on the lender’s specific policies.

Banks and credit unions offer low interest rates and long repayment terms, resulting in a more affordable loan. Of course, these low-cost loans are reserved for the most qualified borrowers with credit scores at least in the low 700s.
Applicants with a low personal credit score will face higher interest rates and a higher overall cost of borrowing. In some instances, applicants with credit or income challenges will need to seek out alternative lenders for a personal loan.

Maximum loan amounts may be lower for personal loans than business loans. Depending on the amount needed, a business loan with higher limits may be a better choice for business owners with higher capital needs.

Be aware that, at tax time, business owners with a business loan can write off interest payments. With personal loans, business owners are unable to write off these payments, therefore missing out on these tax benefits.

3) Equipment Loans

An equipment loan is a loan that is used to finance long-term equipment, such as machinery, industrial kitchen appliances, or a commercial vehicle. This type of financing allows business owners to purchase expensive equipment through affordable monthly payments instead of paying the full cost up front.

One of the great things about equipment loans is that many businesses, including startups, can qualify. Revenue, time in business, and credit requirements are not as strict, with most lenders requiring a score in the low 600s to qualify. Approvals can be given within just days of applying, although timelines vary based on the lender.

Equipment financing isn’t for everyone, though. This type of loan can only be used for the purchase of equipment. The equipment purchased could also become obsolete and may need to be replaced again before the loan is fully repaid.

Ready to apply for equipment financing? We recommend the following lenders:

Lender Borrowing Amount Term Interest/Factor Rate Additional Fees Next Steps

$2K – $5M Varies As low as 2% Varies Visit Site

$5K – $500K 24 – 72 months Starts at 5% Yes Compare

Up to $250K 1 – 72 months Starts at 5.49% Varies Compare

4) Business Credit Cards

Business credit cards work just like personal credit cards. The lender provides a set credit limit, and you can use your card up to and including that credit limit to pay merchants, vendors, suppliers, and for other business expenses.

Since there are fewer requirements to qualify for a business credit card than there are for other types of loans, many startups go this route when they need extra capital. Unsecured cards are available to business owners with scores in the low 600s, although higher scores get higher credit limits and lower interest rates. Borrowers with bad credit scores may qualify for a secured card, which requires a deposit or collateral and helps rebuild credit.

One of the perks of business credit cards is that many have rewards programs. When the card is used for qualifying business purchases, points can be racked up to redeem toward airline miles, cash back, and other rewards.
The downside of business credit cards is high interest rates, which can really add up over time. Keeping a high balance for a long period of time will result in a loan that is more expensive than other options. This is why it’s recommended to pay down debt as quickly as possible to avoid potentially paying thousands of dollars in interest.

5) Small Business Administration (SBA) Loans

The Small Business Administration doesn’t just offer microloans. In fact, the SBA has several programs to help startups get the funding they need.

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.

Review

Microloans

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

Review

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.

Review

Disaster Loans

Loans used to rebuild or maintain business following a disaster. 

Review

The SBA 7(a) program offers up to $5 million for almost any business purpose, from refinancing existing debt to purchasing real estate or acquiring a new business. The Veteran’s Advantage program offers the same benefits with reduced fees for military veterans, while the Community Advantage program provides funding options for businesses and startups in underserved communities.

The SBA also has the CDC/504 loan that funds 40% of project costs for the purchase or improvement of commercial real estate.

For all programs, applicants must be a small business as defined by the SBA and can apply for these loans through an SBA intermediary lender. Applicants should have a solid credit score in the high 600s and no bankruptcies, foreclosures, or past defaults on government loans.

SBA loans are popular with small businesses and startups because of their low interest rates and long repayment terms of up to 10 or 25 years. SBA loans are some of the most affordable loans available.

Because large portions of SBA loans are guaranteed by the government, lenders are more willing to lend to small businesses. Many businesses qualify for SBA loans when banks and other lenders have turned them down.

However, SBA loans aren’t without their drawbacks. The application and approval process can take weeks (or, in some cases, months), so these loans aren’t ideal for startups that need funding immediately.

The application process is also time-consuming and qualifying can be difficult. Business owners must have a strong credit history and meet all qualifications of the SBA to apply for these loans.

6) Crowdfunding

startup crowdfunding

Crowdfunding is a relatively new type of business financing, but it’s really growing in popularity, especially among startups.

With this type of loan, you pitch your idea on a crowdfunding platform. Through this platform, you can reach investors and others that believe in your business and are willing to invest their money to help you get your idea off the ground.

Crowdfunding gives you access to thousands of investors. A successful campaign can yield the funds you need in a very short amount of time without the fees and interest that come along with other loan options. In exchange for their investment, most businesses offer rewards and perks like first access to a new product.

One of the benefits of crowdfunding is that anyone can do it, even if you have poor credit or other challenges that make you ineligible for other types of loans.

Even though anyone can make a campaign, not everyone can be successful. In order to get the money you need through crowdfunding, you have to put in the work, which includes sharing your campaign on social media, websites, and blogs, marketing effectively to potential investors, and offering incentives that make donors want to give.

7) Invoice Financing

If your new business has a shortage of capital due to unpaid invoices, invoice financing may be an option to consider. With invoice financing, you receive a payment for your unpaid invoices to resolve short-term cash flow issues.

Invoice Financing Invoice Factoring

Uses invoices as collateral for a line of credit

Sell invoices for immediate cash

You are granted a credit facility based on the value of your unpaid invoices, and can draw from your available funds at any time

Factor gives you an advance when the invoice is sent and sends you the rest once the customer pays (minus a factoring fee)

You are responsible for collecting invoice payments

Factor is responsible for collecting invoice payments

There aren’t strict requirements on credit scores, time in business, or annual revenues with invoice financing. The quantity and quality of the invoices are typically the most important factor. In other words, are the invoices enough to cover the lender’s fees, and are the customers likely to pay? If so, you have a good chance of qualifying for invoice financing.

While invoice financing is quick and easy, this type of loan doesn’t come without its drawbacks. Fees could be as high as 30% of the invoice total, making this a very expensive form of financing.

This is also a loan that fills a very specific niche: businesses that have cash flow issues because of customers that are slow to pay. If you don’t have unpaid invoices or the quantity or quality are not up to par based on the lender’s standards, another loan option will need to be explored.

8) Friends & Family

To get your startup off the ground, you may turn to an investor you already know: a friend or family member. Just because you know them, though, doesn’t mean that you should just expect them to lend to you. Instead, you should be prepared with a presentation similar to what you would give a bank to let your friend or family member know why they should place their bets on your business.

When working with friends and family, you’ll need to create a payment schedule and sign an agreement. Remember, everything should be in writing. There are even online platforms that help you create and sign agreements and set up a repayment schedule.

You can negotiate a deal with friends and family that works for both of you, which is something you can’t do with other lenders. However, business — especially a deal gone bad — has the potential to destroy relationships, so make sure everything is in writing and treat the business relationship just as you would with a formal lender.

Are You Prepared For A Startup Loan? What You Need To Do Before Applying

Once you’ve selected the type of loan you’d like to receive, you may be tempted to visit a lender or jump online to begin filling out your application. However, before you apply, there are a few steps you should take to ensure you’re ready to receive your funds.

Register Your Business

Before getting started, you’ll need to register your business. How you do this depends on your business structure. For most startups, naming your business, registering in your state, and getting a federal tax ID are the basic steps you need to take.

You’ll also need to find a registered agent in your state, file all state documents, and pay any applicable fees.

Get A Business Bank Account

Before applying for a loan, you’ll need to open a business bank account. A business bank account will be where any funds are direct deposited. A business bank account also makes it easy for bookkeeping purposes by keeping your personal expenses separate from business expenses.

Opening a business bank account will also help you establish a relationship with a bank or credit union. As your business expands, you can open additional accounts, such as a business credit card or loan, with your financial institution.

Check Your Credit Score

Credit score plays a huge role in most loans, so it’s always important to know your score before filling out an application. To see where your credit stands, go online to pull your free credit report and score.

To qualify for the best rates and terms, your score should be in the 700s. Scores in the high 600s still qualify for SBA loans and other affordable options. Scores that are in the low 600s and below will have more limited options with higher interest rates and terms that are not so favorable.

While you can still get a loan with a low credit score, it’s wise to boost your credit before applying to get a more affordable loan. You can do this by making your payments on time every month, avoiding hard inquiries, and paying down your debt to lower credit utilization. Find out more about how you can raise your credit score.

Make A Business Plan

One of the main challenges a startup will face is proving to the lender that their business will be successful. Since this won’t be documented by historical success, a startup will have to prove themselves in a different way: with a solid business plan.

To create a business plan, remember to have a few key elements including:

  • Executive Summary: An introduction to your business that summarizes your plan.
  • Business Outline: How does your business stand apart from the competition? What problem does your business solve?
  • Marketing Plan: How will you reach your target market and bring in customers?
  • Operations Details: An overview of your operations, including your location, available space, and equipment.
  • Financial Projections: How much profit you expect to make over a set period of time.

Prepare Financial Documents

When applying for a business loan, your lender will require personal and business documentation. Although requirements vary based on the type of loan and the lender’s requirements, you should be prepared with the following documents:

  • Personal tax returns
  • Personal financial statements for all owners
  • Balance sheet
  • Income statement
  • Business financial statements
  • Profit and loss statement
  • Business licenses and registrations

Decide How Much You Need

You should know how much money you want to borrow before applying for a loan. To do this, you’ll need to perform a few calculations. For example, if you need money to purchase inventory, get estimates from suppliers. If you’re purchasing new equipment, get a few quotes for the equipment you need.

When applying for a loan, you’ll need to tell the lender the exact amount you’re seeking, as well as an explanation of how the funds will be used. It’s also important to remember that just because you need it doesn’t mean you can afford it. Learn more about calculating the affordability of your loan.

Startup Business Loan FAQs

Do startup business loans require a down payment?

A down payment may be required based on the type of loan and the amount selected. A down payment shows a lender that you’re serious about your business and you have something to lose if the business is not successful.

Some SBA loans and personal loans require down payments. Other types of funding, such as invoice financing, do not have down payment requirements.

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

There are small business loans available for borrowers with bad credit. However, you should be aware that the interest rates for these loans are often much higher and your options are more limited.

If you have bad credit, loans such as equipment financing, business credit cards, lines of credit, and invoice financing are available. Term loans may also be available through alternative lenders.

To open up more options and get better rates, it’s best to work on boosting your credit before applying. However, if your financial needs are urgent, make sure to shop around for the most affordable option. Taking out a high-cost loan that doesn’t offer a good return on investment can throw you further into debt and drag your credit score down with it.

Can I get a startup business loan with no credit check?

Almost every lender will at least perform a soft pull of your credit to get an idea of where you stand in terms of credit. However, depending on the type of loan you select and the lender you choose to work with, other factors — such as the performance of your business — may play a larger role in approval than your credit score.

Conventional lenders like banks will always require a credit check, but there are a few alternative options available that do not have this requirement.

Do banks offer business loans to startups?

Banks have very strict lending requirements for business loans. Startups are seen as risky investments from a lender’s standpoint. While it isn’t completely impossible to receive a loan from a bank, it will be extremely difficult.

To qualify, a borrower must have a very high personal credit score, extensive industry experience, and very detailed business plans. Financial projections will also be required, in addition to other documentation proving that the business has a high chance for success — and paying back the loan.

Because it is so difficult for startups to qualify for bank loans, many startup owners turn to SBA programs for their funding needs. A government guarantee on loans takes some of the risk off of lenders while providing startup and small business owners with rates and terms that are competitive with bank loans.

What is the quickest way to get a loan for my startup?

There are several ways to get quick funding for your startup. Financing options like lines of credit, business credit cards, and short-term loans from alternative lenders can be approved in just minutes, giving you access to funding almost immediately.

However, a speedy loan comes at a price. These loans come with high interest rates, extra fees, and are much more expensive over the long term.

What type of startup business loan has the lowest interest rates?

SBA loans have among the most competitive interest rates among all business loans. If you have a high credit score, personal loans from banks and credit unions also have very low interest rates.

Final Thoughts

Getting a business loan for your startup may take research and a few additional steps, but don’t let a closed door leave you feeling defeated. Understand the types of loans to pursue, what you need to do before applying, and how to present your business, and you’ll soon be on your way to receiving the business loan you need.

The post Small Business Startup Loans: Your 8 Best Options appeared first on Merchant Maverick.

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