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

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$250,000

9% – 36% factor rate

500

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$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

The post Business Loans And Other Financing Options For Wholesale Distribution Companies appeared first on Merchant Maverick.

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Farm And Agriculture Loans: Your Best Options

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

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

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

Government Programs For Agriculture & Farm Financing

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

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

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

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

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

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

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

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

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

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

Government Farm Loan Rates & Fees

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

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

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

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

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

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

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

What You Need To Qualify For A Government Farm Loan

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

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

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

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

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

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

Grants For Farm & Agriculture Businesses

startup grants

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

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

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

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

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

Alternative Loans & Financing For Agriculture Businesses

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

Equipment Loans

Best For…

Purchasing equipment

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

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

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

Our Top Pick: Lendio

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

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

Business Credit Cards

Best For…

Recurring monthly expenses or emergencies

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

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

Our Top Pick: Chase Ink Business Unlimited

Chase Ink Business Unlimited


chase ink business unlimited
Apply Now 

Annual Fee:


$0

 

Purchase APR:


15.24% – 21.24%, Variable

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

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

Installment Loans

Best For…

Purchasing supplies or inventory

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

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

Our Top Pick: Fundation

fundation logo

Review

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

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

Short-Term Loans

Best For…

Working capital needs and seasonal gaps in revenue

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

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

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

Our Top Pick: OnDeck

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

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

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

Lines Of Credit

Best For…

Businesses that need a flexible financing option

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

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

Our Top Pick: FundBox

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

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

Real Estate Loans

Best For…

The purchase of commercial real estate property or land

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

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

Our Top Pick: SmartBiz

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

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

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

What To Consider When Choosing A Lender

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

How Much Money Do I Need?

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

How Will I Use The Loan?

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

Do I Meet All Lender Requirements?

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

What You’ll Need To Apply For A Farm Loan

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

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

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

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

Final Thoughts

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

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

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Shopify VS Squarespace

Shopify VS Squarespace

Pricing

✓

Tie

Cloud-Based Or Locally-Installed

Tie

✓

Specific Size Of Business

Tie

Hardware & Software Requirements

Tie

✓

Ease Of Use

✓

Features

Web Design

✓

✓

Integrations & Add-Ons

✓

Payment Processing

✓

Customer Service & Technical Support

Negative Reviews & Testimonials

✓

Tie

Positive Reviews & Testimonials

Tie

✓

Security

Winner

Final Verdict

Review

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Review

Compare

Right away, Shopify and Squarespace both score points in my book for their names. Shopify is all about helping you build an online store where customers can shop — “shop-ify-ing” a regular website, as it were. Squarespace, by comparison, is a more traditional website builder, allowing you to create a literal “square space” (or series of square spaces) where people can view your content and images on the internet.

Thank you, Shopify and Squarespace. Your names actually make sense.

Indeed, Shopify is a household name in the world of shopping cart software, whereas Squarespace is well-known for its attractive and modern site design capabilities. Squarespace is more than just a pretty face, though. In the last few years, this platform has added ecommerce functionality at a surprising level of sophistication.

If you’re here for an epic cage match between Squarespace and Shopify, I’m guessing you’re thinking about both of these platforms in terms of ecommerce. You’re in luck, because this is the precise focus of our comparison. How does Squarespace’s ecommerce functionality and design measure up to the ecommerce powerhouse that is Shopify? How do they compare in terms of pricing, customer service, and payment processing? Keep reading for our take on these and other key facets of Shopify and Squarespace.

Don’t have time to read an entire article? Take a look at our top-rated eCommerce solutions for a few quick recommendations. Every option we present here offers excellent customer support, superb web templates, and easy-to-use software, all for a reasonable price.

 

Pricing

Winner: Squarespace

Both Shopify and Squarespace offer free 14-day trials with no credit card required, and neither charge setup or cancellation fees. From there, the two platforms begin to diverge. Here’s how the differences play out:

Shopify

  • Price Range: Choose from $29/month (Basic), $79/month (Shopify), or $299/month (Advanced) plans. There’s also a $9/month plan (Lite) for selling in-person, for embedding little “buy” buttons on other sites, and for selling on Facebook — but you don’t get an actual online store at all, so we’re leaving this plan out of our comparison for the most part.
  • Annual Subscription Discount: Save 10% when your subscription is paid annually upfront, or 20% if you pony up for two full years. For example, the Basic Plan becomes $26 or $23/month, and the Shopify Plan becomes $71 or $63/month.
  • Subscription Structure: All Basic ($29/month) plans and above include unlimited storage, products, and bandwidth. Higher subscription levels add a few features and additional staff accounts. Subscription levels also affect your Shopify transaction fees and your payment processing fees. Which leads us to…
  • Additional Transaction Fees: If you choose Shopify Payments (powered by Stripe) as your payment gateway, you are not charged any separate transaction fees. As an added bonus, you also see a gradual decrease in your payment processing fees with Shopify Payments as you climb the subscription ladder. However, if you use an alternative payment processor and not Shopify Payments, Shopify does charge extra transaction fees, beginning at 2.0% on the Basic plan. Thankfully, these fees gradually decrease to 1.0% and 0.5% as you increase your subscription.

Squarespace

  • Price Range: For ecommerce capability, you must skip over the $16/month plan and start at the $26/month (Business) level. However, merchants who’d really want to take advantage of Squarespace’s ecommerce features in a manner that’s comparable to Shopify are likely opting for the $30/month (Commerce Basic) or $46/month (Commerce Advanced) plans.
  • Annual Subscription Discount: The Business plan drops to $18, Commerce Basic to $26, and Commerce Advanced to $40 per month when paid upfront in one annual lump sum. You also qualify for a free domain registration for one year when you pay your main subscription annually.
  • Subscription Structure: Similar to Shopify, features are added as you increase your Squarespace subscription level. Bumping up to Commerce Basic or Advanced will eliminate separate Squarespace transaction fees.
  • Additional Transaction Fees: A 3.0% fee (above your gateway fees) is incurred by Squarespace on every purchase if you’re on the Business Plan. This additional transaction fee is eliminated, however, on Commerce Basic and Advanced.

For a direct comparison with Shopify, use the smaller print, month-to-month figures for Squarespace (Commerce Basic $30 and Commerce Advanced $46). Shopify promotes month-to-month figures ($29, $79, or $299).

Confusing enough for you? With all these pricing components, you can’t actually perform a true apples-to-apples comparison of cost. In truth, both Shopify and Squarespace offer a fair market price for their services. I will say that the transaction fee issue is problematic with both companies, especially since many competing platforms have eliminated these extra charges altogether. The good news is that each platform at least offers some way out of these fees.

In the end, I’m primarily basing my pricing verdict on one key factor: Squarespace offers its complete arsenal of features for only $46/month ($40/month if paid annually). In contrast, Shopify reserves its premium features for sellers with much deeper pockets (six and a half times deeper, to be exact). The big question is: does Squarespace offer enough ecommerce features at that $46/month level? The answer will depend on your business needs, but you can keep reading to develop a clearer picture of each platform.

Cloud-Based Or Locally-Installed

Winner: Tie

Your Shopify or Squarespace store will be fully-hosted. No need to download and install either one locally.

Specific Size Of Business

Winner: Shopify

Both platforms allow unlimited bandwidth and products, but Shopify is better at accommodating a wider range of business sizes and product catalogs. In addition, Shopify provides a natural growth option via Shopify Plus, whereas Squarespace offers no enterprise-level plan at this time. On the other hand, if you happen to sell a handful of very expensive products (and that’s what makes your business “big”), Squarespace could still work swimmingly for you.

Hardware & Software Requirements

Winner: Tie

Since Squarespace and Shopify are both SaaS (Software as a Service) platforms, you only need a computer, an internet connection, and an up-to-date browser to use either service. Both also provide Android and iOS apps for managing and editing your store.

Regarding supported browsers, Squarespace edges out Shopify by offering Chrome and Safari support on Linux operating systems, while Shopify only works with Windows and Mac. Meanwhile, Shopify stores are optimized for Samsung Internet in addition to Chrome and Safari browsers when viewed on mobile. Depending on your point of view, these finer points may or may not make a difference, so I’m still calling it a draw in this category.

Ease Of Use

Winner: Shopify

With both platforms specializing in general ease of use, we really need to examine Squarespace and Shopify in terms of usability for ecommerce.

Neither platform has a dedicated setup tutorial inside the dashboard, but both have documentation and instructional videos handy. If you’re accustomed to using or testing popular ecommerce platforms like Shopify, Squarespace will definitely have its own learning curve. Once I got the hang of it, though, I could operate the backend quite smoothly.

When you create a trial account with Shopify, you’re taken to the main admin panel. Shopify’s admin is structured like most ecommerce dashboards I’ve seen. Although you can preview your storefront at any time, your backend functions are kept separate from the storefront.

Shopify Dashboard:

With Squarespace, however, you must choose a theme (you can change it later) before you even get to see your admin panel. Once the admin opens, your dashboard is actually a combination of your backend control panel on the left, and your storefront preview on the right.

Squarespace Dashboard:

Although I can vouch that both platforms are very easy to use in the grand scheme, I find navigation of Squarespace’s backend to be slightly trickier than Shopify’s. The Squarespace UI is structured so that there are more dashboard layers to dig through — and then dig back out of again. Additionally, the left control panel menu changes (or even disappears) depending on what layer you happen to be in at the moment, which can be disorienting. This is in contrast to Shopify’s menu, which remains a fixed anchor point for admin navigation.

Take a quick look at the following screens from each platform to see what I mean:

Add A Product — Shopify:

You can see above that my main menu remains fixed on the left side of the dashboard as I enter my product details.

Add A Product — Squarespace:

With Squarespace, I’m already a couple of dashboard layers in, my left sidebar is gone, and I must dive one more screen deep from here to even enter my price. Also, what is not shown above is that you can’t just jump right in and start adding products with Squarespace like you can with Shopify and other online store builders. Even with Squarespace’s ecommerce-friendly templates, you must create a separate product page for your website first. I admit I had to resort to Squarespace’s documentation to figure this out, since I’m accustomed to ecommerce dashboards that make adding your first product a completely frictionless process.

Adding and managing inventory is just one piece of running an online store, but it remains a reliable ease of use test case. While you can list unlimited products with Squarespace, I think the backend interface is better designed for sellers offering a relatively small number of aesthetically-oriented products. Merchants with a large inventory will appreciate Shopify’s clear menus, efficient navigation, and the way in which product data is ultimately organized.

Features

Winner: Shopify

Shopify is the deserving winner in the features category. With solid out-of-the-box functionality and a rich add-on ecosystem, the blunt truth is that Shopify has spent much more time and resources cultivating features specifically for online sellers.

That said, there are a few features Squarespace offers that even Shopify lacks. Another thing to keep in mind is that Squarespace’s comparatively small feature set may still be just right for certain sizes and types of companies.

Key features of both platforms include:

  • Unlimited products, bandwidth, and storage
  • Free SSL certificate
  • Sell physical or digital products
  • Shipping & accounting integrations
  • Inventory & order management
  • Offer gift cards
  • Create discounts and coupons
  • Checkout on your domain
  • Abandoned cart recovery
  • Guest checkout & customer accounts
  • Real-time, carrier-calculated shipping
  • Analytics & reports
  • SEO tools

I’d say the Shopify versions of some of the above features are stronger or more versatile than the Squarespace versions. For example, the discount engine is much more flexible with Shopify.

Now, here are a few features that differentiate the two platforms:

Shopify

  • App store with thousands of integrations
  • Point of sale integration (Shopify POS or third-party POS)
  • Manual order creation (virtual terminal)
  • Proprietary shipping platform (Shopify Shipping) for carrier discounts and label printing
  • Extensive dropshipping capability
  • Enterprise expansion available via Shopify Plus
  • Abandoned cart recovery at cheaper plan level

Squarespace

  • Unlimited staff contributors on all ecommerce plans
  • G Suite integration (full year free)
  • $100 Google AdWords voucher
  • Free domain for a year if you pay annually
  • Customizable checkout forms
  • In-dashboard product image editing
  • Third-party calculated shipping rates at cheaper plan level

Web Design

Winner: Squarespace

Both platforms offer elegant, modern templates that are fully mobile responsive. Here’s a quick comparison of template stats:

Shopify Themes

  • 67 total templates, most with 2-4 style variations
  • 10 templates are free and supported by Shopify developers
  • Remaining third-party themes cost $140-$180

Squarespace Themes

  • 90 templates organized into 21 template families
  • All templates are free and supported by Squarespace developers

Within these themes, both platforms facilitate the adjustment of fonts, colors, and layouts without any coding experience. In fact, I’d say both services offer more flexibility in this area than the average ecommerce store builder. If you still run into design limitations or simply want to alter the code, each site builder makes it relatively easy to customize your store with HTML, CSS, and Javascript.

The overall web design winner is a tough one to call, because that decision really depends on the type and number of products you intend to sell, with Squarespace catering to smaller catalogs with visual interest. If we were deciding strictly based on the variety of pre-made templates designed for stores selling lots of stuff, Shopify would snag the win.

That said, here are some ways Squarespace stands out when it comes to design:

  • All templates are free, and all are created and supported by Squarespace.
  • Offers a more versatile drag-and-drop editor for page layout customization.
  • Allows you to edit your product images from within your dashboard.
  • Uses a common templating language (JSON), versus Shopify’s own invented language (Liquid).

Was this category too close to call? Share your thoughts in the comments!

Integrations & Add-Ons

Winner: Shopify

Shopify has an impressive app store with around 2500 integrations — more than the vast majority of SaaS ecommerce platforms at large. While add-ons can certainly increase your monthly expenditure with Shopify, there’s no denying that your choices are plentiful. Plus, since a huge community of developers and merchants interact with Shopify apps, you also have access to thousands upon thousands of detailed user reviews.

Squarespace takes a completely different approach to integrations. No app store is offered, but Squarespace spins this as an advantage. Any pre-built integrations (about 70 in total) are already incorporated into your dashboard and fully tech-supported by Squarespace. Aside from payment providers (Stripe, PayPal, Apple Pay) and shipping carriers (UPS, USPS, and FedEx), there are just a small handful of official Squarespace integrations specifically related to ecommerce. Here are a few key add-ons:

  • ShipStation: Order fulfillment
  • Xero: Accounting
  • MailChimp: Email marketing
  • Zapier: Workflow automation, multi-app connector

Just like many Shopify apps, several Squarespace apps have monthly subscription fees of their own. And, just like with Shopify, you can always build custom integrations if you have those skills or can hire someone who does. To put things in quick perspective, however, Squarespace has one official shipping/fulfillment app in ShipStation. Shopify has over 280 choices in its “Orders & Shipping” category, and over 600 results pop up if I simply type “shipping” in the app store’s search bar.

The win in this category goes to Shopify, the reigning monarch of ecommerce integrations. Besides keeping decision-making overload at bay, the trick with Shopify add-ons is to always check the quality (including quality of developer support) and ongoing cost of each integration.

Payment Processing

Winner: Shopify

Shopify wins at payment processing for one primary reason: flexibility. Consider the sheer number of gateway options with Shopify — over 100. With Squarespace, Stripe and PayPal are your only choices. More gateway options means availability in more countries and currencies, more ways for your customers to pay, better odds of finding the perfect processor for your specific needs, and even the opportunity to customize your own pricing model and rates in some cases. With Shopify, you can also accept cryptocurrencies or set up manual payment methods like cash on delivery, money orders, and bank transfers.

This is not the end of the story, however. Factor in the additional transaction fees that may be charged by either platform depending on your situation, as well as Shopify’s payment processing discounts with Shopify Payments (powered by Stripe), and the comparison becomes more nuanced.

As we examine these complications further, keep in mind that the going rate to process ecommerce transactions with most gateways these days is 2.9% + $0.30.

Here’s how your processing will work with Squarespace according to your subscription level:

Squarespace + PayPal and/or Stripe

  • Business ($26/mo.): 2.9% + $0.30, + 3.0% Squarespace fee = 5.9% + $0.30 per transaction
  • Commerce Basic ($30/mo.): 2.9% + $0.30
  • Commerce Advanced ($46/mo.): 2.9% + $0.30

Those are the only potential processing costs you’re looking at with Squarespace. That additional 3.0% Squarespace fee on the Business plan is pretty brutal, but as soon as you upgrade to Commerce Basic for an extra $4/month, it disappears. For this reason, I don’t think the Business plan is a sustainable option for most ecommerce stores.

Now, let’s take a quick look at Shopify, remembering that using Shopify Payments as your gateway provides two perks: 1) no extra Shopify transaction fee on any plan, and 2) decreased payment processing fees as you upgrade your overall Shopify subscription.

Shopify + Shopify Payments

  • Basic ($29/mo.): 2.9% + $0.30
  • Shopify ($79/mo.): 2.6% + $0.30
  • Advanced ($299/mo.): 2.4% + $0.30

Shopify + Alternative Gateway (Generic Example)

  • Basic ($29/mo.): 2.9% + $0.30, + 2.0% Shopify fee = 4.9% + $0.30
  • Shopify ($79/mo.): 2.9% + $0.30, + 1.0% Shopify fee = 3.9% + $0.30
  • Advanced ($299/mo.): 2.9% + 0.30, + 0.5% Shopify fee = 3.4% + $0.30

Another twist is that Shopify Payments is currently only available for businesses located in 10 countries, so you’re stuck with an alternative gateway and that pesky Shopify transaction fee if your country isn’t included. (Squarespace at least doesn’t punish you for something you can’t control — your location.) On the flip side, if you are in one of the supported countries, you could opt to use Shopify Payments in addition to any of the other gateways Shopify offers to increase your customers’ payment options.

In a perfect world, both platforms would let you pick your own processor from among many, and never penalize you with extra transaction fees for any reason! Both Shopify and Squarespace have their own flaws in this regard.

So, what does this all mean for your business? The short answer is math. To determine the real winner in this category for your own company, you must consider your monthly subscription cost to either platform, your average number of transactions per month, and your average transaction size — not to mention the countries and currencies involved. Because the best platform and subscription level for your business depends on these and other factors, I award Shopify the payment processing win for at least making things interesting!

Customer Service & Technical Support

Winner: Shopify

In terms of overall quality of customer support, both Shopify and Squarespace receive mixed user reviews. That said, Merchant Maverick’s own experiences with customer service and technical support would award Shopify the victory in this category. We’ve had better luck contacting the Shopify support team through the available channels — even when they’ve been unaware that we are software reviewers on the prowl.

Shopify also has more available support channels and more open-hours. Take a look:

Shopify

  • Phone: 24/7
  • Email: 24/7
  • Live Chat: 24/7

Squarespace

  • Phone: None
  • Email: 24/7
  • Live Chat: Monday-Friday, 4AM-8PM

Squarespace publishes a whole manifesto on its website explaining why no phone support is offered if you’d like to read it for yourself. Although they don’t come right out and say it, the bottom line is that this helps keep overall costs down. Meanwhile, not being able to contact a live person (even via live chat) after 5pm Pacific time is pretty brutal if you’re running an online store. Squarespace should know better — ecommerce never sleeps:

One final note in this category: both platforms provide several self-help resources — community forums, blogs, video tutorials, webinars, knowledgebase articles, and the like. However, note that Shopify resources are 100% geared toward ecommerce, whereas you’ll have to wade through other topics to find ecommerce resources at the Squarespace site.

Negative Reviews & Complaints

Winner: Squarespace

When comparing user reviews for these platforms, it’s important to keep in mind the difficulty in teasing out feedback on Squarespace that is specifically related to ecommerce. Despite its growing ecommerce capability, Squarespace typically ends up in the generic website builder category on most review sites, with users discussing traditional website building issues.

Those caveats aside, here are some of the most common issues that come up for each platform:

Shopify

  • Extra transaction fees when not using Shopify Payments
  • Costly add-ons
  • Poor customer support
  • Frustration with Shopify Payments

Squarespace

  • Glitches & bugs
  • Poor/limited customer support
  • Limited theme customization

Of course, traditional website builders tend to get raked over the coals for the slightest theme customization limitations. We’ve already said Squarespace’s design capability is quite good overall, particularly when compared to a lot of shopping cart builders. When customers do criticize Squarespace specifically on ecommerce, there are no consistent patterns emerging so far. For this reason, I award this category to Squarespace based on a “no news is good news” argument. We’ll keep checking back for patterns.

Positive Reviews & Testimonials

Winner: Tie

Both Shopify and Squarespace tend to rate highly for overall customer satisfaction on user review websites. On top of that, both platforms are known for their ease of use and elegant templates. And, along with all the negative review of customer support both software programs have received, users of both platforms have been known to also sing praises for customer support. The combination of these factors led me to call this one a draw.

Once again, we’re faced with the dilemma that there’s not a whole lot of feedback about Squarespace’s ecommerce offerings. I have definitely seen several generic comments, such as “good for ecommerce!” Honestly, I think people are mostly pleased (and perhaps a bit surprised) that there’s some solid ecommerce capability available with Squarespace at all. I haven’t come across many users directly comparing their experiences with the two platforms.

Security

Winner: Shopify

Our combatants are quite close in this category. Both offer PCI (Payment Card Industry) compliance, a free SSL (Secure Socket Layer) certificate for your site, two-factor authentication for logging in to your account, a CDN (Content Delivery Network), and even provide methods for complying with the GDPR (General Data Protection Regulation) laws implemented by the EU in 2018.

The main difference I can see is that Shopify’s checkout pages are covered by an industry-standard, 256-bit shared SSL certificate. Squarespace’s checkout pages are covered by a less-robust, 128-bit certificate. My understanding is that while 128-bit encryption may end up working slightly faster, it’s technically less secure.

Final Verdict

Winner: Shopify

Squarespace put up a good fight in several categories, but Shopify emerges victorious as the better ecommerce website builder. Shopify’s pricing, core feature set, and vast app store can serve budding sellers on the Lite plan, all the way up to enterprise clients using Shopify Plus. Meanwhile, ecommerce was quite literally an afterthought for Squarespace. The platform’s developers have done an admirable job adding features for online selling, but they just can’t compete with Shopify’s dominance here.

As we’ve said time and again in this comparison, Squarespace still provides an interesting option for sellers who’d like to feature a small number of products with aesthetic appeal. Especially if you’ve already been using Squarespace to develop your company story and brand, I’d definitely recommend fully exploring the ecommerce feature set — perhaps by bumping up your subscription for just month or two — before completely abandoning ship for Shopify or another dedicated shopping cart builder.

I’ll offer one more interesting twist before you head off to test Shopify and/or Squarespace for yourself. Some users have actually used the two services in combination. How? By integrating those “buy now” buttons from a $9/month Shopify Lite plan into an existing Squarespace website. It’s a roundabout option, to be sure, but it also gives you access to in-person selling with the Shopify POS app. At any rate, take that as some final food for thought, and best of luck in your search for the perfect ecommerce platform.

The post Shopify VS Squarespace appeared first on Merchant Maverick.

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The Best Business Loans For Trucking Companies

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

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

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

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

Loan Type What Is It?

SBA Loans

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

Equipment Loans

Loans used to purchase equipment such as semi-trucks.

Medium-Term Installment Loans

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

Business Lines of Credit

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

Short-Term Business Loans

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

Business Credit Cards

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

Small Business Administration (SBA) Loans

Best for…

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

Types Of Loans Offered By The SBA

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

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

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

SBA Loan Terms & Fees

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

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

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

SBA Loan Borrower Eligibility

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

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

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

Where To Find SBA Loans

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

Review

Visit Site

Streamlines SBA loan process for:

  • Debt refinancing
  • Working capital
  • Commercial real-estate

Highlights:

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

SBA microloans are available through participating non-profit organizations.

Equipment Loans

Best for…

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

Equipment Loan Uses

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

Equipment Loan Terms, Fees, & Down Payment

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

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

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

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

Borrower Eligibility For Equipment Loans

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

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

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

Equipment Loans VS Leases

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

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

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

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

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

Where To Find Equipment Loans

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

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

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

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

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

Medium-Term Installment Loans

Best for…

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

Medium-Term Installment Loan Uses

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

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

Medium-Term Loan Terms & Fees

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

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

Borrower Eligibility For Medium-Term Loans

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

Where To Find Medium-Term Loans

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

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

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

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

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

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

Business Lines Of Credit

Best merchant online credit card processing companies image

Best for…

Businesses that want access to capital on demand.

Business Line Of Credit Uses

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

Business Line Of Credit Terms & Fees

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

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

Borrower Eligibility For Business Lines Of Credit

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

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

Where To Find Business Lines Of Credit

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

Lender Borrowing Amount Draw Term Draw Fee APR Next Steps

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

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

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

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

Short-Term Business Loans

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

Best for…

Business owners that are forced to cover emergency expenses.

Short-Term Business Loan Uses

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

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

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

Short-Term Loan Terms & Fees

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

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

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

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

Borrower Eligibility For Short-Term Loans

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

Where To Find Short-Term Loans

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

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

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

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

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

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

Business Credit Cards

Best for…

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

Business Credit Card Uses

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

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

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

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

Business Credit Card Terms & Fees

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

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

Borrower Eligibility For Business Credit Cards

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

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

Where To Find Business Credit Cards

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

Card Name Best For Next Steps

SimplyCash Plus Business Credit Card from American Express

Cash back

Compare

Chase Ink Business Preferred

Travel rewards

Apply Now

Chase Ink Business Cash

No annual fee

Apply Now

Blue Business Plus Credit Card from American Express

0% introductory rate

Compare

Capital One Spark Classic For Business

Fair credit

Compare

Wells Fargo Business Secured Credit Card

Bad credit

Compare

Trucking Business Loan FAQs

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

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

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

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

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

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

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

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

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

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

Can I get a grant for my trucking company?

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

Final Thoughts

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

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

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Best Credit Cards For New Business Owners

If you’re a new business owner, getting a credit card sounds like an awesome idea. Credit cards help you build credit, save you money with rewards, and enable you to make large purchases without needing cash on hand.

But as a new business owner, you may be wary of applying for a credit card because your company lacks credit history. The good news? Many card issuers will take your personal credit history into account. This means that if you’ve maintained a good personal credit score, you have an excellent chance of qualifying for a business credit card. The even better news? There are plenty of options even for those with limited credit history or poor credit scores.

We’ve researched some of best credit card options for new business owners and listed them below. Read on through to determine which one is right for you!

Comparison Of The Best Credit Cards For New Business Owners

Best for Card
Cash back SimplyCash Plus Business Credit Card from American Express
Travel rewards Chase Ink Business PreferredSM
No annual fee Chase Ink Business CashSM
0% introductory rate Blue Business Plus Credit Card from American Express
Fair credit Capital One Spark Classic For Business
Bad credit Wells Fargo Business Secured Credit Card

Best Card For Cash Back Rewards: SimplyCash Plus Business Credit Card from American Express

SimplyCash Plus Business Credit Card from American Express



Compare

Annual Fee:


$0

 

Purchase APR:


14.24% – 21.24%, Variable

Offering up to 5% cash back on some purchases, the SimplyCash Business Credit Card from American Express is hard to beat. It also provides you with some choice when it comes to cash back categories, meaning that you can customize this card to fit your spending habits.

This nifty card gives you 5% back on purchase made at U.S. office supply stores and on wireless telephone services purchased directly from U.S. service providers (up to $50,000 spent per calendar year). You’ll then get to pick one category from the below list of eight options to earn 3% cash back:

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

As with the 5% categories, you’ll earn the 3% cash back up until you spend $50,000 in a calendar year (after which you’ll receive 1% back). All other purchases will net you 1% cash back.

SimplyCash Plus gives you the ability to buy above your credit limit. There is no annual fee, and 0% intro APR for the first nine months.

Need a more detailed breakdown? Visit our full review.

Best Card For Travel Rewards: Chase Ink Business Preferred

Chase Ink Business Preferred



Apply Now 

Annual Fee:


$95

 

Purchase APR:


17.99% – 22.99%, Variable

While this card from Chase is simply a rewards card, it packs in a lot of bonuses for those that travel frequently.

To start, Ink Business Preferred users get three points per dollar spent on travel, shipping purchases, Internet, cable and phone services, and on advertising purchases made with social media sites and search engines each account anniversary year (up to $150,000 spent). All other purchases get one point per dollar spent. You’ll then be able to redeem your points for 25% more when you redeem them for travel through Chase Ultimate Rewards.

Beyond those basic rewards, Chase also lets you transfer your points on a 1:1 basis to nine airline and four hotel reward programs. If you need something other than travel rewards, you’ll also be able to redeem points for Amazon.com purchases, gift cards, and cash back, making this an extremely versatile card.

If you want more information on this card, check out Merchant Maverick’s complete review.

Best Card With No Annual Fee: Chase Ink Business Cash

Chase Ink Business Cash



Apply Now

Annual Fee:


$0

 

Purchase APR:


15.24% – 21.24%, Variable

This card from Chase lets you earn up to 5% cash back when you make purchases at office supply stores and on internet, cable, and phone services (up to the first $25,000 spent). You can also earn 2% back when spending at gas stations and restaurants (up to the first $25,000 spent). Everything else earns you 1% back.

The cherry on top of all those rewards is that you won’t have to worry about paying an annual fee—this means you’ll end up with savings no matter how much you spend yearly.

The Ink Business Cash also features a 0% intro APR rate for the first 12 months, a very generous offer. Chase is currently offering a welcome bonus of $500 cash back when you spend $3,000 within your first three months of opening an account.

If you want all the deets, read our full review.

Best Card With A 0% Introductory Rate: Blue Business Plus Credit Card from American Express

Blue Business Plus Credit Card from American Express



Compare

Annual Fee:


$0

 

Purchase APR:


12.99% – 20.99%, Variable

If you need to make a big purchase but can’t pay it all up front, having a card with 0% APR is very helpful because you won’t accrue interest. With a 0% intro APR for the first 15 months, the Blue Business Plus Credit Card from American Express has one of the longest 0% intro rates.

On top of that generous intro APR period, the Blue Business Plus also packs in some solid rewards. As a base, you’ll earn two points per dollar spent up to $50,000 yearly, and then one point per dollar thereafter.

Amex also grants you expanded buying power, which enables you to spend above your credit limit. Additionally, this card does not carry an annual fee.

Get the full breakdown on the Blue Business Plus with the complete review from Merchant Maverick.

Best Card For Fair Credit: Capital One Spark Classic for Business

Capital One Spark Classic For Business


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Annual Fee:


$0

 

Purchase APR:


24.74%, Variable

One of the easiest small business credit cards to get, the Capital One Spark Classic for Business was made for those who want to build their credit. Despite being aimed at those with lower credit, this card still offers some decent perks.

To start, its base rewards dole out an unlimited 1% cash back without any sort of annual fee. This means you’ll be saving money no matter what your yearly spending rate is. Additionally, you’ll be able to add employee credit cards at no additional cost. Capital One requires no foreign transaction fees—great if your business needs overseas travel.

For the in-depth rundown on Spark Classic, head on over to our full review.

Best Card For Bad Credit: Wells Fargo Business Secured Credit Card

Wells Fargo Business Secured Credit Card


business credit cards fair credit
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Annual Fee:


$25

 

Purchase APR:


Prime + 11.90%

One of the lone secured cards for business, the Wells Fargo Business Secured Credit Card is an appealing option for those looking to boost a low credit score. Wells Fargo targets this card for those just starting a business, businesses with little or no credit, and those with past credit problems.

You also have a couple of reward options: get 1.5% cash back or one point per dollar spent, which can be redeemed for gift cards, merchandise, airline tickets, and more. Besides the base bonuses, you won’t need to worry about paying program or foreign fees. However, you’ll need to fork over $25 annually, and you can add up to 10 employee cards.

Want more low credit options? Check out our breakdown of the best business credit cards for those with bad credit.

FAQs About New Business Credit Cards

Do I need business credit to get a business credit card?

No, when you apply for a business credit card, issuers will also consider your personal credit history, which can be used to guarantee repayment.

What business information do I need to supply to get a credit card?

When applying for a business card, issuers usually request your company’s business tax identification number. If you don’t have one, you can often supply your personal social security number instead. They’ll likely ask you for your business’s legal structure, its ownership type, and its age. It’s also not uncommon for issuers to request your annual revenue, how much you spend, and which country your business is located in.

Can I still get a business credit card if I’m not registered as a business?

Yes, you don’t need to be officially registered as a business to get a business credit card. Find out more with our guide to business cards for the self-employed.

Can I get a new business credit card without signing a personal guarantee?

Usually, no. If you’re a new small business owner, you’ll most likely have to sign a personal guarantee.

Can I use personal credit cards for business?

Yes, there are a number of reasons why you might prefer a personal card, from better legal protection to better potential rewards. We go into more depth on the subject in our personal credit card guide.

Comparison Of The Best Credit Cards For New Business Owners

Card Name Best For Next Steps

SimplyCash Plus Business Credit Card from American Express

Cash back

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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

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Capital One Spark Classic For Business

Fair credit

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Wells Fargo Business Secured Credit Card

Bad credit

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The post Best Credit Cards For New Business Owners appeared first on Merchant Maverick.

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The 6 Best Business Lines Of Credit For Bad Credit

Each small business is unique, but every business has at least one thing in common: they all need money to operate. Whether it’s for day-to-day operations, a major purchase, or the dreaded unexpected emergency, businesses need ready cash — and lots of it.

In an ideal world, you would just reach for your checkbook or debit card every time an expense popped up. Unfortunately, things aren’t that cut and dry in the real world. Customers are late in paying their invoices; businesses have seasonal slumps; unexpected emergency expenses cut into the bottom line.

Wouldn’t it be great to have on-demand access to cash whenever it was needed? Actually, there is a small business financing solution that works that way: a business line of credit.

What happens, though, when you have poor credit? Maybe you’ve tried to qualify for other business financing in the past and have been turned down. The great news is that business lines of credit are available to everyone, even applicants with low credit scores.

Ready to learn more? Read on for more information about business lines of credit, including what they are, how you can use them, and how to obtain one — even if you have less-than-perfect credit.

What Is A Business Line Of Credit?

A business line of credit is a type of revolving credit. The lender provides the business owner with a credit limit. Much like they would with a credit card, the borrower can make as many draws as needed — up to and including the total credit limit — to get fast access to funding. Interest and fees are charged only on the balance that has been used by the borrower.

Once a borrower begins to make draws, the money is paid back at a later time on a scheduled basis, which could be weekly, monthly, or on another schedule set by the lender. Payments are made toward the principal balance, as well as toward the interest and fees charged by the lender. As money is paid back, it becomes available to borrow again.

Is A Credit Card A Type Of Line Of Credit?

Business credit cards are another type of revolving credit, and while very similar to lines of credit, they aren’t exactly the same thing.

A credit card allows a borrower to make multiple purchases up to and including the set credit limit. Cards can be used for online purchases or brick-and-mortar establishments that accept credit cards.

Cash draws can be made from a credit card, but these draws typically come with higher fees and interest rates. With most credit cards, you also can only access a certain percentage of your total credit limit as a cash advance. When cash is needed, a line of credit is the better option.

However, credit cards have their own benefits. Credit cards can be used immediately, while lines of credit draws may take 24 hours or longer. Credit cards also offer rewards programs, allowing users to rack up airline miles, bonus points, and cash back with every use. Lines of credit do not offer these rewards.

When Should I Use A Line Of Credit?

A line of credit is handy any time you need quick access to money. A line of credit can be used when an emergency expense arises; it can also be used for purchases that you’d rather pay off over time.

Really, a line of credit can be used for any business expense. However, like other types of financing, line of credit loans should only be used when needed. Interest and fees can make this a very expensive form of credit. Before spending, ask yourself if the return on investment will be worth the cost or if there are more affordable alternatives available. If you do decide to make a draw, try to pay the balance off as quickly as possible to avoid paying unnecessary interest or fees.

When Should I Look For Other Financing Options?

In some scenarios, you may want to look into other financing options. For very large purchases, a long-term loan with a lower interest rate may be a more logical choice.

One of the major benefits of a line of credit is how fast you can receive the money you need. For emergencies, this may be the only option. However, if you are planning to make a purchase that isn’t an immediate need, it may be best to shop your options to find the most affordable type of financing.

What Is Considered Bad Credit?

business card for bad credit

Some lenders have their own standards to define bad credit, but in general, a score between 350 and 599 is considered poor.

A low credit score could occur for a number of reasons. A missed payment, a foreclosure, collections, or bankruptcy can pull a credit score down quickly. Even having too many new accounts or high credit utilization can drag a score down. Unfortunately, most lenders don’t consider the circumstances and just see one thing with a low credit score: risk.

Why Is My Personal Credit Score Important?

Lenders consider borrower risk before approving a loan. The lower the risk, the more likely the lender will be to approve the loan. The higher the risk, the higher the chances are of a rejected application. If a risky borrower is approved, interest rates are usually much higher and terms are not as favorable.

Personal credit score plays a big role in assessing risk. Borrowers with high credit scores will have more financing options and will receive the best rates and terms. Borrowers with lower credit scores will be limited in their options. They may qualify for lower amounts and suffer from higher overall loan costs. In some cases, borrowers with low scores will be unable to qualify for unsecured loans. These borrowers will have to put up collateral or pay a deposit for a secured loan.

How Quickly Can I Improve My Personal Credit Score?

Unfortunately, boosting your personal credit score isn’t an overnight process. While it’s possible to raise your score by a few points in just a few weeks, the process of raising your credit score from “bad” to “good” could take months – or in some cases, years.

The first step to improving your personal credit score is to pull your report and score to see where you stand. This can be done at no cost online. Look carefully through your report for any erroneous items that can be disputed with the credit bureaus. A mistake on your credit report will need to be proven to the creditor and then corrected or deleted.

If you have open lines of credit, make sure to pay your balances down as quickly as possible. Not only will this help you save on interest over time, but it will also lower your credit utilization, which in turn can help raise your credit score.

At the very least, make sure that you’re making minimum payments on all of your accounts each month. A late or missed payment can severely affect your credit score. Do not make too many inquiries into new accounts, and don’t open too many new accounts at the same time. All of these moves throw up a red flag to lenders.

Finally, raising your score can sometimes be a waiting game. Hard inquiries remain on your credit report for two years, while bankruptcies and foreclosures stay on your credit report for seven years. While you can work in other ways to build your credit in the meantime, only time will erase these past mistakes.

Is My Business Credit Score Important?

If you’re a business owner, you have a business credit score in addition to your personal score. A business credit score shows your business’ credit history and helps lenders assess whether or not you are a risky borrower.

Lines of credit, credit cards, and loans taken out for your business will all affect your business credit score. As with your personal credit, if you make late payments or miss payments on a business account, your score will be lower. Your business will be viewed as a riskier investment. If your score is high, lenders will feel more confident in giving you the financing you seek.

A business credit score is important when applying for financing, so it’s vital to ensure that your business credit score is as high as possible. The best loan products, like long-term bank loans and commercial mortgages, are reserved for borrowers with high personal and business credit scores. For many lines of credit, business credit score is considered by the lender when determining whether to approve your application.

The Best Business Lines of Credit For Bad Credit

Whether you have an emergency expense and need money quickly or you just want to have a backup form of funding on-hand for the future, a line of credit can be good for your business. Before you apply, become familiar with the best lines of credit for borrowers with poor credit scores.

Fundbox

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Fundbox provides business lines of credit up to $100,000 for qualified borrowers. In order to qualify, all applicants must have a business checking account and a recommended yearly revenue of $50,000. Businesses must be based in the U.S. or in select U.S. territories. Applicants must have at least two months of activity in Fundbox-supported accounting software such as QuickBooks. If this qualification is not met, an applicant can provide bank statements to prove three months of transactions in a business bank account. There are no minimum credit scores to qualify.

The application process for Fundbox takes less than 10 minutes and most applicants can receive an approval decision in 3 minutes or less. Once approved, the borrower can access funds immediately, with most transfers going through as quickly as the next business day. Fundbox charges fees starting at 4.66% on the amount drawn. Balances can be paid early and any remaining fees will be waived. Repayments are made weekly over 12 or 24 weeks.

Kabbage

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Kabbage provides up to $250,000 via lines of credit. While Kabbage does pull your credit score, the lender focuses more on business performance than credit history, so borrowers with low credit scores can be approved.

To qualify for a Kabbage line of credit, businesses must have been in operations for a minimum of one year. There are revenue requirements: either $50,000 in annual revenue or $4,200 monthly revenue for the last three months. Kabbage requires borrowers to link their business accounts (PayPal, QuickBooks, business bank accounts, etc.) to determine if they qualify and how much they are qualified to receive.

With Kabbage, the application and approval process takes approximately 10 minutes. Once approved, borrowers can draw money immediately, and funds are usually transferred the next business day. Kabbage has also released the Kabbage Card, which lets borrowers use funds immediately anywhere VISA is accepted.

Kabbage offers repayment terms of 6 or 12 months. Payments are made monthly through automatic withdrawals. Kabbage charges fees between 1.5% and 10% on the borrowed amount based on business performance.

Headway Capital

headway capital

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Headway Capital provides lines of credit up to $100,000. Minimum qualifications for a Headway Capital line of credit is annual revenue of at least $50,000 and at least one year in business. The business must also be located in one of the states served by the lender. There are no minimum credit score requirements, although a soft credit pull will be performed during the application process.

Headway Capital offers repayment terms of 12, 18, or 24 months. Weekly or monthly payment options are available. Fees, minimum initial draw amounts, and maximum credit limits vary by state. Applicants for Headway Capital lines of credit can be pre-approved in just minutes. Once underwriting is complete and the loan is approved, borrowers can draw immediately from their line of credit and receive the funds as quickly as the next business day.

OnDeck

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OnDeck provides lines of credit up to $100,000 for qualified business owners. All applicants must be in business for at least one year with annual revenue of at least $100,000. The applicant must also be a majority owner of the business and have a credit score of at least 600. Business and personal credit scores, as well as business performance, will be evaluated for approval.

Rates for OnDeck lines of credit are as low as 13.99%, although the average APR is 32.6%. Repayment terms are weekly and made over a 6-month period. Once approved, borrowers can make a draw on funds immediately. With an ACH transfer, money will be received within 1 to 2 business days. OnDeck also offers Instant Funding, which transfers funds to an eligible business debit card in just minutes.

Two Credit Cards For Merchants With Bad Credit

If you want to pay your vendors, contractors, and suppliers, a business credit card may be the right choice for you. A credit card gives you instant access to funding without waiting for transfers, and you can withdraw cash if needed. Not only will you be able to use your funds immediately, but business credit cards can also help you boost your credit score to apply for other types of financing in the future.

Capital One Spark Classic

Capital One Spark Classic For Business



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Annual Fee:


$0

 

Purchase APR:


24.74%, Variable

The Capital One Spark Classic is a popular choice with business owners that have lower credit scores. To qualify, all applicants must have a credit score of at least 580. This is an unsecured card that comes with a 24.74% variable APR and no annual fee.

One of the advantages of this card is that it has a 1% cash back offer for every business purchase. Rewards are unlimited, and there is no minimum to redeem. The Capital One Spark Classic comes with fraud coverage and free employee cards. Using the card responsibly can also help you boost your credit while giving you access to the capital that you need.

Capital One Secured Mastercard

Secured Mastercard from Capital One



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Annual Fee:


$0

 

Purchase APR:


24.99%, Variable

The Capital One Secured Mastercard is a personal credit card, but it can be used by a business owner who wants to rebuild their credit.

There is no annual fee, and this card comes with a 24.99% variable APR. The Capital One Secured Mastercard is a secured credit card that requires a refundable deposit of $49, $99, or $200 based on the creditworthiness of the applicant. Once approved, a credit line of $200 will be available. Once five monthly payments have been made on time, borrowers will receive a credit limit increase. Over time, borrowers can receive higher credit lines and qualify for additional Credit One products.

Final Thoughts

Having a low credit score can make qualifying for a business loan difficult but not impossible. Lines of credit and credit cards can help even borrowers with low scores receive the money they need to build their businesses. By applying for the right line of credit and using it responsibly, you will not only keep your business operating smoothly but can also build your credit in the meantime to qualify for more financing options in the future.

The post The 6 Best Business Lines Of Credit For Bad Credit appeared first on Merchant Maverick.

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The Complete Guide to PayPal’s Fees, Rates, and Pricing

As a consumer mobile wallet, PayPal is darn-near ubiquitous. But with more than 17 million merchants worldwide calling PayPal their payments processor, it’s also a massive force in the merchant services industry. So if you’re looking for a quick and easy way to get set up with credit card payments, whether for a POS system or online, PayPal is probably going to be on your radar, and with good reason.

But should you choose PayPal as your payments processor, and what will it cost? The good news is that PayPal offers transparent, pay-as-you-go pricing with no monthly fees, no account termination fees, or other hidden costs. You can predict fairly well what you’ll pay with PayPal, and all payment processing fees are deducted before PayPal deposits funds in your account.

The one major drawback is that PayPal is a third-party processor, also referred to as an aggregator. That means the company essentially onboards merchants as sub-users of one, giant merchant account that includes the entirety of PayPal’s merchant base. This means that the company does minimal underwriting before approving an account. You don’t need to provide much info beyond confirming your identity to open an account. However, this does mean you face a greater amount of scrutiny after opening an account, and PayPal can terminate your account or place a hold on funds with no notice to you.

That sounds worrisome, but the reality is it only happens to a small percentage of merchants. You can also take steps to protect yourself by recognizing the common red flags that processors look for and avoiding them. Check out our article on how to avoid merchant accounts holds and terminations to learn more.

PayPal obviously isn’t the right choice for everyone. There are restrictions on the types of products merchants can offer, and it doesn’t support certain business models. High-risk businesses should look somewhere else for a merchant account. However, most merchants should be fine with a PayPal account for payment processing.

Read on for a closer look at what you can expect to pay with PayPal as your business’ credit card processor! You can also check out our PayPal and PayPal Here reviews for a focused look at the products and services.

Payment Processing Fees

The major concern for most merchants who use (or are considering using) PayPal are the payment processing costs, so we’ll start there. PayPal offers predictable, flat-rate pricing for all merchants. You don’t have to worry about higher interchange for American Express cards, or MCCs, or qualified vs non-qualified transactions. Your exact rate will depend on the type of transaction.

Merchants who use PayPal’s mPOS app, PayPal Here, or integrate with one of PayPal’s POS partners (such as Vend), will pay the following for in-person transactions:

  • 2.7% per swiped, dipped or tapped transaction
  • 3.5 + $0.15 per keyed transaction

For online transactions, including monthly subscription charges, donations, and digital invoices, PayPal charges the following:

  • 2.9% + $0.30 per online transaction

That’s it. Really. The simplicity of PayPal’s pricing is one of the biggest draws for merchants. You can predict fairly easily what your pricing will be and, because PayPal deducts its fees before depositing funds in your account, you don’t have to worry about an end-of-the-month invoice or going over a limit and incurring additional fees.

What About Alternative Payment Processing Rates?

If you’re wondering whether PayPal offers any sort of alternative payment plans, the answer is yes. Merchants with an average transaction size under $10 can opt for the micropayments plan. PayPal also offers a nonprofit discount for online transactions to qualified 501(c)(3) nonprofits.

  • Micropayments Plan: 5% + $0.05 per transaction. (Note: This rate applies to all transactions, even those above $10)
  • Nonprofit Discount (Online Only): 2.2% + $0.30 per transaction

If you integrate with one of PayPal’s partner POS systems, such as Vend or TouchBistro, you may be eligible for special discounts  (presumably volume-based) or other promotions. However, these offers aren’t clearly disclosed, just advertised on the POS software sites.

Other PayPal Fees For Payment Processing

While PayPal does charge a few extra fees relating to payment processing, they aren’t many. But these are what you might come across:

  • 1.5% Cross-Border Transaction Fee: For US merchants who accept online payments from buyers out of the country, or in-person transactions involving a card from outside the US, PayPal charges a 1.5% cross-border fee. That means, for example, that a US merchant accepting a Canadian card at a POS terminal will pay 4% of the transaction value to PayPal.
  • 2.5% Currency Conversion Fee:  If PayPal has to convert the currency before it deposits the funds in your account, you’ll pay another 2.5% conversion fee. Whether you have to pay the conversion fee depends on the customer’s bank and whether it will handle the currency conversion (usually at a cost to the customer).
  • $20 Chargeback Fee: Chargeback fees are pretty standard, and if a customer files a chargeback against you, PayPal will assess a $20 fee in addition to withdrawing the funds to cover the transaction amount.
  • Refund Fee: In the event of a refund, PayPal will refund the percentage-based fee from the transaction to you, but keep the fixed fee. For most in-person transactions that means you’ll pay nothing. However, refunds on keyed transactions mean you’ll pay $0.15. Refunds on online or invoiced transactions will cost $0.30. PayPal can be a bit confusing about how this works in its transaction summaries, but be aware that you will pay a fee for most refunded transactions, albeit a small one.
  • 1% Instant Transfer Fee: If you’d like to move your PayPal balance to a bank account immediately, you can do that — for a fee. PayPal charges merchants 1% of the transfer value, capped at $10 per transfer, but your funds will be available typically within 30 minutes (s0 long as your bank’s system isn’t incredibly slow). You’ll have to connect an eligible debit card to support instant transfers as well. However, if you prefer to have instant access to funds without paying a fee, don’t forget that PayPal offers a business debit card that’s linked to your PayPal balance, too.

Software Fees

One of the big draws for PayPal is the lack of software fees. Instead of paying a monthly fee for PayPal’s ecommerce features, you pay only the payment transaction costs (in most circumstances — but we’ll come back to this in a moment). While you’ll need to arrange for your own domain and web hosting, you can implement PayPal’s “buy” and “donate” buttons with no additional costs. You can send digital invoices for free and only pay the transaction cost when the invoice is paid.

Likewise, access to PayPal’s mPOS app, PayPal Here (read our review) is also free. However, if you opt to integrate PayPal into a POS app, invoicing software, or another platform, you’ll be responsible for those software costs. PayPal doesn’t charge anything for use of the integration.

Also, take note: PayPal doesn’t charge merchants any PCI compliance fees, account maintenance fees, customer service fees, or termination/account closure fees.

However, PayPal does offer a couple of advanced software options that come with additional costs:

  • PayPal Payments Pro: The “Pro” plan from PayPal has two advantages. One, it includes a virtual terminal to accept payments over the phone by keying in a card from a browser window.  Two, it allows merchants to keep the checkout process on their own website rather than redirecting to PayPal to complete a transaction. This does come with a couple of concerns. For one, you’re not automatically PCI compliant and you’ll need to take additional steps to handle your PCI compliance. Two, $30/month for a virtual terminal is pretty pricey considering you’ll still pay higher rates than swiped/dipped/tapped transactions. Square and Shopify both offer free virtual terminals. Also, opting for PayPal Payments Pro and the Virtual Terminal will mean a few different transaction fees to worry about:
    • 3.5% American Express Fee: Any Amex cards will process at the higher 3.5% rate if you’re on the Pro plan.
    • 3.1% + $0.30 Virtual Terminal Fee: Any transactions processed through PayPal’s Virtual Terminal process at 3.1% + $0.30, plus the international transaction fee if applicable.
  • Recurring Billing: If you’d like to sell subscriptions (software, gift boxes, etc.), PayPal does offer a set of recurring billing tools. Recurring payments are available with PayPal’s Express Checkout Option at no additional charge, but if you have PayPal Payments Pro and want advanced tools, they’ll cost you $10/month. This doesn’t apply to “Donate” buttons, which have their own option for donors to choose between a one-time or recurring donation.

  • Mass Payouts: If you need to distribute funds to multiple parties, PayPal’s Mass Payouts feature might be an appealing option. You have two options here: using PayPal’s API to handle the command, or uploading a spreadsheet. Which method you choose affects how much you pay — if you opt to upload a spreadsheet through PayPal’s website, you’ll pay 2% per transaction, capped at a maximum $1 USD, which is pretty reasonable. If you opt for the API, you’ll pay a flat fee of $0.25 USD per payment. This is a great way to distribute payments to contractors, for example, or manage marketplace payments if you use PayPal’s platform.

PayPal Hardware Costs

Unless you’re integrating PayPal with a POS system or using the free mPOS, PayPal Here, you won’t have to worry about hardware costs. But if you do, you’ll have a few options for card readers:

  • Chip & Swipe Reader: PayPal’s entry-level chip reader sells for $24.99. In addition to EMV capabilities it supports magstripe transactions, but no contactless payments. However, it does connect to phones and tablets via Bluetooth and comes with a convenient mounting clip.
  • Chip & Tap Reader: To get a credit card reader that supports magstripe, EMV, and contactless payments, you’ll need the Chip and Tap reader, which sells for $59.99. We’ve already reviewed this reader as well as the optional charging dock ($30 separately, or bundled for $79.99), with a very positive rating. Again, the Chip and Tap reader connects via Bluetooth. In addition to the charging dock, it comes with a convenient mounting clip.
  • Chip Card Reader: The Chip Card Reader was the first EMV-enabled card reader PayPal offered, and it’s still the only hardware option for merchants who want to integrate with one of PayPal’s POS partners. It sells for $99 on the PayPal site, with an optional charging dock. Given the price point, it shouldn’t surprise you to learn that this all-in-one reader connects via Bluetooth.

  • Mobile Card Reader: PayPal used to offer its entry-level swipe-only reader for free, but now it sells for $15 because PayPal, like most processors, really wants you to start accepting EMV. Use of the mobile reader comes with limitations on accounts, so if you do a decent volume of credit card transactions and don’t want to encounter any holds on your funds, you should avoid the mobile reader at all costs:

*Key-in transactions and sales over $500 in a 7-day period made with the Mobile Card Reader are subject to an automatic 30-day reserve where funds are held in your PayPal account to cover the high risk associated with these types of transactions. For increased protection from fraudulent transactions, we recommend using a chip card reader. All PayPal accounts are subject to policies that can lead to account restrictions in the form of holds, limitations, or reserves. Additional information about these policies can be found in the PayPal User Agreement.

Apart from the cardreaders, PayPal doesn’t offer any proprietary hardware. If you need a countertop register setup, you can choose from an array of tablet stands, receipt printers, and cash drawers. A few select models are confirmed to work, while many others are “unofficially supported” in that they’re likely to work in most cases. The PayPal Here app doesn’t officially support any external barcode scanners (it supports in-app scanning using the device’s camera), but Bluetooth-enabled scanners may work with your setup.

Is PayPal Actually a Good Value?

We’ve talked pretty extensively about the cost of using PayPal, but we haven’t really talked about value. Because value is so much more than just the actual, physical cost. Value encompasses convenience, customer service, and other extra factors that could easily justify paying more than the absolute lowest prices.

PayPal isn’t the absolute cheapest processor out there — especially not for businesses that handle more than $10,000/month in credit card transactions. Larger businesses may be eligible for merchant accounts with volume discounts. For low-volume businesses, PayPal often does offer more competitive pricing because of the lack of monthly fees. The flat-rate pricing, especially for in-person transactions, can mean cost savings over interchange-plus.

But the real value in PayPal is the massive consumer trust and convenience. Just about everyone recognizes the PayPal name, and with 200+ million consumer users around the world, it’s safe to say a lot of people have PayPal accounts. The barriers to entry are minimal — you don’t need a huge amount of technological experience to implement PayPal for in-person or online payments. As long as you aren’t using PayPal Payments Pro, you don’t even have to worry about PCI compliance. PayPal handles it for you, at no additional cost.

Apart from the issue of account terminations or funding holds, the only other consistent complaint about PayPal is its customer service, and reports vary. Some merchants say they’ve never had a problem with customer service. Others say that their support reps have been downright unhelpful when they’ve called in. Fortunately, PayPal offers extensive self-help resources so you should be able to deal with most technical issues without having to contact PayPal directly.

I can’t say unequivocally that PayPal is right for everyone. It’s not. But it is a really good option for a lot of merchants, especially low-volume businesses that are just starting out. For a closer look at PayPal and all its services, we recommend checking out our PayPal and PayPal Here reviews.

If you’re not sure PayPal is right for you, I suggest looking at our Square vs. PayPal article, as the two companies are fairly similar in their business models and offerings.

Thanks for reading! If you have any questions or comments, we’d love to hear from you, so please drop us a comment!

The post The Complete Guide to PayPal’s Fees, Rates, and Pricing appeared first on Merchant Maverick.

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Do I Need To Pay A Down Payment To Get A Small Business Loan?

If you’re a small business owner, you already know that growing, taking care of emergencies, and even just handling day-to-day operations takes capital — and lots of it. Sometimes, when expenses can pile up, it makes sense to consider turning to a small business lender for a helping hand.

After you’ve calculated the amount you need, selected a lender, and started the application process, however, you may hit a financial roadblock: you need ready money to put a down payment on the loan.

To obtain a small business loan — especially for a large amount — lenders often require the borrower to pay a percentage out-of-pocket as a down payment. But why is this required? It seems a bit counterintuitive, after all. You’re borrowing money because you need more, but you have to pay money up front to actually receive the loan.

Is there a way around this apparent Catch-22? What loans require down payments, and what are your options if you don’t have the funds to pay the down payment? Read on to find out more.

Why Lenders Require A Down Payment

If you’ve ever taken out a large loan before, you’re already familiar with down payments. Car loans and mortgages are two examples of loans that require down payments. Let’s say that you go to the car dealership to purchase a car for $30,000. A 10% down payment is required. This means that you will pay $3,000 out of pocket, while the lender will loan you the remaining $27,000 to be paid over the next several years.

Down payments work the same way for business loans. But why do lenders require it?

Requiring a down payment is just one of the ways that lenders lessen their risk. When you make a down payment, you’re investing your own money, which demonstrates to the lender that you’re serious about the loan and more likely to pay it back. It will also be easier for the lender to recoup at least part of their money in the event of a default. If an asset must be repossessed to pay off the debt, the lender will not have to sell the item for full value in order to recoup their investment.

Of course, down payments aren’t just good for lenders — they benefit you, too. By putting up a down payment, you’re able to lower the amount of money that you borrow. This means that not only will your monthly payments be smaller, but you also will save on interest over time, making the loan more affordable over the long term.

Do All Loans Require A Down Payment?

Most larger business loans — including commercial mortgages, commercial auto loans, and equipment loans — do require a down payment in order to get approval for funding.

Whether a down payment is needed at all — and, if so, the required amount — will often vary based on the creditworthiness of the buyer. For example, a borrower with a solid history may qualify for a “zero down” offer or very low down payment, whereas a borrower with a troubled credit history may be required to pay a down payment to be approved for the loan.

One thing to consider is that when there is a minimum down payment requirement, it’s a wise move to put more money down, if possible. As previously discussed, this means you’ll need to borrow less money, leading to lower payments and long-term interest savings.

How The Cost Of A Down Payment Is Determined

There are a few factors that determine the cost of a down payment. The first is the lender’s policies. Lenders may automatically require a down payment for specific loans or loans that exceed a certain amount.

Credit history also plays a role in the amount of the down payment. Down payment requirements are often lower for borrowers with high credit scores and solid credit histories. In some cases, these borrowers may even qualify for no-down payment offers. Borrowers with low scores may be required to make a down payment before even being considered for a loan.

Collateral may also play a role in the amount of the down payment. If sufficient collateral has been put up to cover the loan in case the borrower defaults, a down payment may not be required. For other loans with no specific collateral requirements, a down payment may be required based on the amount of the loan and the creditworthiness of the borrower. This also holds true for loans where the assets being purchased with loan proceeds (such as vehicles, real estate, or equipment) serve as the collateral.

Typical Down Payment Requirements

Whether a loan requires a down payment is based on a number of factors, including the type of loan selected. For some loans, a down payment is always required but may vary based on the profile of the borrower and other considerations, such as the amount of the loan. For other loans, a down payment may not be required at all.

Loan Type Typical Down Payment Requirement

Bank Loans & Lines of Credit

0% – 20%

Online Loans & Lines of Credit

None

SBA 7(a) Loans

10% – 20%

SBA CDC / 504 Loans

10% – 30%

Business Acquisition Loans

10% – 20%

Commercial Real Estate Loans

10% – 30%

Equipment Loans

0% – 20%

Invoice Financing

None

Bank Loans & Lines of Credit

Business loans from a bank are typically reserved for the best borrowers. Even so, banks want to protect themselves from risk as much as possible, which is why a down payment to receive a loan is required, especially for higher loan amounts.

The typical down payment requirement for a bank loan is 10% to 20%. The down payment amount will be based upon the amount borrowed, how the loan funds will be used, the borrower’s credit history, and how the loan will be collateralized.

Business lines of credit from a bank are different in that a down payment is not required. Secured lines of credit may require collateral but will not require a down payment. Learn more about collateral requirements for business loans. A personal guarantee or blanket lien may be required in place of specific collateral for some loans.

Online Loans & Lines of Credit

More business owners are turning to online loans because they are convenient to apply for, are funded quickly, and have qualification requirements that are less strict than conventional loans.

Online loans and lines of credit are also a top choice for business owners for another reason: they do not require a down payment. However, for most loans, collateral or a personal guarantee will be required to secure the loan. Learn more about personal guarantees before applying for your next loan.

Looking for a reputable online lender? The following lenders offer good rates and terms for online loans and lines of credit:

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

SBA 7(a) Loans

The Small Business Administration 7(a) program provides loans to small businesses through intermediary lenders. These loans are very popular because of their high limits (up to $5 million), low interest rates, and flexible terms.

Like other lenders, SBA intermediaries will require a down payment that is sufficient to mitigate risk. Intermediary lenders typically require a down payment of 10% to 20% for 7(a) loans. The down payment amount is based on the borrower’s credit history, the amount of the loan, and the amount of collateral, if any, that is used to secure the loan.

SBA CDC / 504 Loans

SBA CDC/504 loans are loans that are used for the purchase or improvement of commercial real estate. With these types of loans, a borrower works with two lenders – an SBA-approved Certified Development Company and a traditional lender like a bank.

The CDC provides 40% of the total project cost as a loan, while the second lender loans 50% of the total cost. This leaves the borrower with the remaining 10% to be paid as a down payment. Based on the credit profile of the borrower and the amount funded, an additional 10% to 20% may be required by some lenders.

Business Acquisition Loans

When money is borrowed to acquire a business, a down payment is required. Again, it all comes down to the risk posed to the lender. Low-risk borrowers with stellar credit scores and high-value collateral can often receive down payments for business acquisition loans as low as 10%.

However, loans for borrowers with lower credit scores, loans of higher amounts, or loans that aren’t fully collateralized may require higher down payments up to 20%.

Commercial Real Estate Loans

Commercial real estate loans are used to purchase land or property for commercial use. A commercial real estate loan is similar to a personal mortgage, including the need for a down payment.

Many lenders require a minimum 10% down payment for commercial real estate loans. However, requirements vary by lender, so in some cases, up to 30% of the purchase price may be required as a down payment.

With commercial real estate loans, the lender considers the loan-to-value, or LTV, ratio. This means that the lender looks at the appraised value of the property compared to how much the borrower is requesting. A higher LTV poses more risk for the lender, especially when the borrower doesn’t have a solid credit history. To lessen this risk, a higher down payment may be required to lower the LTV.

The SBA CDC/504 loans discussed previously offer an alternative if you’re looking to purchase commercial real estate with a lower down payment.

Equipment Loans

An equipment loan is a type of financing that is used to purchase equipment and machinery needed for a business to continue or expand operations. Equipment loans may require a down payment, although there are options available for 100% financing with no down payment required. Equipment that holds its resale value will most often qualify for very low or no down payments. Because it serves as the collateral and can be repossessed and sold if the loan goes into default, there is less risk for the lender.

However, depending on the amount of the loan needed and other factors, including credit history, an equipment loan may require a down payment of up to 20% of the total value of the equipment.

Think equipment financing is right for you? Check out these lenders:

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

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

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

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

Invoice Financing

With invoice financing, lenders provide an advance on cash for unpaid invoices. This type of loan is best for businesses that have cash flow issues due to unpaid invoices.

With invoice factoring, the lender provides you with a percentage of cash up front. Once the lender collects payment from the customer, the remaining percentage is paid to you minus any fees and interest collected by the lender.

Invoice discounting is similar. However, most of the unpaid invoice is advanced to you up front. Once you are paid by the customer, you pay back the advanced funds, along with any fees and interest charged by the lender.

With invoice factoring and invoice discounting, the unpaid invoices act as the collateral. Because the collateral reduces the risk for the lender, there are no down payments required for this type of loan.

What To Do If You Can’t Afford A Down Payment

You need a loan in order to expand your business, but you can’t afford the down payment – now what? Fortunately, there are a few steps you can take when you’re struggling to come up with the funds to make the down payment.

The first thing you can do is consider different loans to find options with lower down payment requirements. SBA loans typically have lower down payment requirements than loans from banks. If you meet the qualification requirements, consider applying for SBA loans, which also have very competitive rates and terms.

You can also explore loan options that don’t require a down payment, such as online loans and lines of credit. Remember, though, paying a down payment will help reduce the amount that you borrow, the monthly payment, and the overall cost of the loan.

Another strategy involves credit cards, but not in the way that you might think. While you can certainly choose to put a down payment on a credit card, this isn’t a wise financial move. Interest charges will rack up as long as there is a balance, keeping the business in debt. Instead, this strategy involves paying off your credit cards and other debts. Once old debts are paid off, the money being used to pay balances, plus interest, can then be applied toward the down payment.

If the financing need isn’t immediate, you can also consider saving the money. You can put money in a savings account or into certificates of deposits, money market funds, or other short-term investment vehicles.

If a low credit score is an issue that contributes to a high down payment, pull your free credit report and score and get to work building your credit profile to qualify for lower down payments — along with improved interest rates and terms — in the future.

While it’s possible to use credit cards or other borrowed funds to pay your down payment, this ultimately just adds to your business debt, so it’s best to avoid these methods if possible.

Final Thoughts

A down payment for a small business loan may seem like an inconvenience, but this requirement is put in place to protect the lender. The good news is that the lender isn’t the only one that will benefit. Having a solid down payment for your business loan will help you save money over the long-term in interest fees, while also reducing your monthly payments and lowering your debt — all keys to smart, responsible borrowing.

Looking for a business loan? Start here.

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

The post Do I Need To Pay A Down Payment To Get A Small Business Loan? appeared first on Merchant Maverick.

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What Are High-Risk Business Loans And Where Do I Get One?

Qualifying for a loan can be frustrating for a business owner. With so much paperwork and so many requirements, the process is confusing, long, and — all too often — ultimately futile. Maybe your credit score is too low. Maybe your business hasn’t been in operations long enough to prove it can be profitable. Whatever the case, finding the right loan can be a challenge.

Don’t despair, though. Before throwing in the towel on finding a loan, you can explore the options available to what lenders consider “high risk” borrowers. With alternative loan options, business owners can get the financing they need while also building a positive credit history for the future.

Read on to learn more about high-risk business loans and where to get them.

What Businesses Are Considered High Risk?

When considering whether to approve a loan application, lenders will always focus on the risk posed by the borrower. After all, lenders are out to make a profit on the money they loan. They want to work with businesses and individuals that make payments on time every month. They lean toward approving businesses and individuals that have documentation proving that they can afford to pay the loan with interest. On the flip side, lenders are wary of working with businesses that are seen as risky.

But what makes a business risky? There isn’t just one factor. In fact, there are several things lenders consider before making their approval decision. If your business is defined by any one of the following four characteristics, it may fall in the high-risk category, often making it more difficult to obtain financing:

Startups & New Businesses

One entrepreneur may have the next great idea that she knows will change the world. Another entrepreneur needs money to start a business that’s been his lifelong dream. Both are ready to put in the work to make their endeavors successful. Both have confidence in their businesses — all they need is the money to get their ideas off the ground. Unfortunately, lenders don’t have the same level of confidence.

Startups and new businesses are considered riskier borrowers because they don’t yet have a proven track record. An established business can approach a lender with bank statements, profit and loss statements, and years of income tax returns proving that it is profitable. On the other hand, startups and new businesses haven’t yet built a reputation and don’t have the paperwork to verify their success.

This doesn’t mean that startups and new businesses are out of the running entirely when it comes to getting a business loan. What it does mean is that these businesses will have to prove themselves to lenders in other ways, like coming up with a detailed business plan and future profit projections. These borrowers should look into SBA (Small Business Administration) loans for startups and may also need to consider other forms of lending outside of traditional methods like banks and credit unions.

Businesses With Low Revenue

Lenders want to see that a business is making enough money to cover all of its debts in addition to a new loan payment. For businesses with high revenue, this is no problem. There’s plenty of money flowing in; all they need is a financial boost, perhaps for a larger purchase like real estate or equipment.

On the other hand, businesses with low revenues will encounter problems when applying for a loan. Maybe a seasonal lull has contributed to recent low revenue, or the business has many unpaid customer invoices that affect incoming cash flow. Unfortunately, the reason for your low revenue doesn’t typically matter to a traditional lender. Regardless of why current revenue is poor, lenders will call into question whether or not your future revenue will be enough to pay back a loan as agreed.

While seeking traditional loans may be challenging — or even impossible in some cases — there are financing options available for businesses with low revenue.

Businesses With Bad Personal Credit

Every business owner has a credit score. For most lenders, this score is one of the most important factors taken into account when deciding whether to approve a loan. The higher the credit score, the higher the odds for approval. Not only is a business owner with a great score more likely to get approved, but they’ll also receive the best rates and terms.

However, sometimes credit scores aren’t exactly where they need to be. Old medical bills, late payments to creditors, and high credit card utilization can all contribute to a lower credit score. Even having too many inquiries when shopping for a loan can make a credit score drop by several points. In some cases, a business owner may not even have started building a solid credit history, and the lack of credit is viewed similarly to bad credit by lenders.

Having bad personal credit certainly makes it more difficult to qualify for a loan, but it’s not impossible. There are bad credit options available for business owners. While some of these loans may have higher interest rates or terms that aren’t as favorable, these loans can give business owners the cash they need while also helping them to build a solid credit history.

Businesses In A High-Risk, Unstable Industry

In some cases, businesses that are in high-risk, unstable industries may also be seen as high-risk borrowers. Whether the industry itself is dangerous and unsafe or the business itself is at risk of becoming obsolete, lenders consider industry factors when approving loans.

Remember, lenders want to work with businesses that are going to be able to pay off the loan. If the future of the business could be in question, this throws up a red flag for lenders.

However, like the other high-risk businesses previously mentioned, there are alternative lending options available. Small business owners just need to know where to look and how to obtain these loans.

What Are My Options For High-Risk Business Loans?

High-risk businesses aren’t going to be able to just walk into a bank and walk out with a loan. But even though traditional loan options may not be available, that doesn’t mean there aren’t any lending options out there. In fact, there are several available to high-risk businesses. However, every business owner should have an understanding of how each loan works to ensure that the financing decision is a wise one that benefits the business.

Short-Term Loans

Short-term loans are loans that are paid off in a short period of time – usually one year or less. In some cases, short-term loans may be paid off in just a few months or weeks.

Qualifying for a short-term loan is easier than qualifying for other loans (like long-term installment loans). Credit requirements are not as stringent for short-term loans, so business owners with low personal or business credit scores may qualify.

Revenue and time in business requirements are also less strict for short-term loans, opening this type of funding up for startups, new businesses, and businesses with low revenues. Often, the application process is straightforward and easy and funds are available quickly.

Not only will receiving a short-term loan provide business owners with the capital they need, but making timely payments on a short-term loan can boost credit and open up other financing options for the future.

With short-term loans, however, rates can be very high, so it’s necessary to shop around for the best terms. Some banks offer short-term loans, while alternative lenders also provide this type of financing. Learn everything there is to know about short-term loans before moving ahead with the application process.

Merchant Cash Advances

A merchant cash advance is a type of financing that is based on credit card sales. With a merchant cash advance, a lender advances a sum of money to a business. Instead of taking monthly payments and using collateral to back up the loan, the cash advance is paid back through a percentage of future credit card sales. This is typically an option chosen by businesses that may have slower sales periods. With this model, the business would pay less toward the cash advance when sales are down and more when sales pick up. Usually, the percentage paid is between 10% to 20%, but this varies by lender.

Other times, a lender advances money to a business, then takes a fixed payment through weekly or daily ACH withdrawals. Regardless of the number and amount of sales, the payment remains the same.

Because this method of financing is based on sales, credit score and time in business is typically not as important of a factor as it is with installment loans or other types of financing. A lender will evaluate the cash flow of the business to determine how much money the business is eligible to receive, as well as work out the payment schedule.

While these cash advances could help businesses that are in a bind, it should be noted that interest rates can be high, with some annual interest rates soaring into the triple digits. Merchant cash advances are available through some banks and many alternative lenders. Before accepting an offer, all businesses should evaluate other loan options and weigh out the benefits of taking the loan versus the overall costs to avoid getting trapped in a cycle of debt. Learn more about the merchant cash advance process.

Looking for a reputable MCA provider?

Lender Borrowing Amount Min Credit Score Time To Funding Next Steps

$2K – $5M 550 1-2 Days Apply Now

$5K – $500K 550 1-3 Days Apply Now

$5K – $500K 500 2-5 Days Apply Now

$5K – $250K 500 2-5 Days Apply Now

Invoice Financing

Few things are more frustrating to a business owner than having money they can’t access. This is what happens when a business has unpaid invoices. Whether the invoices aren’t yet due and an emergency situation has popped up or a customer is late in making their payment, unpaid invoices can pose a challenge for any business.

The good news is that there are options. Businesses that just can’t wait to get paid from their customers can take advantage of invoice financing. With invoice financing, there are two different options to consider.

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

The first option is known as invoice factoring. With invoice factoring, the lender will pay the business a percentage of the invoice total. The lender will then collect the payment from the customer. Once the invoice has been paid, the remaining invoice total will be given to the business, less any fees and interest charged by the lender.

The second option is invoice discounting. The lender will loan the business an amount of money based on a percentage of the invoice (for example, 90% or 95% of the invoice total). Once the business collects payment from the customer, the loan is paid back, along with interest and fees.

Invoice financing is an easy way for businesses to resolve cash flow issues due to unpaid invoices. This option can be used by businesses with a low credit score, lack of collateral, or a limited time in operations. Thinking of applying for invoice financing? Learn more before getting started.

Fundbox and BlueVine are two of the most trusted invoice financing providers around. Compare rates below.

Fundbox BlueVine

Up to $100,000

Credit Facility

$20,000 – $5,000,000

100%

Advance Rate

85% – 95%

0.4% – 0.7% per week

Discount Rate

0.3% – 1% per week

None

Other Fees

Possible $25 wire transfer fee (no ACH transfer fee)

12 or 24 weeks

Term Length

13 weeks (91 days)

No

Monthly Minimums

No

Recourse

Recourse Or Non-Recourse

Recourse

Non-Notification

Notification Or Non-Notification

Both

Personal Loans For Business

Traditional business loans can be difficult to obtain. Business and personal credit scores are taken into consideration, while documentation to prove the success of the business through incoming cash flow is required. The process can be even more difficult for new businesses and startups with a lack of business credit or a limited time in business.

Instead of getting a business loan, some business owners may opt to use their own personal credit score and income to qualify for a personal loan to use toward business expenses. Since it is a personal loan, the revenue of the business or its credit score will not be a factor in approving the loan.

Business Loan Personal Loan

Borrowing Amount

$2 million+

Max. $100,000

Term Length

6 months – 25 years

1 – 7 years

APR

4% – 99%+

5% – 36%

Fees

Possible origination fee, assessment fee, packaging fee, referral fee, guarantee fee, or others

Possible origination/closing fee, application fee, referral fee, or others

Collateral

Possible personal guarantee, UCC-1 blanket lien, and/or specific collateral such as accounts receivable, real estate, or equipment

Usually unsecured

Personal loans for business use are available through banks and alternative lenders. An applicant will need to prove that they are able to pay the loan by submitting documentation such as pay stubs and bank statements.

Creditworthiness is also a factor. While there are options available for applicants with low credit scores, the best interest rates and terms are given to those with higher credit scores. Learn more about applying for a personal loan for business.

In some cases, collateral may be required in the form assets and property (including real estate or vehicles). Whether collateral is required and how much collateral is needed is based upon the amount of the loan, the borrower’s creditworthiness, and the lender’s policies.

Asset-Backed Business Loans

As we’ve established, lenders want to make sure they get paid before loaning money to borrowers. When revenue or income isn’t where it needs to be or a credit score is low or non-existent, the borrower seems like a big risk. However, sometimes lenders are willing to take a risk on these borrowers provided they have adequate collateral.

Asset-backed business loans are business loans that are backed by collateral. This simply means that the borrower pledges to put up assets in the event that the loan goes into default. If the borrower fails to pay, the lender has the right to seize the assets, which can then be sold to pay off the loan.

Assets and property, including real estate, equipment, and accounts receivables, can be used as collateral. Typically, business assets are used as collateral, but in some cases, personal real estate and assets may be used.

These loans are available through banks and alternative lenders. The amount of collateral needed to secure the loan is dependent upon the amount borrowed and creditworthiness. The full amount of the loan will generally need to be collateralized.

Business Credit Cards

Many businesses have business credit cards, and it’s easy to see why. Business credit cards allow a business owner to have access to funds on-demand, the application process is typically quite easy, and even borrowers with lower credit scores can get approved. Some credit cards even come with rewards, such as cash back bonuses or airline miles.

Business credit cards are available through many banks and financial institutions and can be used just like personal credit cards. Multiple draws can be taken up to the amount of the maximum credit limit. Borrowers pay back the balance plus interest that is applied to the used funds.

With so many credit card options, it’s easy for a business to qualify for one, even when the business has lower revenues or credit scores. Some borrowers may have lower credit limits and higher interest rates, while others may need to pay a security deposit.

Businesses that opt to use credit cards should always keep their balances as low as possible, as a high credit utilization can have a negative impact on credit. In order to avoid paying interest month after month, business credit cards should be paid down or the balance completely paid off as quickly as possible.

Do you have excellent personal credit, even though your business is considered high-risk? Check out these 0% interest rate business credit cards.

Credit Card 0% Introductory Period Next Steps
American Express Blue Business Plus 0% APR on purchases and balance transfers for the first 15 months Compare
Chase Ink Business Unlimited 0% APR on purchases and balance transfers for the first 12 months Apply Now
American Express SimplyCash Plus 0% APR on purchases for the first 9 months Compare
Capital One Spark Cash Select For Business 0% APR on purchases for the first 9 months Compare
Bank of America Business Advantage Cash Rewards Mastercard 0% APR on purchases and balance transfers for the first 9 months Compare

Final Thoughts

Every business faces financial challenges which are made even more difficult when the business is seen as high-risk by lenders. However, there are financing options open to these high-risk businesses, whether they’re in an unstable industry or are just building up their credit and reputation.

Before accepting any offer, don’t forget to evaluate the full cost of the loan. A loan should only be used to help the business, not drag it into debt. Shopping around for offers and weighing out the pros and cons for each type of financing is a critical step before signing on the dotted line. Responsible borrowing — and making payments as scheduled each month — is the best way for businesses to receive more favorable loan options in the future.

The post What Are High-Risk Business Loans And Where Do I Get One? 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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