Business Loans For HVAC Companies

business loans for hvac companies

It’s hard to imagine modern life without the benefit of the work done by the HVAC industry. HVAC companies (HVAC refers to heating, ventilation and air conditioning) are tasked with keeping us warm in the winter, cool in the summer, and breathing safely as we live our lives in the archipelago of enclosed spaces that comprises our indoor universe.

With the economy in a period of expansion, demand for new construction has risen, and where the construction industry goes, so goes HVAC work. After all, these new offices, homes, and transportation systems aren’t going to keep themselves ventilated and comfortable.

As with any industry, HVAC companies have their own particular financing needs. There’s no shortage of loan products out there, offered by banks, online lenders, credit card issuers, and even the federal government. But you probably knew that already. The question most relevant to you is: Which types of loans best fit the specific financing needs you’re going to have in the course of operating your HVAC business?

That’s where Merchant Maverick comes in. We’ll help make sense of the lending market for you and direct you to the loan products that best fit your specific needs. Let’s get down to the nitty-gritty and delve into how to get a business loan for an HVAC company.

Financing Need Best Loan Type Recommended Lender
Marketing & Advertising Medium-Term Loan Fundation
Equipment Purchasing Equipment Loan Lendio
Business Expansion SBA Loan SmartBiz
Emergency Funds Business Credit Card Chase Ink Business Unlimited
Working Capital Short-Term Loan PayPal LoanBuilder
Covering Payroll Line Of Credit OnDeck

Loans For Marketing & Advertising

business loans for HVAC

Whether your HVAC company is just finding its legs and seeking to generate new leads or is established but working to expand, marketing and advertising are integral to an HVAC business’s success. Of course, such a campaign costs money, and the funds need to come from somewhere.

While we’re not here to tell you how to run your marketing campaign, here’s a quick tip: Reach out to people just before summer and winter begin. It’s when your services will be most in demand — for obvious reasons!

Medium-Term Loans

A medium-term loan is an installment loan (a loan that is repaid periodically over a defined period of time with interest) with a term length of between two and five years. You can typically borrow more with a medium-term loan, but if your anticipated marketing campaign won’t cost that much, a short-term loan would be appropriate.

A medium-term loan can obviously be used for any business purpose. However, since you should be able to more accurately estimate the cost of your marketing campaign than many other types of business expenses, a loan in which you borrow a specific amount of money is particularly appropriate here.

Recommended Option: Fundation

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Founded in 2011, Fundation has since become one of the leading “alternative” lenders, boasting competitive rates, a solid reputation, and fixed-rate pricing (the interest rate will not increase over the life of the loan). Fundation’s term loans max out at $500K; accordingly, Fundation’s borrower qualifications are stricter than those of many online lenders. Fundation also offers lines of credit of up to $100K.

Fundation’s installment loans are offered with terms of one to four years and are fixed-rate, meaning the assigned interest rate will remain unchanged over the life of the loan. Additionally, Fundation sports a rapid time-to-funding, typically between two and seven days.

Loans For Equipment Purchasing

business loans for hvac companies

The HVAC industry relies on heavy equipment — the bigger the building, the heavier the equipment. Of course, these heating and cooling systems don’t come cheap. While any loan products can be used to cover the cost of purchasing HVAC equipment, there’s one type of loan tailored for this purpose: Equipment loans.

Equipment Loans

In many ways, an equipment loan resembles a traditional installment loan — you’ll be paying down the principal plus interest with monthly payments. The advantage of the equipment loan is that the equipment you purchase with the funds serves as collateral. Equipment loans are therefore secured loans, and secured loans typically have better rates and terms than their unsecured counterparts.

With an equipment loan, the lender usually covers most of the cost of purchasing the equipment, leaving around 10% to 20% to be covered by you. On occasion, however, the lender might be willing to cover the entire cost.

Equipment Leases

An equipment lease is another means of equipment financing. Such leases fall into one of two categories: Capital leases and operating leases.

With a capital lease, you are considered to be the owner of the equipment in question, so the arrangement resembles a loan in many ways. You make your monthly payments throughout the course of the lease. Afterward, you pay a small residual to close your account.

An operating lease lets you essentially rent the equipment during the lease, making monthly payments. When the lease ends, you can either return the equipment or buy it at fair market value, giving you a nice degree of flexibility.

See our article on equipment loans vs equipment leases for more information.

Recommended Option: Lendio

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Lendio isn’t your typical lender. In fact, Lendio isn’t a direct lender at all. Lendio is a loan aggregator, which means that you submit a single loan application which Lendio then passes on to multiple lenders, saving you time and effort. Within about three days of submitting your application, you should be fielding multiple equipment financing offers.

Through Lendio, you can find an equipment loan as large as $5 million, with loan terms ranging from one to five years and interest rates as low as 7.5% for highly qualified borrowers.

Loans For Business Expansion

business loans for hvac companies

Let’s say your HVAC company has been thriving and is ready to expand to meet the challenges of our glorious future of relentless climate extremes. Without an infusion of cash, however, your expansion plans may not be feasible. If you’re looking for a sizable loan at a reasonable interest rate, consider an SBA loan.

SBA Loans

The Small Business Administration (SBA) is an agency of the federal government meant to assist small businesses in obtaining funding. For the most part, the SBA does not lend directly to businesses. Rather, it guarantees up to 85% of loans offered by SBA-approved lenders. These lenders are known as intermediaries.

While SBA loans feature competitive rates and terms, be warned that borrower requirements tend to be rather stringent.

Here’s a rundown of four of the main SBA loan programs with links to articles describing the programs in greater detail.

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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Recommended Option: SmartBiz

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There is no shortage of SBA-approved lenders out there. However, if you’re looking to grow your HVAC business with an SBA loan, you might find the complex SBA application process to be intimidating and fraught with peril. The beauty of SmartBiz is that the company helps simplify and streamline the application process for you so that you can make sense of it all.

SmartBiz is not a lender. Describing themselves as the “white knight in small business lending,” SmartBiz will match you with an SBA-approved lender after helping you through the onerous application process. You’ll need to have at least two years of business history behind you and a personal credit score of at least 650, but if you meet these and other requirements, you can get an SBA-backed loan of up to $350,000 with interest rates between 8% and 9%. Not too shabby!

Loans For Emergency Funds

business loans for hvac

Let’s say the construction industry takes a downturn, leaving you with less business. You still have employees to pay and expenses to cover. How should a company in your position deal with unexpected cash flow problems? When you need a flexible funding solution you can draw from on an as-needed basis, consider a business credit card.

Business Credit Cards

As business credit cards tend to feature higher interest rates than business loans, they aren’t an ideal funding mechanism in many instances. But when unexpected situations arise and you need a stop-gap measure to temporarily plug some funding holes, there’s nothing like the ease and convenience of a business credit card. With the right card, you can cover emergencies while earning rewards and/or cash back along the way.

A good credit history will help you get lower interest rates and a higher credit limit. However, even with a less-than-stellar credit history, there are options available to you, including secured credit cards, which require a security deposit.

If you’re unsure of your credit score, whatever you do, don’t pay for a credit check. Here are some websites that let you check your credit score for free.

Recommended Option: Chase Ink Business Unlimited

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 great way to cover those unexpected expenses while earning 1.5% cash back to boot. If you’re using a credit card to cover emergencies, you’re probably not looking for a card with rotating cash back spending categories or lavish travel benefits. The Ink Business Unlimited comes without these extraneous distractions so you can focus on getting your HVAC business out of a jam while earning cash back on everything you buy.

Keep in mind that you’ll need good to excellent credit to qualify for the Ink Business Unlimited. If your credit doesn’t fit that description, check out these options for business owners with poor credit.

Loans For Working Capital

loans for hvac businesses

Working capital refers to the money you use to keep your business running on a day-to-day basis. When times are good, your cash flow should be sufficient to keep your company running smoothly. The problem is that without extraordinary luck, times will not always be good, particularly in a field prone to seasonal slow-downs like the HVAC industry.

When seeking a loan for this purpose, you’ll want something that affords you a high degree of flexibility in terms of what you can spend your funds on. For this reason, a short-term loan may be worth your consideration.

Short-Term Loans

A short-term loan is an installment loan that must be repaid within 12 months or less. Payments must be made on a weekly or even daily basis and are normally deducted automatically from your business account. If approved, you can usually get your funds within a few days. Short-term loans are all about fast money, both in terms of getting the money and paying it back.

Instead of charging interest on what you borrow, short-term lenders charge you a flat fee known as a factor rate. This factor rate is a multiplier that determines the lender’s fee. I’ll give an example: Take out a $50,000 loan at a 1.2 factor rate, and you’ll be paying $60K for the loan over the agreed-upon term length.

Recommended Option: PayPal LoanBuilder

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PayPal’s LoanBuilder is what the name suggests. You essentially build your own loan by customizing its elements to fit your particular situation. The loans offered range from $5K to $500K and term lengths run from 13 to 52 weeks.

LoanBuilder’s lender requirements aren’t terribly strict. Your business must have been running for at least 9 months. Your annual revenue must be at least $42,000 and your personal credit score must be at least 550. As ever, your credit history and your company’s overall health will determine your maximum borrowing amount and your rates.

Loans For Covering Payroll

 

Heating and cooling systems don’t install themselves. To ensure that our apartments, workplaces, and shopping centers don’t become unlivable nasty hellscapes, an HVAC business needs workers. Workers need to be hired, trained, and paid, all of which costs money.

If you need help hiring new employees (or paying the ones you already have), consider a line of credit.

Lines Of Credit

A line of credit operates on the same principle as a credit card. Instead of receiving a lump sum of dinero all at once, you’re given a credit line you can draw from whenever you feel the need. As with a credit card, you’ll have a credit limit to contend with, and you pay fees and interest only on the funds you use, not the total amount of the line of credit.

Recommended Option: OnDeck

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If you need funding quickly, consider a line of credit from OnDeck. Approval should come in a matter of days, and the credit requirements are not particularly strict. Your credit line can run anywhere from $6K to $100K.

One thing to keep in mind about OnDeck’s lines of credit is that they are a short-term funding mechanism, lasting only about 6 months.

What To Consider When Choosing A Lender

business loans for hvac businesses

For business owners seeking a loan, there has never been a wider array of funding options. To help narrow down your search, consider the following questions.

Why Do I Need A Loan?

Before you can even start looking at particular options, you need to be certain of the purpose of your loan. Whether you’re looking to expand your business or purchase new equipment, only by defining your precise need can you select a loan product that fits what you seek to accomplish. Otherwise, you’re flying blind without any point of reference.

No one lender or loan makes sense for every business need under the sun. Know what it is that you need and shop accordingly!

Am I Qualified?

There’s no need to examine a lender in detail if you won’t qualify for its loans in the first place. Try to find and examine a lender’s minimum qualifications before going through the terms and fees with a fine-toothed comb.

Vendors of business loans nearly always inquire about your time in business, credit rating, and revenue. On each of these measures, the lender may have a strict cutoff point where, if you don’t meet the benchmark, you don’t qualify. Alternately, they may just use this information to determine your rates. Either way, it’s information you’ll need to provide.

Do The Rates & Terms Meet My Needs?

It’s obviously important to consider a lender’s rates and terms when deciding on what loan to pursue. Make sure you can afford the funding; nothing will give you nightmares like taking out a loan you can’t repay. However, a lender’s reputation and business practices are equally important. To get a sense of just how a lender treats its customers, try to find user feedback on the company in question wherever you can. Read enough reviews (we do business loan reviews, you know!) and borrower feedback and you’ll get a pretty good idea as to whether the lender is an honest broker or a predator fixing to bleed you dry.

What You Need To Apply For HVAC Business Loans

The number of documents you’ll have to round up depends on the lender. Naturally, you’ll need the basics — name, business name, address, telephone number, email address, social security number, and federal tax ID number. Many lenders will require much more, however. Here are some documents you should be prepared to submit, depending on the lender:

  • Business & Personal Credit Reports/Score
  • Business & Personal Bank Statements
  • Business & Personal Tax Returns
  • Profit & Loss Statements
  • Balance Sheets
  • Income Statements
  • Business Licenses
  • Business Owner Resumes
  • A Business Plan

For a more thorough look at how to apply for a business loan, read our in-depth take on business loan requirements.

Final Thoughts

Now more than ever, we need the HVAC industry at the top of its game. As I write this, wind-driven fires have spread dangerously smoky air over large parts of my tinder-dry home state of California, and proper indoor ventilation is literally the last line of defense for many in the affected areas.

When seeking a loan for your HVAC company, do your due diligence, explore all your options, and get your documents in order. This should set you up nicely for getting the loan that paves the way for your success.

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

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Financing And Loan Options For Manufacturing Companies

Operating a manufacturing business is extremely rewarding. Whether you’re creating products that ship directly to retailers or you’re working with other manufacturers, the potential for profits is great. However, as you’ve likely already seen in your business, owning a manufacturing company isn’t all smooth sailing. In order to make those big profits, you have to invest in your business.

Once you have steady cash flow, it’s easy to cover day-to-day operating expenses. But what happens when your bank account is running a little low or a major expense poses a threat to your operations? From emergencies to expansions to cash flow shortages, there are multiple scenarios where you fall a little short financially.

Instead of worrying, take action. When your manufacturing business has an expense you can’t handle on your own, there are loan and financing options for any situation. Don’t panic if you’re unsure of where to start. In this post, we’ll cover the types of loans available for your business, how to choose the right lender, and what to expect when it’s time to apply.

Read on to learn more and take the next step to fund your manufacturing business.

Financing Need Best Loan Type Recommended Lender
Purchasing Equipment Equipment Financing Lendio
Purchasing Materials Line Of Credit FundBox
Business Expansion SBA Loan SmartBiz
Cash Shortages Invoice Factoring BlueVine
Hiring, Training & Covering Payroll Term Loan OnDeck
Marketing & Advertising Business Credit Card Chase Ink Preferred

How To Finance A Manufacturing Company

Your business is unique, and so are its financial needs. The type of loan or financial product you select is primarily centered on how you plan to use your funds. For example, if you want to purchase real estate, you should seek out long-term, low-interest options instead of a short-term loan. If you need to cover this month’s payroll, an equipment loan won’t help you out. The key is to identify why you need the money and select the right financial solution for your situation.

Purchasing Equipment

No matter what type of manufacturing business you operate, you need equipment to keep operations running efficiently. If you manufacture clothing or garments, sewing machines and pressing machines are essential equipment. If you operate a furniture manufacturing business, your business needs saws, planers, sanders, and other expensive tools and equipment.

Over time, your equipment may become old and outdated. Or maybe your equipment is still in good working order but you need to add more as part of an expansion. Either way, buying equipment doesn’t come cheap, and funding these expenses out-of-pocket can be tough, if not impossible. Instead of breaking the bank, you have a more affordable option: equipment financing.

Equipment Financing

When you receive an equipment loan, your lender will fund the full purchase price of your equipment. After paying a small down payment of 10% to 20%, you can take possession of the equipment and put it into use immediately. Then, you’ll simply make scheduled payments to your lender, which are applied to the balance of your loan (and toward any additional fees and interest charged for taking the loan).

With a high credit score, you may be able to qualify for $0 down financing. However, if at all possible, you should make a down payment to lower your scheduled payments and reduce the overall cost of borrowing.

Equipment loans can only be used to purchase equipment, including machinery, tools, furniture, fixtures, and vehicles. When you receive equipment financing, additional collateral is typically not required. Instead, the equipment being financed serves as the collateral and can be repossessed if payments are not made as agreed. Once your loan has been paid off, the equipment is yours to keep, sell, or trade.

Equipment leases are another option to consider. When you take out an equipment lease, you can use the equipment for a set period of time, such as 2 years. At the end of your lease, you have two options: pay a lump sum to purchase the equipment or return the equipment and sign another lease for new equipment. Unless you pay the remaining balance at the end of the lease, you will never take ownership of the equipment. This may be a good option for you if you update your equipment frequently or if you desire a lower down payment and lower monthly payments.

Recommended Option: Lendio

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Lendio isn’t a lender; rather, it is a loan aggregator that matches you with a lender that best fits your needs. One of the financial products offered through Lendio’s service is equipment loans.

Through Lendio, you can apply for $5,000 to $5 million to finance your equipment purchase. Repayment terms are available from 1 year to 5 years, with interest rates as low as 7.5%.

To qualify with a lender through Lendio’s network, a time in business of at least 12 months is required. You must also have at least $50,000 in annual revenue and a personal credit score of 650. If your credit score falls below this threshold, solid cash flow and revenue could still help you qualify for financing.

Purchasing Materials

Image of hands holding credit card and pressing a keys of keyboard

As a manufacturer, you need materials to manufacture your goods to sell to other manufacturers or retailers. When you don’t have the right materials, you can’t produce your goods, which negatively affects your revenue. If financial troubles prevent you from buying the materials you need, keep your business operating without a hitch by using a line of credit for your purchases.

Lines Of Credit

A line of credit is a flexible form of revolving credit. Instead of receiving a lump sum payment, your lender will assign a credit limit. You can make draws from your credit line as often as you need for any amount within your set limit. This is ideal when you need to make multiple purchases over a period of time or you’re unsure of the exact amount of money you need.

You can use your line of credit for any business expense, including purchasing supplies, materials, and inventory. Once you make a draw from your line of credit, the funds are typically transferred immediately and will be deposited in your business bank account as soon as the next business day. Interest or fees are charged only on the used portion of the credit line. As you pay down your balance, the funds will become available for you to use again.

It’s easy for most business owners to qualify for a line of credit. However, the best rates and terms and the highest credit limits are given to the most established, creditworthy businesses.

Recommended Option: FundBox

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FundBox provides revolving lines of credit up to $100,000. When you make a draw, payments are made over a period of 12 or 24 weeks. Equal payments are made weekly and are withdrawn directly from your checking account.

Fees for drawing from your Fundbox line of credit start at 4.66% of the total draw amount. Your fee will be based on the health of your business. If you repay early, any remaining fees are waived, helping you save money.

To qualify for a Fundbox line of credit, you must have a business checking account and at least $50,000 in annual revenue. You must show two months of activity in Fundbox-supported accounting software. If you don’t have activity in accounting software, bank statements from the last three months are acceptable.

Business Expansion

Your business is growing, and it’s time to expand. There’s just one problem: expansion costs money that you don’t have. Purchasing commercial real estate, funding improvements for your facility, building an addition, or constructing a new building all come at a price that even the most successful manufacturing companies can’t pay up front. When it’s time to expand your business, move forward with confidence with the help of a Small Business Administration loan.

SBA Loans

The Small Business Administration provides a variety of resources to help small business owners succeed. One of the best resources is the organization’s low-cost, flexible loan options. SBA loans are available through lenders known as intermediaries. This could be banks, credit unions, or nonprofit organizations.

If you’ve applied for a business loan through a traditional lender like a bank, you may have been turned down. With an SBA loan, your chances for approval are higher because these loans are guaranteed by the government in amounts up to 85%, so there’s less risk for the lender.

One of the most popular types of loans for large expenses like business expansion is the 7(a) loan. With a 7(a) loan, up to $5 million is available to qualified businesses for nearly any business purchase, including commercial real estate, land development, improvements and upgrades, equipment, and more. Loan terms are set at 10 years for most purposes, although real estate purchases have terms up to 25 years.

The cost of borrowing varies based on the type of loan you select and the amount borrowed. The SBA has a set of standards used by its intermediary lenders to keep interest rates low, making loans more affordable for business owners.

Recommended Option: SmartBiz

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Applying for an SBA loan doesn’t have to be difficult or stressful when you work with a lender like SmartBiz. SmartBiz simplifies the SBA application process, helping you get the money you need as quickly as possible.
There are two types of SBA loans available through SmartBiz: working capital and debt refinancing loans and SBA 7(a) commercial real estate loans.

With working capital and debt refinancing loans, you can apply for $30,000 to $350,000 to use for business expansion, marketing, hiring employees, purchasing inventory, or refinancing existing debt. Interest rates are between 8% and 9% with repayment terms of 10 years. To qualify, you must be in business for at least 2 years and have a personal credit score of at least 650.

SmartBiz also offers SBA 7(a) commercial real estate loans from $500,000 to $5 million. You can use these funds to purchase a new commercial property or refinance your existing property. Rates are between 6.75% and 8% with repayment terms of 25 years. To qualify for this loan, you must be in business for at least 2 years with a credit score of at least 675. Any property funded with loan proceeds must be at least 51% owner-occupied.

Additional requirements for SBA loans include no outstanding tax liens, recent charge-offs, or defaults on government loans. You must not have any bankruptcies or foreclosures within the last 3 years. You must also qualify as a small business based on the SBA’s definition, which limits your company’s net worth, number of employees, and annual revenues.

Cash Shortages

Cash shortages happen to everyone. A seasonal drop in sales, an unexpected emergency expense, or another situation could leave your bank account running a little short. Sometimes, the real problem is your unpaid invoices. For times when money is tight, invoice factoring can help make up for these shortages.

Invoice Factoring

Unpaid invoices can leave you in a financial bind. Instead of waiting weeks or months to receive payment, consider invoice factoring. If you’re a B2B business and you have unpaid invoices, you may qualify for this type of financing. With invoice factoring, a lender pays a large portion of an unpaid invoice directly to you. Once the invoice is paid by the customer, the remaining amount of the invoice is paid to you after the lender takes any fees charged for the service.

With invoice factoring, the invoices are the collateral for the loan. A high credit score is typically not needed to qualify. Your invoices are the most important factor in this type of financing. A lender will ensure that your invoices are a sufficient amount to cover any fees. Lenders will also make sure that your invoices are for customers who are likely to pay.

Recommended Option: BlueVine

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BlueVine has invoice factoring lines up to $5 million. Rates may be as low as 0.25% per week. You can receive approval in as little as 24 hours when working with BlueVine.

To qualify, you must be in business for at least 3 months and have at least $100,000 in annual revenue. You must be a B2B business and have a personal credit score of at least 530.

Hiring, Training & Covering Payroll

It’s time to expand your business, which means hiring and training new employees, but your funding falls short. Maybe you’re not ready for expansion, and your business is struggling just to cover your current payroll. No matter the situation, a term loan can help.

Term Loans

When you apply for a term loan, you’ll receive a lump sum of money that can be used for any purpose, including hiring, training, covering payroll, or for use as working capital. The terms of these loans vary. While some lenders provide loans for up to 12 months, other lenders may offer repayment terms of several years.

If you’re applying for a short-term loan, one difference you may notice is that a factor rate is used to calculate how much you owe. This multiplier is used to determine the one-time fee that is added to the cost of your loan, replacing a traditional interest rate. The factor rate is based on the lender’s policies, as well as the creditworthiness of the borrower.

Other term loans have a traditional interest rate. Your interest rate and repayment terms will be based upon your creditworthiness and ability to pay back the loan.

One thing to note is that some term loans, such as short-term loans with low borrowing requirements, come at a very high cost. As with any other type of financing, shop around to find the best rates and terms for your business.

Recommended Option: OnDeck

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OnDeck has loan options up to $500,000 for qualified borrowers. There are two different loan options available. Short-term loans come with repayment terms between 3 and 12 months. These loans have simple interest starting at 9%.

Loan options with longer terms are also available. These loans come with terms of 15 to 36 months with annual interest rates starting at 9.99%.

For all loans, origination fees are charged by the lender. For the first loan, fees are between 2.5% and 4% of the total loan amount. Subsequent loans have reduced fees.

To qualify, you must be in business for at least one year and have a gross annual revenue of $100,000. You must have a personal credit score of at least 500 to qualify. Daily or weekly payments are automatically deducted from your checking account.

If you’re looking for other financing options, OnDeck also has lines of credit up to $100,000.

Marketing & Advertising

You want to get the word out about your business to bring in more customers and increase your revenue. Word-of-mouth and free social media advertising may bring more customers your way, but you’re not going to scale at a higher level until you launch a paid marketing and advertising campaign.

Marketing and advertising can get expensive very quickly, although the return on investment is often high enough to justify this expense. But what happens when you just don’t have the extra funds to market and advertise your business and services? A business credit card can help, and you can even be rewarded just for using it.

Business Credit Cards

One of the best things about a business credit card is that it can be used any time for any business purpose. When you have marketing and advertising expenses that need to be covered, you won’t have to wait days or weeks to get financing approval. Instead, you’ll be able to use your credit card immediately to cover the expense.

A business credit card is great for marketing and advertising campaigns because you won’t have to request a specific amount. You can use your card as needed to cover any expense, whether it’s marketing and advertising costs or an emergency expense.

When you’re approved for a business credit card, your lender will provide you with a credit limit. Your purchases can’t exceed the credit limit assigned to your card. You can make multiple purchases with different vendors as needed provided you don’t exceed your credit limit. Each month, you’ll pay at least a minimum payment that will be applied to the borrowed balance and the interest charged on used funds.

Business credit cards can be a very expensive form of financing if you only make the minimum payment each month. Cut down on the amount of interest you pay and the overall cost of borrowing by using your credit card responsibly and paying all or a significant portion of your balance each month.

Business credit cards are available for all types of credit situations. Borrowers with the highest scores will receive the lowest rates and highest credit limits, in addition to the best rewards cards, introductory rates, and bonus offers. There are options available for fair credit scores that come with higher rates and lower limits. For bad credit borrowers, a secured card requires a cash deposit but helps you rebuild your credit and qualify for additional cards and financial products with responsible use.

Recommended Option: Chase Ink Business Preferred

Chase Ink Business Preferred



Apply Now 

Annual Fee:


$95

 

Purchase APR:


17.99% – 22.99%, Variable

If you have good to excellent credit and need a business credit card, consider applying for the Chase Ink Business Preferred card. This card has a variable APR of 17.99% to 22.99%. There is a $95 annual fee associated with this card.

This credit card is great for marketing and advertising expenses. You’ll earn 3 points for every $1 spent on advertising purchases with search engines and social media platforms. You’ll also earn 3 points for every $1 for shipping purchases, travel, cable, internet, and phone purchases. It’s important to note that this offer is only valid for the first $150,000 spent in combined purchases.

For all other purchases, you’ll receive 1 point for every $1 spent. If you redeem your points for travel through Chase Ultimate Rewards, they’re worth 25% more, giving you the most bang for your buck.

The Chase Ink Business Preferred Card also has a bonus offer of 80,000 points when you spend at least $5,000 within three months of opening the account.

Does The Government Offer Loans For Manufacturing Companies?

There are so many options when it comes to financing your manufacturing company. You have traditional lenders like banks and credit unions. You have alternative lenders that you can seek out online. You even have government loan options available to you.

One of the most popular government loan options has already been discussed in this post: SBA loans. These loans are backed by the government, so lenders feel more comfortable approving them since there’s less risk. In addition to the 7(a) loan that is open to any qualified small business owner, the SBA has programs for veterans, startups, and businesses operating in underserved areas.

Another option to consider is the United States Department of Agriculture’s Business & Industry Loan Program. This government-backed loan program allows lenders to provide affordable loans to businesses that don’t qualify for traditional financing. Any business that saves or creates jobs in a rural area is eligible to apply. This includes manufacturing businesses.

These loans can be used for almost any purpose, including acquiring a business, updating or constructing facilities, purchasing equipment and supplies, paying startup costs, or for use as working capital. Loan proceeds can also be used to refinance certain types of debt. These loans come with terms between 7 and 30 years. Most loans distributed through this program are between $200,000 and $5 million.

The Best Loan Options For Starting A Manufacturing Business

The options previously discussed work well for established businesses, but what happens when you need financing for a manufacturing business that hasn’t even been started yet? You need capital to fund your venture, but it seems impossible to receive a loan … or is it?

If you need capital to start a manufacturing business, you have to know where to look. At times, you may even have to get a little creative. Since traditional lenders like banks prefer to work with low-risk borrowers, you won’t be able to receive a loan, right? Not exactly. If you have a high personal credit score, you can apply for a personal loan through your bank, credit union, or another lender for money to start your business. Since it’s a personal loan and not a business loan, your business information — or lack thereof — won’t be a consideration for approval. You will, however, need a solid credit score and income that is sufficient to pay back the loan.

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

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

If you don’t want to go that route, there are additional options. Microloans are perfect for startups and new businesses. The SBA Microloans program provides up to $50,000 for startups, new businesses, and established companies. These loans are available through nonprofit intermediary lenders. Other nonprofit organizations also provide microloans to eligible business and startup owners.

You can also look to private investors. Peer-to-peer loans have less stringent requirements than traditional loans and may be an option to explore. You can also spread the word about your business and appeal to investors with crowdfunding. If you have a family member or friend that believes in your business and has money to invest, a loan from that person is a possibility. Just remember, no matter who gives you the money, borrow responsibly, read and understand all contracts, and pay your loan as agreed to start your business off on the right foot.

What To Consider When Choosing A Lender

5 C's of Credit: What Lenders Look For

Now that you’re familiar with the types of loans available for your manufacturing business, you may be tempted to jump online and start an application. Before you apply, you still need to choose a lender. The internet gives us access to more lenders than ever, so you may be tempted to just pick and choose based on what your search engine pulls up. However, a smart business owner knows the importance of shopping around for the best rates and terms.

Before you choose a lender, consider these factors to help narrow down your choices so you can feel confident that you’ve selected the most affordable financing option for your situation.

What Is The Loan Used For?

This question should be easy to answer. Why do you need money? Once you know how you’re using the money, you can choose the type of loan that’s best for the situation. For example, if you need a more flexible option for making purchases or in case of an emergency, apply for a line of credit or credit card. If you want to make an expensive real estate purchase, you don’t want a high-cost, short-term option. Instead, an SBA loan would be the best choice.

Once you know which type of loan you need, you can narrow your search to include only those lenders offering these products. You won’t apply with a short-term lender for an SBA loan or a lender that specializes in equipment loans when you need a flexible line of credit. Choose your loan, then narrow down your pool of lenders based on your business needs.

How Much Money Do I Need?

This is another simple question. How much money do you need? If you want to purchase equipment that costs $150,000, a lender that has maximum loan amounts of $100,000 won’t be a match. Before you fill out an application, calculate how much you need, how much you can afford, and find a lender that offers that amount.

Do I Qualify?

Applying for loans you won’t qualify for is simply a waste of time. If a lender has annual revenue, time in business, or credit requirements you just don’t meet, move on to another option. If you have challenges in these areas, find a lender that works with your specific situation. For example, if your credit score is low, consider loan options that are based on the performance of your business. If you have a new business, apply for loan options that work for startups and new businesses, like microloans. Also, take collateral and down payment requirements into account when selecting your lender and applying for a loan.

One important step to take before you apply for a loan is to know your credit score. Pull your free credit score online and review your credit report for errors. If your financing need isn’t immediate, take steps to raise your score if it’s low. With an improved credit score, you’ll qualify for more financing options that are more affordable and come with more favorable terms.

Do The Rates & Terms Work For My Business?

A loan may help you out right now, but you have to consider whether it will benefit your business over the long term. You want to select a lender that offers loans with the lowest rates and best terms you are qualified to receive. A short-term loan may be funded fast, but daily payments and a high factor rate could become a burden. In this situation, you could save hundreds or even thousands of dollars by waiting for a long-term option with better rates and terms.

Of course, in some situations, getting a loan quickly is important. Even so, shop around to make sure that you get a loan that you’ll be able to afford that has payment terms that are best for your business.

What You’ll Need To Apply For A Loan

Some types of financing for your manufacturing business require very little information about yourself and your business. For example, your name, business name, federal tax ID, social security number, contact information, and annual revenue may be all that’s required to qualify for a business credit card. However, there are other loans that require much more information and documentation before you’re approved.

Before you apply, you can get the specific requirements from your lender. However, you may want to go ahead and gather a few documents, including:

  • Business & Personal Tax Returns
  • Business & Personal Credit Scores/Reports
  • Business & Personal Bank Statements
  • Profit & Loss Statements
  • Balance Sheets
  • Licenses & Articles Of Incorporation
  • Business Plan
  • Future Projections
  • Account Numbers & Balances If Refinancing Debt

Your requirements may vary based on the lender you select, the type of loan you’re applying to receive, and the amount of your loan. Sometimes, a lender may even require additional information after you’ve submitted your application and documentation. Be prepared to offer this additional information promptly to move one step closer to approval and funding.

Final Thoughts

You need money just to keep your manufacturing business operating each day. This amount increases even more when you face a challenging situation, from growth and expansion to emergency expenses.

When you need money, it’s important to not stress yourself out over the situation and remember that you have financial options. Take a deep breath, run some calculations, pick your lender, and apply for the financing you need. You’ll be out of your financial rut and heading toward success again in no time.

The post Financing And Loan Options For Manufacturing Companies appeared first on Merchant Maverick.

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Business Loans And Other Financing Options For Wholesale Distribution Companies

Wholesale distributors play a critical role in the retail supply chain. It is crucial for a wholesale distributing business to be a well-oiled machine: storing manufacturers’ products, then shipping them as needed to retailers, which then sell these products to customers. If the wholesale distributor fails in its critical tasks, retailers won’t have the products they need, leading to many unhappy customers.

Like it is for other businesses, one of the most important resources for the success of a wholesale distribution company is capital. Heavy equipment, warehouse space, and inventory requirements are just a few of the big expenses these companies face. Incoming cash flows certainly help fund day-to-day operations, but what happens when more capital is needed than is readily available in your checking account?

If you’re running short on funds, a business loan can help. Before signing the dotted line for a loan, read on to explore the different types of financing available to you, which options are best for your situation, and how to kick-off the application process.

Financing Need Best Loan Type Recommended Lender
Purchasing Equipment Equipment Financing Lendio
Business Expansion SBA Loan SmartBiz
Purchasing Inventory Line Of Credit Kabbage
Cash Shortages Invoice Financing BlueVine
Emergency Funding Business Credit Card Chase Ink Business Unlimited

Why Take Out A Loan For A Wholesale Distribution Business?

If you’re in the wholesale distribution business, you may be familiar with situations where you’re running a little short on cash. Whether your business is booming and you need to expand your facilities or your bank account is too low to purchase inventory for a seasonal uptick, there will be times when you need extra money.

With a business loan, you’ll receive the money you need right away with the benefit of being able to pay it back over time. Since there are many different types of loans, the type you choose should be based on the unique financial needs of your business.

Purchasing Equipment

As a wholesale distribution company, your business is reliant upon heavy equipment. From forklifts and pallet jacks that are used in your warehouse to delivery vehicles, software, and mailing systems, your business requires equipment to be efficient. Unfortunately, this equipment doesn’t come cheap.

Whether you’re updating your equipment or adding new equipment as part of your expansion, make these large purchases more affordable for your business by applying for equipment financing.

Equipment Financing

Equipment financing is a type of funding that is used for the purchase of equipment. Instead of paying the full cost up front, you’ll pay a smaller down payment — typically 10% to 20% of the equipment’s cost — and be able to put the equipment into use immediately. You’ll make payments on a scheduled basis to your lender on the balance of the loan. Interest is also charged by the lender for providing the service. The equipment purchased with loan proceeds is the collateral for this type of financing.

There are two main types of equipment financing to consider: equipment loans and equipment leases. With an equipment loan, you’ll make a down payment, followed by regularly scheduled payments. At the end of the repayment term, you take ownership of the equipment. At this time, the equipment is yours to keep, sell, or trade. You own it free and clear.

With an equipment lease, you may also pay a down payment, although it’s typically lower than the down payment required with an equipment loan. You’ll make regular payments for the duration of the lease, which is typically around 2 years. Once your lease is over, you return the equipment and upgrade with a new lease, or you may have the option to pay a lump sum to take ownership of the equipment. While you’re essentially “renting” the equipment, a lease may be a consideration if you want a lower down payment or if you upgrade your equipment frequently.

Credit and revenue requirements vary by lender, but borrowers with solid credit histories and strong businesses qualify for the lowest rates, best terms, and lower down payments.

Recommended Option: Lendio

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Lendio isn’t a direct lender. This loan aggregator allows you to submit just one application to connect with multiple lenders, so you can shop for a loan more efficiently. Through Lendio, you’ll find the most affordable equipment loan for your situation.

Lendio offers access to equipment loans from $5,000 to $5 million. Loan terms are spread out over 1 to 5 years, with interest rates as low as 7.5% for the most qualified borrowers.

To qualify, you must be in business for at least 1 year, have a minimum annual revenue of $50,000, and a personal credit score of at least 650. If your credit score doesn’t meet the minimum requirements, you may qualify based on your cash flow and revenue over the last 3 to 6 months.

Business Expansion

Expansion is a good sign — it means that your business is growing. The drawback, however, is that expanding your business takes money, and you may be stalling because you don’t have the funds. When your business is ready to grow, follow the lead of other smart business owners by applying for a Small Business Administration loan.

SBA Loans

The Small Business Administration, or SBA, has loan programs to provide affordable, flexible financing for businesses that encounter difficulties when applying for loans from traditional lenders.

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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SBA loans are backed by the government in amounts up to 85%, so there’s less risk for lenders and higher rates of approval when compared to bank or credit union loans.

There are several programs offered by the SBA. One of the most popular is the 7(a) program. SBA 7(a) loans can be used for almost any business purpose, from real estate purchases to working capital. With a 7(a) loan, you receive up to $5 million with repayment terms up to 25 years. Interest rates are set by the SBA, so these loans are extremely competitive and affordable. SBA 7(a) loans are available through SBA-approved lenders known as intermediaries.

When you’re expanding your business, 7(a) loan funds can be used to purchase land or real estate, pay for improvements in your facilities, or purchase equipment. High borrowing amounts, low interest rates, and flexible usage make 7(a) loans a popular choice among business owners.

For business expansion, another SBA loan to consider is the CDC/504 loan. Through this program, up to 40% of your project costs are funded by an SBA-approved Certified Development Company. A traditional lender provides 50% of the project costs, while you’re responsible for the remaining 10%.

Recommended Option: SmartBiz

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If you’re familiar with SBA loans, you’ve probably heard that the application process is difficult and time-consuming. If the process is intimidating to you, SmartBiz has made it easier for business owners to receive the capital they need.
SmartBiz offers SBA commercial real estate loans for $500,000 to $5 million for qualified borrowers. The interest rate is set at the base rate plus up to 2.75%. As of November 2018, rates are between 6.75% and 8%. Repayment terms are available up to 25 years.

With a commercial real estate loan, you can refinance your commercial mortgage, purchase the property you’re currently occupying, or buy a new commercial property.

SmartBiz also offers working capital and debt refinancing loans between $30,000 and $350,000 with rates between 8% and 9%. Repayment terms for these loans are 10 to 25 years. Loans can be used to purchase equipment, hire new employees, or for other business expansion plans.

To qualify for SBA working capital loans, a minimum credit score of 650 is required. Commercial real estate loans require a credit score of at least 660. The time in business requirement is at least 2 years. No bankruptcies or foreclosures within the last 3 years, open tax liens, and outstanding collections should appear on your credit report.

Anyone who has been delinquent or defaulted on a government loan in the past is not eligible to receive an SBA loan. If real estate is being purchased, the property must be at least 51% owner-occupied. Your business must also be considered a “small business” as defined by the SBA. Depending on the amount of the loan and your credit history, collateral may be required.

Purchasing Inventory

Your retailers depend on you to ship the inventory they need for their brick-and-mortar and online shops. If you don’t have the inventory in stock, you can’t make your shipments. If you don’t make your shipments, you lose business and the revenue that comes with it.

It’s not uncommon to face financial burdens that make purchasing inventory more difficult. A seasonal increase in orders that brings higher expenses, an unexpected emergency, or another situation could prevent you from purchasing needed inventory. Fortunately, there’s a solution: a line of credit that can help you through these tough financial times.

Lines Of Credit

A line of credit works like a credit card. However, instead of using a card to make purchases, you make draws from your line of credit. With every draw, the money is sent directly to your checking account. These funds can be used for any business expense, including the purchase of inventory.

A line of credit is a flexible financing option. Instead of receiving a lump sum for a specific amount, your lender will provide you with a credit limit. You can make multiple draws as needed up to this credit limit. You only pay fees or interest on the portion of the credit that has been used. Most lenders initiate transfers immediately, so you can have funds as soon as the next business day.

Rates, repayment terms, and credit limits vary. With most lenders, a solid credit score yields the best interest rates and terms. If you have a low personal credit score, there are lenders that evaluate the performance of your business to approve your line of credit and set your credit limit.

Recommended Option: Kabbage

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Kabbage provides lines of credit up to $250,000. Depending on the amount borrowed, repayment terms are set at 6 or 12 months. Kabbage charges a monthly fee with rates between 1.5% and 10% on the borrowed portion of funds. If you pay your balance off early, you’ll save money on monthly fees.

To qualify, you must be in business for at least one year. Revenue requirements are as follows: $50,000 in annual revenue or $4,200 in monthly revenues for each of the last three months. When you apply for a line of credit, you’ll link your business accounts — including PayPal, QuickBooks, eBay, and your business checking — so that the lender can assess the health of your business and issue your approval and credit limit. There are no personal credit requirements to qualify.

The application process takes fewer than 10 minutes, and you can be approved immediately. When making draws, transfers are immediate and you can receive your funds as soon as the next business day. However, Kabbage also offers the Kabbage card, which gives you instant access to the funding you need. When using your Kabbage card, a new loan will be taken out with the same rates and terms as traditional draws.

Cash Shortages

Cash shortages happen in any business. In the distribution industry, there are a number of reasons this can occur, including slow-paying customers. It’s not uncommon to have unpaid invoices that have impacted your incoming cash flow. If you’re facing this problem and waiting for payments is affecting your operations, why not use invoice financing to help fill in the gaps?

Invoice Financing

Invoice financing is available for B2B business (like distributors) that are suffering from unpaid invoices and need money immediately to cover business expenses.

The invoices serve as the collateral, and with many lenders, you don’t need a high personal credit score to receive a loan. Instead, the lender will consider the quality and quantity of your unpaid invoices. Your invoices should be of a sufficient amount to cover any fees or interest associated with a loan, and your invoices must be for customers who are likely to pay.

Invoice factoring is one type of invoice financing. The lender pays a portion of the unpaid invoice directly to you. After the lender collects payment from your customer, you’ll receive the remaining balance after fees and interest have been taken out.

With invoice discounting, you’ll receive most of the balance up front. After you collect payment from your customers, you’ll repay the loan along with interest and fees to the lender.

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

Recommended Option: BlueVine

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BlueVine is a lender that provides invoice factoring lines up to $5 million. The factoring fees for receiving the line of credit start at 0.25% per week. BlueVine pays 85% to 90% of your invoice amount up front, and pays the remainder, minus fees, after the invoice is paid.

To qualify, you must have a minimum personal credit score of 530 and a time in business of at least 3 months. You must be a B2B business with qualifying invoices and at least $100,000 in annual revenue. The application process takes about 10 minutes, and you can be approved for financing as quickly as 24 hours after applying.

Emergency Funding

Emergencies happen, and often, these emergencies come with unexpected expenses. When these emergencies occur, time is of the essence. A flexible form of financing, like a business credit card, can help you get over these financial hurdles and even reward you for responsible borrowing.

Business Credit Cards

A business credit card is a great resource to have if an emergency arises. Once you’ve been approved for a business credit card, you can put it into use immediately. You won’t need additional approval to use your card, and you won’t have to wait on money transfers.

Once you’re approved for a business credit card, your lender will set a credit limit. You can make multiple purchases as needed up to this credit limit, so you can cover your emergency, purchase supplies and inventory, or tackle other business expenses. The borrowed portion of funds will incur interest based on the rate assigned by the lender. The sooner you pay down or pay off your balance, the more affordable this financing becomes. As you pay down your balance, funds become available to use again.

With a solid credit history, you’ll receive lower interest rates and a higher credit limit. There are options available for high-risk borrowers with low credit scores, including secured cards, which require a deposit and can help build credit.

Some of the best business credit cards have rewards programs. With every purchase, you’ll receive points to redeem for perks or cash back offers as a reward for responsible use.

Recommended Option: Chase Ink Business Unlimited

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 targeted at borrowers with good to excellent credit. This card comes with no annual fee and an introductory APR of 0% for the first 12 months. After the introductory period, the Chase Ink Business Unlimited has variable APR of 15.24% to 21.24%.

In addition to competitive rates, the Chase Ink Business Unlimited card gives 1.5% cash back on all purchases. The card also has a bonus offer of $500 cash back after spending $3,000 within the first 3 months of opening your account.

If you don’t qualify for the Chase Ink Business Unlimited card due to your credit score, check out other business credit card options for fair credit and bad credit.

The Best Loan Options For Starting A Distribution Business

If you’re an established business with proof of solid performance, getting a business loan isn’t difficult. However, what if your financial needs are different? What do you do when you need money to get your business started?

Getting a loan to start a distribution business can be a challenge. After all, traditional lenders like banks and credit unions want to work with established, low-risk businesses. Because your business is non-existent or very new, you haven’t yet proven yourself to these lenders. But that doesn’t mean you’re completely out of options. You may just have to get a little more creative and dig a little deeper to find a lender that will work with your situation.

In addition to the SBA loans we’ve already discussed, the SBA has a Microloans program that’s suitable for new businesses and startups.

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-approved nonprofit lenders can provide up to $50,000, although the typical loan is around $13,000. Loan proceeds can be used to purchase inventory, supplies, fixtures, furniture, or equipment. Funds can also be used as working capital. Rates can’t exceed the limits set by the SBA and are generally between 8% and 13%. Borrower requirements include a credit score in the high 600s and qualifying as a small business based on the SBA’s definition.

If you don’t qualify for an SBA Microloan, other nonprofit organizations have microloan programs available. Credit requirements, maximum borrowing amounts, rates, and terms vary by lender. In addition to microloans, many nonprofits offer additional resources for new business owners, including training, classes, and mentorships. Looking for a microlender? Check out the options below.

Lender Max. Borrowing Amount Rates Req. Credit Score Next Steps

$500,000

2.9% – 18.72% factor rate

550

Apply Now

$250,000

9% – 36% factor rate

500

Apply Now

$500,000

9.4% – 99.7% APR

500

Apply Now

Another financing option to cover startup expenses is a personal loan. If you have a high credit score, you may be able to obtain a personal loan with low rates that can be used to fund your business. Approval for a personal loan will be based on your personal credit score and history, as well as your personal income. The following lenders offer reasonable rates for personal loans that can be used for 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

You can also jump online and look into peer-to-peer lending options and crowdfunding. Peer-to-peer loans are often easier to qualify for than traditional bank loans, while crowdfunding allows you to use a platform to raise money from investors.

Finally, loans from a friend or family member could be an option that works for you. Make sure that any loan agreement is on paper and signed by all parties involved. Be careful to treat the loan just as you would any other by paying it back on time as scheduled.

What To Consider When Choosing A Lender

In order to receive a loan, you have to choose a lender that is willing to work with you. In the past, most business loans were obtained from a bank, credit union, or another traditional lender. Today, there are more options than ever thanks to online lending.

The good news is that with so many lenders, it’s easy to find at least one willing to work with you – even if you have credit challenges, a short time in business, low annual revenues, or other factors that would disqualify you from traditional loans. The bad news is that finding the right lender can be overwhelming. With so many choices, which is best for you? To narrow down the lender pool, ask yourself these key questions to find the best loan for your financial situation.

How Will I Use The Loan?

This should be an easy question to answer. Why do you need a loan? Did an emergency expense pop up out of the blue? Have you been planning an expansion for the last 6 months and you’re ready to take action? By knowing how you plan to use the loan, you’ll be able to select the loan product best for that situation and can narrow down your selection of lenders.

Let’s say you want to expand your business and need a commercial real estate loan. In this case, lenders that offer short-term loans or lines of credit with low limits wouldn’t be the right choice. Instead, you’d want to find lenders that offer long-term loans with low interest rates, like SBA loans.

How Much Money Do I Need?

You should never apply for a loan without an idea of how much you need and how much you can afford to borrow. Taking money just because a lender offers it is can lead to unnecessary debt that can negatively impact your business. Instead, run some calculations and borrow only what you truly need.

Once you’ve figured out how you’re going to use the loan, take the time to figure out what amount would cover that financial need. Going back to the commercial real estate example, you could begin looking at properties online comparable to what you’d like to purchase to get an idea of the market values in your area. If your loan is going to be used to purchase equipment, shop around, get bids and quotes, and have an idea of the total cost of your purchase.

Not only will this help you prevent unnecessary debt, but it can also help whittle down the number of lenders you’re considering. If your loan needs are $500,000, a lender that has maximum borrowing limits of $100,000 can be crossed off of your list.

Do I Meet All Borrower Requirements?

Before you apply for a loan, make yourself familiar with the lender’s borrowing requirements. Time in business, annual revenue, and credit scores are factors considered by most lenders. If you don’t meet the requirements of the lender, you won’t qualify for a loan.

Most lenders perform a soft credit pull when prequalifying you for a loan. A hard credit pull — the kind that shows up on your credit report — is performed further along in the process for most financial products. However, some lenders do perform a hard pull once you hit “Submit” on your application. Avoid an unnecessary inquiry by ensuring that you meet all credit requirements. Before you apply, make sure to check your free credit score online.

Remember, there are many financing options available to business owners, regardless of credit score, time in business, or revenues. Take the time to find the loans that you’re qualified to receive.

Does The Lender Offer Rates & Terms That Work For My Business?

When you select your lender, you want to work with one that will offer you the best rates and terms for your particular situation. A short-term loan that’s funded almost immediately may seem appealing, but a high overall cost of borrowing could put a burden on your business. If you have a solid credit score and a healthy business profile, you should be able to shop around to find rates and terms that are most affordable for you.

If you have credit challenges, there are options available for you. However, there are some drawbacks to these high-risk financial products, like high interest rates and fees or daily payment requirements. If you don’t need the money immediately, you can take steps to boost your credit score so you can apply for a more affordable loan in the future.

What You’ll Need To Apply For A Wholesale Distribution Loan

You’ve decided what type of loan best fits your needs, and you’ve calculated how much you need and can afford. You’ve selected a lender. Now, it’s time to begin the application process. Before you start, there are a few key items the lender will require to approve and fund your loan.

For all loans, you’ll be required to provide basic information about yourself and your business. This includes the name of your business, contact information, your social security number, and your federal tax ID. For some loans, such as business credit cards, this may be the only information you need.

For other loan options, you’ll be required to submit documentation. This documentation will allow the lender to see how your business is performing and if you’ll be able to afford a loan. Documentation requirements vary by lender, but commonly requested documents include:

  • Business & Personal Credit Reports/Score
  • Business & Personal Bank Statements
  • Business & Personal Tax Returns
  • Profit & Loss Statements
  • Balance Sheets
  • Income Statements
  • Business Licenses

If you’re a new business, you may be required to submit the resumes of all business owners, a detailed business plan, and financial projections. If your loan requires collateral, you’ll submit information about the collateral you’re putting up to back the loan. If no collateral is required, you may still be required to sign a personal guarantee or agree to a blanket lien before receiving your loan. Learn more about business loan requirements.

Application, underwriting, approval, and funding times vary based on the type of loan you’re trying to receive. SBA loans take at least several weeks, while lines of credit and business credit cards may be approved on the spot. During the application process, your lender may need to speak with you to ask questions about information and documentation you’ve submitted or to request additional information. Make sure your lender has current contact information on file and that you make yourself available for calls or emails as needed to continue moving through the loan process.

Final Thoughts

Running a distribution business takes organization, hard work, and capital. As a business owner, it’s your job to bring these things to the table, but it’s understandable when money becomes an issue. A business loan can be an excellent resource to keep operations running smoothly or to grow your business provided you do your planning, shop around for the best rates, and understand what your business can afford.

What’s Next
    • Check out the top 8 small business startup loan options
    • Business loan options that don’t require a credit check
    • Your guide to low-cost SBA loans

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Business Loans For Auto Repair Shops

Cars may be starting to look more like computers, but they still won’t stay on the road long without the help of a trusty local auto repair shop.

If you’re in the auto repair business, you know that the volume of work — as well as the types of problems you’ll encounter — can vary greatly by the day. Even the most prepared shop may run into emergencies where funds aren’t readily available. When that happens, you may need a quick loan to keep things running smoothly. Or you may just need a traditional loan for a large, planned expense.

No matter your need, navigating through the vast market of traditional and alternative lenders can be daunting. Read on and we’ll walk you through how to get business loans for auto repair shops.

Financing Need Best Loan Type Recommended Lender
Purchasing Equipment Equipment Financing Lendio
Supplies and Inventory Short-term Loans PayPal LoanBuilder
Working Capital Lines of Credit OnDeck
Marketing and Advertising Business Credit Card Chase Ink Business Preferred
Business Startup/Expansion/Remodeling SBA Loan SmartBiz

Loan For Equipment Purchasing

We’re not talking parts for your customers’ vehicles. A loan of this type can help you buy the bigger stuff you’ll be keeping in-house and using regularly — things like air compressors, vehicles lifts, brake lathes, and engine hoists.

In most cases, you won’t be purchasing heavy equipment on the fly; you’ll purchase it when you’re first opening your shop, or you’ll have a general idea of when an old piece of equipment needs to be replaced. In these cases, you’re probably less concerned about speed than you are about getting a good deal that fits the needs of your shop.

Equipment Loans

If you prefer to own your equipment, you may want to look into equipment loans. These resemble traditional installment loans in many ways: they’ll accrue interest over time, you’ll make monthly payments, etc. But these loans have a built-in advantage; the equipment you’re purchasing with them can serve as collateral. Collateral is an asset the borrower puts up as security when they take on debt. Secured loans generally have better rates and terms than comparable unsecured loans.

Traditionally, equipment loans cover around 85 percent of the equipment’s costs, but some lenders may cover the entire cost. In most cases, this does not include transportation costs.

Equipment Leases

These are not loans strictly speaking, but they are a popular way to finance heavy equipment. (Read more about equipment loans vs equipment leases.) Leases fall into two broad categories.

Capital leases are essentially an alternative way to buy your equipment. In most cases, you are considered the owner of the equipment under this type of lease. You’ll make monthly payments for the length of the lease, at the end of which you’ll pay a small residual (sometimes as low as $1) to close your account.

Operating leases are closer to the traditional definition of a lease. In this case, you’ll effectively “rent” the equipment over the course of the lease, making monthly payments. At the end, however, you’ll have the option to return the equipment or buy it at fair market value. This type of lease is useful for equipment that becomes obsolete quickly.

Recommended Option: Lendio

If you’re not working with a captive lessor or your preferred bank, it’s nice to be able to hit a bunch of potential equipment financers with one easy application. Lendio is a great way to do just that. Within 72 hours of your application, you should have multiple equipment financing offers on your screen. Funds are typically dispensed within a week of accepting an offer.

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Loans For Supplies & Inventory

You never want to be in a position where your auto body shop is suffering from too much business. Whether you’re facing a very high volume of customers, or an unusual number of customers all presenting with similar car problems, you may find your supplies depleted more quickly than you can collect on your invoices.

When this happens, you may want to consider a short-term loan.

Short-term Loans

Fast, streamlined, and (relatively) expensive, short-term loans are handy when you need a loan fast and want to pay it back quickly.

Short-term loans can usually get money into your hands within a day or two, which makes them a good choice for unplanned emergency financing. Rather than charge interest, short-term loans use a flat fee formula, or factor rate, to calculate the amount of money you’ll owe. For example, if you take out $10,000 at a 1.2 factor rate, you’ll need to pay back $12,000.

Short-term loans usually have terms shorter than a year, so their repayment schedule is much faster than those of medium and long-term loans. If you take out a short-term loan, you’ll be making weekly or daily payments, which, in most cases, will be automatically deducted from your business account.

Recommended Options: PayPal LoanBuilder

Because short-term loans are so fast and volatile, you’ll want some flexibility over the terms of your loan. PayPal’s LoanBuilder product is built around the idea of customization. You’ll be able to customize many elements of your loan to fit your need. Better yet, their rates are reasonable (as short-term loans go).

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Loans For Working Capital

merchant cash advance industry

Working capital is a wonky term for the money you have on hand for daily operational expenses. If everything’s going well, you probably don’t have to give it a lot of thought. But if emergency expenses have tapped into your reserves, you may find yourself unable to pay some small, recurring expense.

Working capital loans tend to be some of the most flexible when it comes to what you can spend your money on.

Lines Of Credit

Since working capital expenses come in many different forms and amounts, it’s nice to have a flexible financial cushion to fall back on. Rather than giving you a lump sum, a business line of credit pre-approves you for a certain amount of money, called your credit limit. While your account is active, you can draw on your credit line as much or as little as you want so long as the total amount you’ve borrowed doesn’t exceed your credit limit.

In most cases, you’ll only pay interest on the amount of money you’ve borrowed, though some lenders do charge administrative and access fees. Revolving credit lines let you reuse credit after you pay off your balance, similar to a credit card. Non-revolving lines of credit don’t have this feature and tend to be extended for specific expenses where the final cost is uncertain.

OnDeck

OnDeck offers quick and easy access to lines of credit, even for businesses with fairly poor credit. Depending on your revenue and other qualifications, you can get a credit limit between $6K and $100K with no draw fee. Just be aware that these are short-term credit lines lasting only about 6 months, but considering the approval process only takes a few days, you don’t need to plan too far ahead. The major downside is the $20/mo administrative fee, but OnDeck will waive that if you withdraw at least $5,000 within the first five days of opening your account.

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Loans For Marketing & Advertising

Word of mouth may be the ideal form of advertising, but sometimes you need to reach outside of your normal sphere of influence to draw in new customers. Or maybe you’re a new business that needs to establish a customer base.

Designing and running an effective advertising campaign is outside of the purview of this article, but most of the good ones require spending some money.

Business Credit Cards

Surprised? Business credit cards are often suggested as a way to smooth out your business’s cash flow, but they also have some other features that make them ideal for certain types of expenses. Namely, rewards programs that allow you to get a return on specific expenses — expenses like advertising.

Just be sure to pay off your balance within your business credit card’s grace period, or the cost in interest will exceed your rewards savings.

Recommended Option: Chase Ink Business Preferred

Chase’s Ink Business Preferred credit card is at the top of most business credit card lists, and for a good reason. It offers one of the most lucrative rewards programs out there. Advertising expenses spent on social media sites and search engines earn triple points (as do travel, shipping, and telecom expenses). Those points can be redeemed on travel, on Amazon, as gift cards, statement credit, or cash back.

The card has an annual fee of $95 and an APR between 17.99% and 22.99%.

Chase Ink Business Preferred



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Annual Fee:


$95

 

Purchase APR:


17.99% – 22.99%, Variable

Loans For Business Startups, Remodeling, Or Expansion

Like equipment purchases, business remodeling and expansion (or starting your business up in the first place) falls under the category of “large, planned expenses.” One of the bigger and more daunting business expenses occurs when you’ve outgrown your space.

If you need additional bays, or even a larger overflow lot, you’ll want a loan that can offer you a large sum of money at a low interest rate. Your best bet is probably an SBA loan.

SBA Loans

The Small Business Administration (SBA) is a government agency tasked with advising and assisting small businesses. The SBA doesn’t usually directly lend to businesses. Instead, it guarantees a portion of an SBA-approved lender’s loan. This guarantee allows you to access better rates and terms than your credit rating or business size might otherwise allow.

The two most common forms of SBA loan are the SBA 7(a) and the SBA 504.

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

The 7(a) offers the most flexibility in terms of what it can be used for. This can include anything from equipment to non-investment real estate, leasehold improvements, business acquisition, or start-up costs. Depending on your needs, however, you may want to look into the SBA 504 loan, which has a higher maximum borrowing amount. These loans can be used to purchase land and buildings, buy long-term equipment, or make improvements to your lot.

Be prepared to play the long game with an SBA loan, though. They take far longer to close than the other financial products we’ve discussed.

Recommended Option: SmartBiz

You have a lot of choices when it comes to SBA-approved lenders, which likely includes your preferred local bank or credit union. You don’t need our advice for that, right?

But if you need help navigating the complexity of the SBA application process and don’t have a lender specifically in mind, you may want to give SmartBiz a look. SmartBiz can’t do a full end-run around the massive amounts of paperwork required to get an SBA loan, but what they can do is keep the process as organized and streamlined as possible on your behalf. Most importantly, they’ll match you with a lender that fits your needs.

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What To Consider When Choosing A Lender

If you didn’t see a lender you liked above, you can always hunt for one on your own. Though it can be a time-intensive task, there are some ways to strategically narrow your search.

Why Do I Need A Loan?

Lenders serve a variety of needs, but not every lender can serve yours. Even if you don’t like the lenders we recommended, the type of financial products discussed above can be a guide for finding a lender.

A slow, traditional lender may not be able to help you get emergency funds, while a fast, expensive alternative lender may be a poor choice for financing an expensive renovation.

Am I Qualified?

One of the easiest ways to rule out a lender is to figure out if they’ll rule you out.

Most lenders have minimum qualifications for borrowers. The most common ones are:

  • Time In business: Lenders want to know you’ll be around long enough to pay them back.
  • Credit Rating: Some lenders use credit rating as a line in the sand, while others use it mainly to help determine rates.
  • Revenue: Lenders want to make sure you can pay off your debt. Sometimes this number is an absolute minimum (like $100,000/yr); other times it’s relative to the amount of money you want to borrow ($1.50 for every $1).

Additional factors may include the number of other loans you currently have, the industry or state you’re in, and whether you’ve had any recent bankruptcies.

Do The Terms & Rates Meet My Needs?

While it might seem that lenders have the upper hand, remember that you are ultimately the one who gets to decide whether or not the transaction happens.

If a lender charges usurious rates, if they pile on unnecessary fees, or if they demand repayment on a schedule you can’t accommodate, you’ll probably want to keep looking.

Try to get a sense of whether your prospective lender will be a flexible partner or a predatory animal looking to cash-in on any small mistake you make. Do they offer early payment incentives? Incentives for repeat business? Is customer service available and helpful?

Final Thoughts

When it comes to keeping your auto repair shop’s engines purring, you have a ton of potential financial solutions at your disposal. With a little patience, you can find a deal that fits your needs.

Didn’t find a lender you were looking for above? Here are some overviews of our contenders for loans, lines of credit, credit cards, and startup financing.

The post Business Loans For Auto Repair Shops 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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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.

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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

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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

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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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Business Auto Loans: Rates, Terms And Where To Find Them

From equipment to commercial real estate, it takes many resources to successfully run a business. For many businesses, vehicles are just another important part of operations. Whether it’s to deliver products to customers, drive sales, or to commute from one location to another, many businesses need reliable, dependable vehicles.

However, most small businesses don’t have the capital to purchase a vehicle with cash. This becomes an even bigger problem when multiple vehicles need to be purchased. In these situations, there is a solution: obtaining a business auto loan. Read on to find out more about the types of business auto loans, why you should consider a loan, and what to expect during the loan process.

What Are Business Auto Loans?

Business auto loans, or commercial auto loans, are a type of financing used to purchase vehicles used for business purposes. A business auto loan provides business owners with money that can be used to buy a vehicle from a dealership or private seller.

The advantage of commercial vehicle loans is that the business does not have to pay the full purchase price up front in order to take possession of the vehicle. Instead, the lender provides the needed funding, allowing the business owner to pay the total loan amount, plus interest and fees, over a longer period of time.

This is extremely beneficial for business owners, as they won’t have to pay tens of thousands of dollars out of pocket. Instead, they will have more manageable monthly payments while being allowed to use the vehicle. Essentially, the process works exactly as it would for a personal auto loan, only it is more tailored to businesses.

Business car loans can be obtained by businesses that need vehicles for any purpose. Whether it’s for delivery vehicles, commuter vehicles for employees, or vehicles to be used by salespeople, a business can receive one or even multiple loans in order to fund these purchases.

Commercial Auto Loans VS Leases

When evaluating funding options for business vehicles, there are two major options to consider: commercial auto loans and commercial auto leases. It’s important for a business owner to understand the differences between the two before starting the application process.

Commercial vehicle loans are used to pay for the vehicle over a period of time (typically 5 years, though terms can be longer or shorter). The borrower pays a set payment each month for the entire length of the term. This loan payment applies to both the principal amount that was loaned, as well as the interest paid to the lender for advancing the money.

While payments are being made, the lender will be listed as a lienholder on the title of the vehicle. This gives the lender the right to repossess the vehicle if the borrower goes into default. However, once the balance is paid in full, the lender will no longer be a lienholder. The title will be given to the borrower, who will then have full ownership of the car and can continue to use the vehicle, trade it in for another vehicle, or sell it outright.

The other type of financing is leasing. Leasing is more like a long-term rental. A lessee (in this case, the business owner) agrees to make monthly payments on the vehicle. The lease period will be for a set period of time, such as 3 years; during that time, a set number of miles per year can be driven. The car must be well-taken care of and not damaged while in use.

At the end of the lease period, the business owner has two options: they can pay off the balance of the lease and own the vehicle, or they can return it. When business owners return leased vehicles, they have the option to enter into another lease for a newer vehicle. Through a lease, the business owner will never own the car unless the vehicle is paid for with cash at the end of the lease period.

When Should I Get An Auto Loan?

An auto loan is a great choice for businesses that want to keep the vehicle for a longer period of time. Making payments to eventually own the vehicle is typically the best option for businesses that aren’t concerned about having the latest and greatest cars.

Auto loans are also the better choice for businesses that will rack up a lot of mileage. Since a lease restricts the number of miles driven annually, business owners that travel extensively in their leased vehicle could end up paying 10 to 20 cents per additional mile – costs that really rack up through the year.

A commercial auto loan may be the best choice for anyone that has a higher risk of damaging the car. Damage to the interior or exterior of the vehicle would result in wear-and-tear fees, which could add hundreds to the cost of a leased vehicle.

When Should I Get An Auto Lease?

A commercial auto lease may be the wiser choice for businesses that want to upgrade every few years to a newer model. If the car is taken care of and not driven too many miles each year, a lease could be a financially-sound decision.

A lease is also less expensive in the short-term. Down payments are often much cheaper for a lease, while monthly payments may be reduced as well. For short-term use, this may be ideal for business owners. At the end of a lease, the car can be purchased for a large lump sum payment. If the business doesn’t have the money, another lease can be signed for a different vehicle. However, this will start the cycle all over again; entering into leases repeatedly is ill-advised as it will result in thousands of dollars in payments without ever actually owning the car.

Business Auto Loan Borrower Requirements

While business car loan requirements vary by lender, an applicant should expect to gather similar documentation regardless of the chosen lender. Business and personal documentation are required to receive a business auto loan. Items such as business licenses and articles of incorporation will be required to prove ownership of the business. A federal Employer Identification Number will also be needed for the application. Sole proprietors without an EIN will be required to submit their Social Security numbers.

The borrower will need to prove that they are able to make the monthly payments on the loan or lease by submitting documents like tax returns, cash flow statements, and bank statements.

Business credit history will be considered during the loan process. In most cases, the personal credit history and score of the applicant will also be evaluated.

It’s important to note that there may be limitations on the financed vehicle if the business plans to save money by purchasing a used car. The borrower may be limited on the age of the vehicle, the mileage, and the value of the vehicle when purchasing a pre-owned car.

Can I Get A Business Auto Loan If I Have Bad Credit?

Business auto lenders will evaluate the credit score of the business. If the score is bad or limited, personal credit will be considered. But what happens if the applicant has a low credit score?

Commercial vehicle loans for bad credit do exist. However, business owners with poor credit should expect to receive higher commercial vehicle loan rates, which will increase the monthly payment amount. Higher down payments may also be required for borrowers with low credit scores. This is because an applicant with bad credit is seen as a higher risk to the lender.

Business owners with poor credit scores should evaluate the affordability of the loan. Acquiring a commercial vehicle will not only result in a monthly loan payment but also other expenses, including property taxes, insurance premiums, gas expenses, and maintenance and repair costs. High monthly payments could prove to be too much for a small business, leading to a default on the loan. This would result in another hit to credit scores, as well as repossession of the vehicle and possible legal action by the lender. In most cases, it makes more sense for a business owner to at least get their personal credit in order before accepting an auto loan.

Business Auto Loan Interest Rates & Terms

The best commercial auto loan rates are reserved for borrowers with the strongest credit histories and proven track records of cash flow. Currently, rates for the most qualified borrowers are under 3%. This rate could go as high as 18% or more for borrowers with poor credit scores or startup businesses. On average, most borrowers receive a rate of just over 4% over a 5-year repayment term.

Business owners who choose to refinance their loans in the future can save on payments with interest rates starting at 2.99%. Refinancing is a great option for small business owners that have high-interest loans and would like to reduce their monthly payments after building a positive credit history.

On average, business owners should expect to put 10% of the total vehicle cost toward the down payment. Maximum terms vary, but 60 months is a typical repayment term for most auto loans. However, this term may be longer or shorter depending on the policies of the lender.

Commercial truck loan rates may be different than for commercial vehicle loans. If a commercial truck is needed, a business owner will need to inquire as to the rates on these heavy-duty vehicles. Currently, interest rates for the most qualified borrowers are below 5%. On average, a 15% down payment on a commercial truck loan is required, but down payments may be as high as 25% of the total cost of the truck. In some cases, a lower down payment or even no down payment may be required, but this would only be available to applicants with strong credit histories and cash flow.

Can I Get A Business Auto Loan Without Signing A Personal Guarantee?

With most business auto loans, all owners with at least a 20% stake in the business are required to sign a personal guarantee. This means that all owners will be held personally liable for the debt. This is almost always the case for applicants with low business or personal credit scores.

Businesses with high credit scores may qualify for business auto loans without personal guarantees. This policy varies by lender and is typically reserved for applicants with the best credit scores. In some cases, a business auto loan refinance is possible after multiple payments have been made on time. During the refinance process, it is possible to put the loan solely under the name of the business without a personal guarantee.

Can I Get a Business Auto Loan Without Making A Down Payment?

Some lenders may offer no down payment options for the most qualified buyers. However, before accepting this offer, it’s important to think about the potential drawbacks.

Financing a vehicle with no down payment will result in higher monthly payments. Also, if the business wants to sell or trade in the vehicle during the life of the loan, they may be unable to do so without putting their own money into the transaction. This is because the loan payment may be “upside down,” which means that more money is owed on the vehicle than what it is actually worth. Entering into a loan with no down payment increases the odds of being upside down on the loan.

If the business doesn’t have the funds to pay a down payment, there are several options available. The first is to wait until there is enough money to make a sizable down payment of at least 10% of the total cost of the vehicle. If a car is needed immediately, other options can be explored, such as taking out a business car lease, which often has lower down payment requirements. Vehicles that are owned by the business and will no longer be in use can also be traded in at a dealership. Financed vehicles may be traded in toward the purchase of a new vehicle as long as there is equity.

Where To Get Business Auto Loans

Once a business has made the decision to move forward with a commercial auto loan, it’s time to begin the application process. The first step is to find a reputable lender to work with. While it is possible to go to an auto dealership to obtain a commercial vehicle loan, this usually results in multiple inquiries on a credit report, which can lower a credit score. Instead, business owners should shop around on their own and have funding in place before making the purchase. There are several options available.

The Small Business Administration (SBA)

Smart small business owners know that loans through Small Business Administration programs are extremely competitive. Though these loans can be difficult to obtain, they often come with great interest rates and repayment terms. While there isn’t a specific SBA commercial vehicle loans program, there are several programs available that provide loans that can be used toward the purchase of a commercial vehicle.

The 7(a) program, for example, offers up to $5 million for almost any business expense, including the purchase of equipment and vehicles. The SBA Express loan program is another option, providing up to $350,000 in funding and a guaranteed approval decision within 36 hours. These loans are obtained through intermediary partners of the SBA, including banks and credit unions.

SBA Microloans are another program to consider for smaller funding needs. If the vehicle to be purchased costs less than $50,000, this may be an option. These loans can be received through SBA-approved non-profit intermediary lenders.

Interest rates and terms are kept low due to the SBA’s program standards. SBA-approved loans are also backed by the government, so intermediary lenders are more willing to work with small businesses, even providing options for new businesses that have been in operations for under 2 years.

One potential drawback is that, with the exception of Express Loans, approval for these loans can take a long period of time. These loans are also reserved for business owners with higher credit scores at least in the high-600s. Think an SBA loan sounds right for your business? Read on to learn more about more about the pros and cons of SBA loans.

Banks & Credit Unions

Most banks and credit unions offer commercial vehicle loan options. Getting a commercial vehicle business loan from a financial institution is much the same as getting a personal auto loan. An application is filled out and documentation is required, including proof of ownership of the business and proof of cash flow.

Banks and credit unions will calculate a Loan-to-Value ratio. This equation involves dividing the total dollar value of the loan by the actual cash value of the vehicle. This percentage can be reduced with the down payment made toward the vehicle. Most banks and credit unions have limitations on the LTV of a financed vehicle, which varies by lender.
When applying for an auto loan through a bank or credit union, business and personal credit will be considered.

Interest rates and terms will be reliant on the applicant’s credit history. Applicants should have at least a credit score of 650 before applying. Lower scores may be accepted but will come at an increased cost. Commercial vehicle finance rates vary by lender; these loans can be approved more quickly than SBA loans but for larger amounts or more complicated credit situations, the process from application to funding can take several weeks or longer.

Most businesses opt to work with the financial institutions with which they have existing relationships. However, business owners that want to shop the best rates should read on to find out more about the banks with the best rates on business loans.

Alternative Lenders

Alternative lenders can be considered when a business doesn’t have a high credit score or a long time in operations. These lenders focus less on credit scores and the length of time in business and more on incoming cash flow. Typically, applications can be filled out online and the loans are funded in a short period of time.

However, there are drawbacks to working with alternative lenders. Typically, business auto loan rates and fees are much higher through these lenders. The overall cost of the loan may be much higher than it would be with a bank, credit union, or an SBA-approved lender. However, if obtaining the auto loan will benefit the business by improving operations and cash flow, this is a high return on investment that outweighs the cost of the loan.

With so many alternative lenders offering loans, it’s hard to decide which is best for business. Check out the top small business lenders that can help you purchase your next commercial vehicle.

Final Thoughts

There comes a time for many businesses when the purchase of a commercial vehicle is necessary. While it’s easy to want to rush the process and accept the first loan offer available, it’s important for a business owner to fully evaluate the needs of the business, as well as the overall cost of the loan.

Interest rates and requirements of business auto loans lenders should be fully understood before you sign on the dotted line. When applying for and accepting a commercial auto loan, the smart business owner will make a careful, calculated decision that will boost the business, not draw it deep into debt.

The post Business Auto Loans: Rates, Terms And Where To Find Them appeared first on Merchant Maverick.

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Small Business Microloans: What They Are And Where To Get Them

Most small business owners already know they can turn to lenders for help to cover large expenses, like the purchase of a fleet of vehicles, expensive equipment, or commercial real estate. However, these loans are often difficult to obtain from traditional lenders like banks, particularly for very small or newly established businesses.

Whether you need a relatively small loan amount or don’t qualify for funding from traditional lenders, there are options out there. In fact, one of the best ways small business owners can fund their business expenses is via microloans.

Ready to explore alternative business loan options? Read on to learn more about microloans and why today’s small business owners are leaning on this source of financing to bolster their businesses.

What Are Microloans?

business loan vs personal loan

A microloan is defined as a small loan that is typically for $50,000 or less. Microloans offer an alternative to traditional bank loans. These loans are for smaller amounts, so they are easier to qualify for, opening up options to small businesses that aren’t eligible for conventional loan options, either due to low revenue or lack of establishment.

How Can Microloans Be Used For Business?

Microloans can be used for almost any business purpose. Microloan proceeds can be used for a startup project or to get a business off the ground. Loans can be used to expand a business through the purchase of equipment, an office lease, or the hiring of employees. Microloans can also be used as working capital. Specific microlenders may have their own policies surrounding what expenses can be paid using loan proceeds.

What Type Of Business Would Benefit From A Microloan?

The businesses that would benefit most from microloans are smaller businesses with fewer employees and lower capital needs. A business that needs a large sum of money for a big expense, like purchasing commercial real estate, should consider other options.

Business owners that would not qualify for traditional bank loans are also great candidates for microloans. This includes startups and new businesses that may not have the documentation, years in business, or revenue required for other loan options. Microloans can be a great choice for women-owned and minority-owned businesses, as well as businesses in underserved and low-income areas.

Because requirements are not as strict, business owners with lower credit scores may qualify for microloans. In addition to getting the money that is needed at the moment, when the loan is paid as agreed, it can help a business boost its credit score to potentially qualify for larger loans in the future.

What Interest Rates Can I Expect From A Microloan?

Like other types of loans, microloan rates vary based on a number of factors, including the chosen lender’s policy and the creditworthiness of the borrower.

Credit score is still an important consideration for microlenders, although minimum score requirements are typically lower than they would be for bank loans and other conventional business loans. Borrowers with the highest credit scores will receive the best interest rates, while borrowers with lower scores will typically be approved with much higher rates.

Other risk factors may be evaluated when determining the interest rate of a microloan. This may include time in business or whether collateral will be required. Borrowers that have collateral to offer may qualify for lower interest rates and better terms.

With all of these considerations, what kind of interest rates should a borrower expect to see when applying for a microloan? On the lower end, an average rate of about 6% for the most qualified borrowers is possible through some lenders.

However, most borrowers should expect to receive interest rates between 8% and 18%. Borrowers with lower credit scores may receive even higher interest rates – sometimes 30% or more.

While these interest rates are higher than those of other loans, easier qualifications and the resources provided by microlenders make them an appealing choice for many small business owners.

Microloan Borrower Qualifications

Borrower qualifications for microloans are much less stringent than they are for other types of small business loans. Requirements vary by lender, but there are a few general rules to remember.

Some microlenders, such as Small Business Administration intermediaries, have their own definitions of a “small business,” which may limit the number of employees, annual revenue, and net worth of the business.

Business owners that seek out microloans should also have a credit score of at least 620. Most microlenders require a score in the low- to mid-600s, at a minimum. While some lenders may accept lower scores, interest rates will typically be much higher.

Borrowers of microloans must not request funding over the organization’s limits, which is usually $50,000. It is important to note here that many organizations receive federal grants and have a limited amount of money to give, so a borrower may not be approved for the maximum amount. Microloan borrowers must also use the loan proceeds only for approved business expenses.

Collateral may be required for some microloans but will depend upon the creditworthiness of the borrower, the amount of the loan, and the lender’s own policies. Even if specific collateral is not required, a personal guarantee or blanket lien is typically part of the loan contract.

Where To Find Microloans

Does a microloan seem like it will be the logical financing choice for your business or startup? If so, the next step will be to begin the application process, which starts with finding a microlender.

The Small Business Administration (SBA)

Loans through Small Business Administration programs have gained a solid reputation among business owners because of their low rates and favorable terms. The SBA’s Microloan program is no exception.

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 are not issued directly through the organization. Instead, loans are obtained through non-profit intermediaries. Funding of up to $50,000 is available, but the average loan amount distributed through this program is $13,000.

Funds from the SBA Microloan program can be used for the purchase of supplies, inventory, fixtures, machinery, and equipment. It can also be used as working capital. Loans cannot be used for the purchase of real estate or to refinance existing debt.

The maximum repayment term for SBA Microloans is 6 years and interest rates range between 8% and 13%. Collateral may be required, as well as a personal guarantee. Loans are available to for-profit small businesses and non-profit childcare centers.

Non-Profit Lenders

There are many non-profit lenders that provide millions of dollars in microloans each year. One of the most popular is Grameen America, which provides microloans of $1,500 and financial training to female entrepreneurs.

Another popular microlender is Kiva, which provides up to $10,000 at a 0% interest rate. Borrowers prove their creditworthiness by inviting friends and family to loan to them, then can fundraise to over 1.6 million lenders through Kiva’s platform for 30 days. Borrowers have up to 36 months to repay the loan.

Other nonprofit lenders serve particular regions in the United States. For example, Accion New Mexico provides lending services and business counseling to borrowers in New Mexico, Nevada, Texas, Colorado, and Arizona. Opportunity Fund is another microlender that services business owners in the state of California. A quick online search will yield non-profit lenders in your area, or you can ask for microlender referrals through colleagues, friends, family, or your financial institution.

Alternative Lenders

Alternative lenders have risen in popularity in recent years because they have simplified the lending process. While most alternative lenders do not classify themselves as microlenders, they often have smaller loans available for small businesses.

A few of the most popular options include Credibly, LoanBuilder, and OnDeck.

Lender Max. Borrowing Amount Rates Req. Credit Score Next Steps

$250,000

9% – 36% factor rate

500

Visit Site

$500,000

2.9% – 18.72% factor rate

550

Visit Site

$500,000

9.4% – 99.7% APR

500

Visit Site

These loans are top choices for business owners because of easier requirements and faster approval and funding. However, interest rates for these loans may be higher than other options and terms not as favorable. When choosing an alternative lender, it’s important to fully assess the total cost of the loan, including interest and fees, to ensure it’s a wise business decision.

How To Apply For A Microloan

Once a lender has been selected, it’s time to begin the application process. This process varies from lender to lender, but there are generally a few similarities across the board.

Before you start the application, pull your credit report and score. This is an easy step, since you can access your credit score online at no cost. Review your score and make sure that it aligns with the requirements of your chosen lender. If not, consider other options or work to clean up your credit before applying.

Once you’re ready to apply, an application will need to be submitted along with documentation. This may include personal and business financial statements, bank statements, and financial projections. Some lenders require a detailed business plan, especially from startups and new businesses. Documentation requirements vary by lender, and more paperwork may be required after you begin the process.

For some microloans, specific collateral may be required, especially for larger amounts. However, if specific collateral is not required, a blanket lien may be included in the loan contract, or you may be required to sign a personal guarantee holding you liable for the debt if the loan goes into default.

One of the best things about microloans is that the application process can be much more personalized. Microlenders are often very willing to walk you through the entire process and provide advice and resources if needed.

Some microlenders require borrowers to go through training or classes before the loan will be approved and released. You should take advantage of these resources, which can help put you on the path to operating a successful business.

Once all documentation is submitted and requirements have been met, the microlender will come to an approval decision. This could take just a few days (with alternative lenders) or a few weeks or longer (with SBA and non-profit organizations). Once approved, the loan will be distributed based on the lender’s policies.

Alternatives To Small Business Microloans

If you need a smaller loan but don’t want to go through the process of finding a microlender and applying for a microloan, there are alternative options available that could better fit your needs.

Business Credit Cards

If you don’t qualify for a microloan or would rather have access to your funds much more quickly, business credit cards may be the answer. Business credit cards are typically approved in just days and are often available to businesses with low credit scores.

Business credit cards can be used toward any business expense. The card can be used up to and including the credit limit set by the issuer. A business credit card can be used for startup costs, larger purchases, or as working capital. Interest is applied only to the portion of the credit limit that has been used.

It’s important for anyone getting a business credit card to understand the interest rates. Borrowers with lower credit scores will often be stuck with a higher APR, so it’s important to use these cards responsibly. Borrowers should also be aware of any fees that are associated with having the account to understand the true cost of using the card. As with any other financial product, credit cards should be used responsibly. This includes spending only when necessary and paying the balance down as quickly as possible to avoid paying years of interest.

Personal Loans for Business

Getting a business loan can be difficult, especially for startups and new businesses. Many banks and lenders will turn these businesses away because they don’t have a solid reputation. However, borrowers with high personal credit scores can consider taking out a personal loan for business.

With a personal loan, the history of the business, including its credit, will not be a consideration. Instead, the income and the credit score of the borrower will be used to determine eligibility. Some lenders do provide personal loans to applicants with low credit scores, but these loans can often be very expensive because of high interest rates.

Invoice Financing

If unpaid invoices are causing cash flow issues, a conventional loan isn’t the only solution. Instead, businesses can look to invoice financing to resolve these cash flow challenges.

There are two different options to consider for invoice financing. The first is invoice factoring. A lender will pay a percentage of the unpaid invoice to the borrower. The lender will then collect from the customer. Once the invoice has been paid, the remaining amount will be paid to the borrower, minus fees and interest charged by the lender.

Invoice discounting is the other option. A large percentage of the invoice is paid to the borrower by the lender. The borrower collects payment from the customer and pays back the loan, along with interest and fees.

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

Invoice financing is best for businesses that have unpaid invoices and need cash immediately. The invoices serve as the collateral for the loan, while credit requirements are not as strict as with other loan options.

Final Thoughts

Microloans can provide much-needed funding for small businesses that have faced challenges when applying for other types of loans. While these loans can certainly help a business get off the ground or overcome financial hurdles, as with any loan, be aware of the costs of the loan to ensure there will be a return on investment and compare all of your options to ensure you’re making a sound decision for your business.

The post Small Business Microloans: What They Are And Where To Get Them appeared first on Merchant Maverick.

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Commercial Loans: Types, Rates, And Where To Find The Best

Have you seen the term “commercial loans” in an ad from a bank or alternative lender and wondered what, exactly, that meant? Or where you’d look for one? Or what the terms of a commercial loan might be?

We’re here to help!

What Are Commercial Loans?

A commercial loan is simply a financial agreement made between a financial institution or private lender and a business (as opposed to an individual) where the business takes on debt in exchange for capital. This money can then be used for business expenses, inventory, or operating costs. Though individual institutions may use the phrase a little differently, commercial loan is more or less a synonym for “business loan.”

Commercial loans aren’t specific types of loans but are rather a category of loans or loan-like products that lenders offer to businesses.

Who Offers Commercial Loans?

While they’re not the only game in town anymore, banks are still one of the best sources of lending available to businesses that fall within their territory. Lending standards are still fairly tight compared to those before the 2008 financial crisis, however, so bank loans may be out of reach for newer businesses or those with bad credit. Still, if you’re looking for the most competitive rates, you’ll probably find them at a bank.

Filling the niche missed by traditional lending institutions is the private, alternative lending market. These lenders tend to have easier qualifications and quicker applications. Additionally, most have more of a national focus, which is helpful if your business is located in an underserved area. The trade-off is usually, though not always, higher rates and stricter repayment regimens since these loans represent investment opportunities in the form of private capital rather than banking services.

What Types Of Commercial Loans Are Available?

This is where it gets interesting and more complex. If you’re entering the market just looking for a “loan” you may quickly be overwhelmed by the terminology, buzzwords, and marketing gimmicks. On top of that, individual lenders will brand their financial products, making it harder to make a 1:1 comparison between different company’s offerings.

The good news is, once you cut away all the gimmicks, there aren’t that many different types of products to wrap your head around.

Term/Installment Loans

Sometimes called medium or long-term loans, term loans what most people think of when they hear the word “loan.” In most cases, a business that successfully applies for a term loan will receive a lump sum of cash which can then be used for business expenses. In some cases, there may be restrictions on what the money can be used for. These loans will generally last between one and 10 years, accruing interest along the way. The longer the term, the more expensive the loan will be.

In most cases, you’ll make fixed, monthly payments to your lender. The loan is considered paid off when you’ve paid back the money you’ve borrowed plus interest.

Short-Term Loans

Isn’t a short-term loan just another type of term loan? You’d think so, but short-term loans are actually pretty different than their medium- and long-term cousins. Short-term loans don’t last that long,  as the name would suggest — usually less than a year — so they don’t have time to accumulate a lot of interest. Because of that, most short-term loans charge a flat fee rather than a true interest rate. This flat fee may be expressed as a percentage (18%) or as a multiplier (1.18). In either case, to figure out how much your flat fee is in dollars, simply multiply that number by the amount you’re borrowing.

Short-term loans are both faster and more expensive than other term loans, featuring expedited application processes. Unfortunately, your repayments are also sped up, with fixed payments made weekly or even daily. These payments are almost always automatically deducted from your bank account. As in the case of term loans, these payments are fixed (with some rare exceptions).

SBA Loans

The Small Business Administration (SBA) is a federal agency tasked with promoting and assisting American small businesses. The term SBA loan is a little bit misleading because the SBA doesn’t usually originate their own loans. Instead, they work through banks and privates lenders, guaranteeing a percentage of the borrower’s debt. This reduces the risk to the lender and allows businesses to qualify for rates and terms they may otherwise be unable to get.

The two most popular programs are the SBA 7(a) and the CDC/504. The 7(a) loan is the more popular of the two. It covers typical working capital expenses as well as site improvements and business acquisitions. 504 loans are oriented more around economic development.

The major drawback to SBA loans is that they have a longer and more complicated application process than similar term loans. While SBA Express loans speed up the process a bit, don’t expect to have the money in your account right away.

Equipment Loans

If you plan on buying equipment with your loan, you may want to consider an equipment loan. Equipment loans look a lot like term loans, but rather than being open-ended are specifically used to cover a percentage (85% is typical) of the cost of a specific piece of equipment.

Why would you want this?

Equipment loans use the equipment you’re purchasing as collateral, meaning you get the benefits (lower rates, longer terms) of a secured loan without putting up any of your own assets.

Lines Of Credit

Not sure how much money you’ll need in the coming year? Do you anticipate needing to make a large number of small purchases over a period of time? Do you just want to have something to fall back on in an emergency?

When you get a business line of credit, your company is approved up to a certain credit limit (a line of credit is very similar to a business credit card in that respect). Let’s say you’re approved for $100,000. You can draw upon that line of credit any number of times, in any amount you want, until you’ve accumulated $100,000 worth of debt. You only pay interest on the amount of credit you’ve used. This makes lines of credit far more versatile than other types of loans.

If the line of credit is revolving, any balance you pay off becomes available for use again. If it’s a non-revolving line of credit, it’s a one-shot deal. You can still withdraw in increments, but once the credit is used, it won’t become available again.

This convenience tends to come at a premium. Lines of credit usually have higher qualifications than loans, and many come with annual or even draw fees. They usually feature variable monthly payments, although some offer no-interest grace periods.

Alternative Financing

These products aren’t loans, commercial or otherwise, but you’re probably going to run into them if you’re looking for commercial loans. Here’s a quick rundown so you won’t be caught off-guard.

Merchant cash advances (MCAs) are an alternative way to get working capital. Rather than lending you money, the funder buys a percentage of your future credit/debit card sales. MCAs fill a similar niche to short-term loans. You’ll still get a lump sum, be charged a flat fee, and make daily payments. But rather than imposing fixed payments, your funder will claim a percentage of your daily card sales. Because MCAs aren’t loans, they aren’t governed by laws affecting loans. This allows them to be offered to riskier “borrowers,” and at a higher rate.

Capital leases are an alternative to equipment loans. Though the word “lease” suggests renting, they’re actually designed with ownership in mind. In exchange for a higher interest rate, you’ll get the full cost of the equipment covered. Like you would with a term loan, you’ll pay a capital lease off monthly. At the end of the lease, there will be a small remainder (as low as a $1) you’ll need to pay to close the transaction. This is called a “residual.”

Invoice factoring is a way to get an advance on your accounts receivable by selling them to a factoring company at a small loss. That company then collects on the invoice in your place. You’ll be paid the majority of the invoice’s value as a lump sum up front, with the remainder paid out to you — minus a fee — when (and if) the factoring company collects on the invoice.

Qualifying For A Commercial Loan

An easy way to narrow down your options is to eliminate any options for which you do not qualify. This will save you time and, potentially, money. Qualifications will vary from lender to lender, but these are the main things you’ll want to consider.

Credit Rating

There’s no way to completely get around it: your credit rating matters when you’re looking for financing. The question is “how much does it matter?”

For the more conservative lenders, your credit rating is a line in the sand. If you don’t meet their minimum standard, they simply won’t work with you. For traditional banks and SBA loans, that line is usually somewhere in the mid-to-high 600s.

With alternative lending, the guidelines aren’t so hard and fast. Some lenders impose minimums below which they absolutely will not go, but others don’t use credit scores for rule-out criteria.

That said, pretty much every lender, traditional or alternative, will use your credit history to determine what kind of rates you’re offered.

Time In Business

Lenders are going to want to know that your business is real and has staying power. A business that’s been afloat for five years inspires more confidence that one that is three months out from opening.

That said, not everyone is looking for the same thing. A traditional bank may want to see two to three years in business before they’re willing to take a risk on you. An online short-term lender may only be looking for six months — or even three months, in some cases.

Revenue

Any reasonable lender is going to want to know that you’re capable of paying them back. Even alternative lenders with loose credit prerequisites, especially those dealing in unsecured loans, will want to see your bank statements to get a sense of your cash flow. The more revenue you regularly take in, the more credit your prospective lender will be willing to extend you.

Location & Industry

This one’s out of your control, but the lender you’re looking at may not lend to businesses in your industry or even to your state. Banks tend to lend mainly through their physical branches and may require you to have a business checking account with them. Alternative lenders operate primarily online, but due to differences in lending regulations between states may not be able to lend to you, or may not be able to offer all their products.

Collateral

If you’re seeking a secured loan or line of credit, you’ll need to be able to put up collateral to secure your funding. What qualifies as collateral varies between lender and product, ranging from cash deposits to inventory, equipment, or real estate. Make sure you can put up the necessary collateral.

What To Look For In A Commercial Loan

Qualifying isn’t enough. It’s important that a lender meets your standards as well. So what should you look for?

Borrowing Limits

Most lenders have minimum and maximum amounts they’re willing to lend to businesses. You’ll want to be certain the lender is capable of giving you the lump sum you’re seeking. Of course, your revenue will have to be sufficient to cover your debt.

Banks are capable of offering larger amounts of money than most alternative lenders. One of the easier ways for a small business to qualify large amounts of money is through an SBA loan.

Term Lengths

How long do you need to pay your loan off? This can be a complex question; there’s no “right” answer. For any individual product, a shorter term length usually means lower interest rates than a longer one. However, paying off a loan quickly may stress your cash flow in the short-term. Having a good sense of your business’s ebb and flow before applying for any financing.

But don’t make the mistake of thinking short-term lending products come with lower interest rates or fees than long-term loans. In fact, those products tend to be among the most expensive in the industry. That said, the speed with which short-term lenders or merchant cash advance providers can get money into your hands may make them the best choice if you have time-sensitive expenses.

Rates

It goes without saying that you want to get the lowest rate you can whenever you borrow money.

APRs serve as one of the easiest ways to make direct comparisons between different products. Even though short-term loans use flat fees rather than interest rates, there are tools available to help you make the conversion.

Remember that lenders don’t always mean the same thing when they say “interest.” The percentage you see may be annual or monthly. In some cases, a flat fee may even be described as an interest rate.

Fees

Not to be confused with interest rates or flat fees, these are costs associated with the loan beyond interest rates. Not all lenders charge fees for every product, and some may have promotions that waive fees.

The most common fee you’re likely to encounter is the origination fee. Usually ranging between 1% – 4% of the amount of money you’re borrowing, this is not a fee you pay out of pocket. Instead, it is deducted from the lump sum you receive from the lender, so you’ll want to take it into account if you’re counting on every cent.

Additional fees may be charged for setting up accounts from which to withdraw automated payments, for late payments, or even just miscellaneous “administration fees.” Approach any lender who charges anything beyond an origination fee with caution and factor those costs into the amount of debt you’re taking on.

Commercial Lenders

Hopefully, we’ve answered some basic, nagging questions about what commercial loans are and how they work. With so many potential options, finding a lender can be an overwhelming prospect. Not sure where to look? We can help get you started.

Loan Type What It Is Typical Rates Learn More

Traditional Term Loans

Loans in which you borrow money in one lump sum and repay in fixed installments. Term loans can be used for most business loan purposes.

4% – 36% APR

Our top picks

Small Business Administration (SBA) Loans

Loans offered by the SBA in partnership with banks and other financers. SBA loans are backed by an SBA guarantee and originated by banks and other partners. 

6% – 12% APR

Our top pick

Commercial Real Estate Loans

Loans used to finance the purchase or commercial real estate.

4% – 36% APR

Our top pick

Business Lines of Credit

Credit lines used for business purposes. Borrowers can draw from their credit line at any time and only pay interest on the amount borrowed. 

8% – 65% APR

Our top picks

Short-Term Loans

Business financing with short term lengths, which normally have a one-time fixed fee instead of interest.

8% – 99% APR

Our top picks

Startup Loans

Loans used to finance the costs of starting a business.

4% – 36% APR

Our top picks

Equipment Loans

Loans used to purchase equipment. The purchased equipment is normally used as collateral to back the loan. 

5% – 24% APR

Our top picks

The post Commercial Loans: Types, Rates, And Where To Find The Best appeared first on Merchant Maverick.

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How To Apply For An SBA Loan: A Complete Guide

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

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

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

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

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

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

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

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

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

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

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

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

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

2. Choose An SBA Loan Program

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

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

Loan Program Description More

7(a) Loans

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

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Microloans

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

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CDC/504 Loans

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

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Disaster Loans

Loans used to rebuild or maintain business following a disaster. 

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7(a) Loans

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

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

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

Loan Amount Less Than Seven Years More Than 7 Years

Up to $25,000

Base rate + 4.25%

Base rate + 4.75%

$25,000 – $50,000

Base rate + 3.25%

Base rate + 3.75%

$50,000 or More

Base rate + 2.25%

Base rate + 2.75%

Microloans

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

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

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

SBA 504 Loans

Borrowing Amount

$500 – $50,000

Term Lengths

Up to 6 years

Interest Rates

6.5% – 13%

Borrowing Fees

Possible fees from the loan issuer

Personal Guarantee

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

Collateral

Collateral normally required, but depends on the lender

Down Payment

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

504 Loans

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

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

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

SBA 504 Loans

Borrowing Amount

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

Term Lengths

10 or 20 years

Interest Rates

Fixed rate based on US Treasury rates

Borrowing Fees

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

Personal Guarantee

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

Collateral

Collateral required; usually the real estate/equipment financed

Down Payment

10% – 30%

SBA Disaster Loans

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

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

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

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

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

Term Rate/fee

Borrowing Amount

Maximum $2 million

Term Lengths

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

Interest Rates

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

Fees

None from the SBA; possible fees from outside agencies

3. Decide On An SBA Partner Lender

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

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

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

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

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

4. Compile An SBA Loan Application

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

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

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

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

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

5. Be Available For Follow-Up Questions

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

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

How To Apply For An SBA 504 Loan

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

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

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

How To Apply For An SBA Loan To Buy A Business

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

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

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

How To Apply For An SBA Loan For A Startup

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

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

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

How To Apply For An SBA Loan For A Franchise

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

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

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

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

SBA Loan Application Process FAQs

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

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

Where do I apply for an SBA loan?

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

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

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

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

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

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

What if I need assistance with my SBA loan application?

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

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

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

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

Final Thoughts

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

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

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