Differences Between Invoice Financing And Invoice Factoring

Unpaid invoices can be a burden for any business. While you know that the money from the invoices will come eventually, slow-paying customers or long repayment terms could have a negative impact on your incoming cash flow — and this could be a problem for your business.

Instead of waiting for weeks (or months) to receive the money owed to your business, how can you get the funding your business needs immediately? What if you could put your unpaid invoices to work for you? What if you could sell your unpaid invoices or use those invoices as collateral to receive the money you need to cover an emergency or to use as working capital?

If outstanding invoices are creating cash flow problems for your business, there are lending options available for you. In this post, we’ll explore invoice financing, invoice factoring, and invoice discounting. We’ll discuss the differences, how they can benefit your business, associated costs, and most importantly, how to make the right choice for your business. Read on to learn more.

What Is Invoice Factoring?

With invoice factoring — also known as accounts receivable factoring — a business owner sells unpaid invoices to a lender. This lender is known as a factoring company or simply a “factor.” When you sell your invoice, the factor gives you an upfront payment that is typically 85% to 95% of the invoice total.

The factor will then proceed with collecting payment from the customer. Once the customer has paid the invoice, the factor will pay the remaining balance to you, less an agreed-upon factoring fee. Factor fees vary by lender but typically add up to between 1% and 6% per month. Factors charge daily, weekly, or monthly fees, so the longer it takes for the invoice to be paid, the higher your fee will be.

Obviously, the factoring fee reduces the amount that you receive from the invoice. This is why it’s important to always weigh out the return on investment before agreeing to sell your invoices. If there isn’t an immediate financial need, waiting for your customer to pay the invoice is the wisest decision, but if an unpaid invoice is causing financial challenges in your business, receiving immediate cash may be worth the cost.

Invoice factoring offers a financial solution for businesses that need funds quickly but may not qualify for other loan options. Most business loans require a certain time in business and minimum annual revenues, and many lenders also take personal credit scores into account. But even if your annual revenues are low, your business is new, or you have personal credit challenges, you may qualify for invoice factoring — provided you have qualifying invoices.

Think invoice factoring is right for you? Learn more about how to determine if invoice factoring is a smart financial choice for your business. Once you’ve decided to move forward, check out our comparisons of top invoice factoring companies.

Financing VS Factoring: What’s The Difference?

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

Two terms that are often used interchangeably are invoice financing and invoice factoring. Invoice factoring is a type of invoice financing. However, when most people use the term “invoice financing,” they are referring to accounts receivable financing.

Accounts receivable financing — or invoice financing — is similar to invoice factoring. However, with this type of loan, your unpaid invoices act as the collateral to secure a line of credit. The amount of your line of credit is determined by the value of your invoices.

With invoice factoring, you receive a lump sum payment from the factor based on the value of the invoice. In other words, the factor purchases your invoices. Therefore, the factor is responsible for collecting payments from your customers. With invoice financing, the invoices still belong to you and are only being used as collateral. This means that collecting payments from customers is your responsibility.

What About Invoice Discounting?

Another form of lending based on unpaid invoices is invoice discounting. Like invoice factoring and invoice financing, this is an option for qualifying B2B and B2G businesses that need extra capital. Let’s explore what invoice discounting is and how it differs from invoice factoring.

Invoice Factoring VS Discounting

Invoice discounting is similar to invoice factoring in that you use your unpaid accounts receivable as collateral. As with invoice factoring, new companies and startups, business owners with low credit scores, and businesses with low annual revenues that do not qualify for traditional financing may also qualify for invoice discounting.

What makes invoice discounting distinct from invoice financing different is who collects the payment. With invoice factoring, the factor collects payment from the customer. With invoice discounting, your business is responsible for collecting the payment. After submitting qualified invoices, you will receive a lump sum payment of up to 95% of the invoice value. You will collect payment from your customer as usual and pass the money onto the lender, plus fees charged for the service.

How To Choose An Invoice Financing Solution

Even though invoice factoring, invoice financing, and invoice discounting have similarities, there are situations when you should select one option over the others. Before you submit your invoices, keep the following considerations in mind:

Notification VS Non-Notification

If a third-party lender purchases your invoices through invoice factoring, your customers will be notified since the factor will be collecting payment.

With invoice financing and invoice discounting, you are collecting payment as usual, so your customers will be unaware of a lender’s involvement.

If you don’t want your customers to be notified by a third-party, choose invoice financing or invoice discounting.

Collecting Payments

If you’re a smaller company, you may not have the manpower to chase down customers for unpaid invoices. If you would rather the lender collect payment, invoice factoring is the option that would work best for you.

It is important to note that invoice factoring often has higher fees. However, the additional costs may be worth it if you do not have the time or resources to track down customers and collect payment.

If you use invoice factoring and the factor collects payments, remember that your customers will be notified of third-party involvement. If this is something you wish to avoid, consider your other financing options.

Asset-Backed Line Of Credit VS Lump Sum

If you want to receive a lump sum payment for your invoices, choose invoice factoring or invoice discounting. With these options, you can receive up to 95% of your invoice value upfront.

If you prefer a more flexible option, consider applying for invoice financing. You’ll receive a line of credit that is backed by your unpaid invoices.

Final Thoughts

If unpaid invoices are dragging your business down, put your accounts receivable to work for you. With invoice factoring, financing, and discounting, you can receive the money you need even when you don’t qualify for a traditional loan. Consider what type of financing would work best for you, shop around for the most affordable fees, and select a lender based on the financial needs of your business.

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The Best Business Loan And Financing Resources For Utah Small Businesses

You’re a business owner in Utah, and you need extra cash for your business. Whether you need capital to get a new business off the ground or you need a financial boost for your established business, there are financing options out there — you just have to know where to look.

If you’ve done some online research and you keep getting the same generic list of lenders, you’re in luck. We’ve compiled a list of the best lenders that serve businesses in Utah. Read on to learn more about the best loan and financing resources for small businesses in your state.

The Best Online Business Lenders For Utah Businesses

Technology has made life easier than ever. Our smartphones keep us connected anywhere in the world, our TVs are smarter, and even our businesses can benefit from technology. The internet allows us to do more than ever when growing our businesses, from employing new advertising techniques to applying for an online loan.

An online business loan is a loan that you apply for and receive online. Online loans eliminate the need for face-to-face meetings at a financial institution. Instead, you can compare, research, and even apply for and receive a loan from the comfort of your home or office.

With an online business loan, you submit your application securely online. For underwriting purposes, you also submit your documentation such as bank statements and tax returns through email or a secure online portal. Your lender can prequalify you, approve your loan, and even disperse loans online.

Even though online lending has opened up new financing opportunities for business owners, it does raise the question: which lender do I choose? Having so many options can be overwhelming, but you can start your research with one of these top picks.

Lendio

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When you’re shopping for loans online, make Lendio one of your first stops. Lendio itself isn’t a lender. Instead, this is a loan aggregation site that connects you with a network of over 75 lenders. With one application, you’ll receive multiple offers from lenders including Bank of America, American Express, and BlueVine. The service is free to use and applying does not affect your credit score.

No matter what type of business loan you need, you can find it on Lendio. Some of the loan options available include:

  • Business Line Of Credit: Up to $500,000 with 1 – 2-year terms
  • Small Business Administration Loans: Up to $5 million with 10 – 25-year terms
  • Equipment Financing: Up to $5 million with 1 – 5-year terms
  • Merchant Cash Advances: Up to $200,000 with terms up to 2 years
  • Term Loans: Up to $2 million with 1 – 5-year terms
  • Business Credit Cards

Through Lendio, you can also apply for invoice financing, acquisition loans, startup loans, and commercial mortgages.

Rates, terms, and fees are determined by each lender that makes an offer and may be based upon your time in business, annual revenue, personal and/or business credit score, and other factors.

SmartBiz

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If you have solid credit and revenue, a Small Business Administration loan is an affordable financing option to consider. However, the application process for an SBA loan is notoriously long and difficult … that is until SmartBiz changed the financing game.

SmartBiz is an online marketplace that specializes in SBA loans. Through SmartBiz, you can apply for 7(a) commercial real estate loans up to $5 million. Rates are between 6.75% and 8%, with repayment terms up to 25 years. Loan proceeds can be used to purchase commercial space or refinance an existing commercial mortgage.

To qualify, the property must be at least 51% owner-occupied. You must be in business for at least 2 years and have a personal credit score of at least 675. You must also be able to show sufficient cash flow to make your monthly loan payment.

SmartBiz also provides SBA debt refinancing and working capital loans with rates of 8% to 9%. With these loans, you can borrow up to $350,000. There are 10-year repayment terms associated with these loans. Funds from your loan can be used to purchase equipment, pay for marketing and advertising costs, cover operating expenses, buy inventory, hire and train employees, or refinance existing debt.

To qualify, you must be in business for at least 2 years and have a minimum credit score of 640. You must also demonstrate sufficient cash flow to cover the monthly payment of your loan.

If you don’t qualify for an SBA loan or you want to pursue another financing option, SmartBiz has bank partners for equipment financing, working capital, and debt refinancing. You can receive up to $200,000 with repayment terms between 2 and 5 years. Fixed interest rates on non-SBA loans are between 7.99% and 24.99%.

To qualify for a non-SBA loan, you must be in business for at least 2 years and have a credit score of at least 640. You must have sufficient cash flow to make your monthly loan payment.

StreetShares

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StreetShares is an online lender that has three financial products to choose from: the Patriot Express line of credit, term loans, and contract financing.

With a Patriot Express line of credit, you can receive up to $250,000 with terms between 3 and 36 months. Interest rates are between 6% and 14% with a draw fee of 2.95%.

StreetShares has installment loans up to $250,000 with terms between 3 and 36 months. The interest rate is between 6% and 14% with a closing fee of 3.95% to 4.95%. If you qualify, you’ll be able to borrow up to 20% of your annual revenue. If you have $100,000 in annual revenue, you’ll be able to borrow up to $20,000.

To qualify for either an installment loan or line of credit, your company must be in business for at least 1 year. Your personal credit score should be at least 620, and you must have a minimum annual revenue of $25,000.

Contract financing with StreetShares is similar to invoice financing. You submit an invoice to the lender for your unpaid contract and receive up to 90% of the invoice amount. Once the invoice is paid, you’ll receive the remaining balance, less lender fees. Rates start as low as 1% for 30-day invoice advances, and there are no limits to the invoices being financed. Federal, state, and commercial contracts are eligible for contract financing. There is no minimum credit score required to qualify.

Kabbage

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To qualify for many business loans and financial products, a minimum of 2 years in business and a good to excellent credit score is required, but what if you don’t meet these requirements? If this sounds familiar, lenders like Kabbage can help.

Borrowers may receive lines of credit with maximum limits up to $250,000 through Kabbage. Repayment terms are set at 6 months or 12 months based on the amount of the draw. A monthly fee is charged for every month you carry a balance, with fees ranging between 1.5% to 10% based on the performance of your business.

To qualify for a Kabbage line of credit, you must be in business for at least 1 year. Revenue requirements are either: $50,000 annually or $4,200 monthly for the last 3 months. There are no credit score requirements.

Kabbage looks at the performance of your business to determine your eligibility and your credit limit. Kabbage analyzes your business performance through your linked business accounts, including your business checking account, PayPal, Amazon, and accounting software.

Prosper

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If you’re a new business or you haven’t yet opened your doors, getting a business loan can be a major challenge. If you have a good personal credit score, why not consider a personal loan for business?

When you apply for a personal loan for business, the lender will only evaluate your personal credit score and income. Your time in business, business credit score, and business revenues won’t be factors in your approval.

One lender that offers personal loans for business in Utah is Prosper. Through Prosper, you can apply for loans from $2,000 to $40,000. Funds can be used for any business purpose, including purchasing equipment, paying operating costs, or covering an emergency expense. APRs for Prosper loans range from 6.95% for the most creditworthy borrowers to 35.99%. An origination fee of 2.41% to 5% of the total loan amount is added to your loan.

To qualify for a Prosper loan, you must have a personal credit score of at least 640 and a credit history of at least 2 years. Your debt-to-income ratio must be below 50% to be approved for a Prosper loan.

Banks & Credit Unions In Utah

A traditional loan from a bank or credit union is one of the most affordable options for your business. If you have a good credit score, high annual revenue, and a solid time in business, you may qualify for a bank or credit union loan with favorable terms and low interest rates.

Even if you face some challenges that disqualify you from receiving a traditional loan, banks and credit unions have other financing options, such as lines of credit, credit cards, and SBA loans. If you’re a business owner in Utah looking for a financial institution, consider one of these top options

Chase Bank

Chase Bank is one of the nation’s leading financial institutions. There are multiple Chase branch and ATM locations throughout the state of Utah in cities including but not limited to Salt Lake City, Providence, Saratoga Springs, and South Ogden.

Chase Bank offers multiple financial products for business owners. As a Chase Bank customer, you can apply for a business checking or savings account, term loans, equipment loans, and lines of credit. Chase Bank also provides commercial real estate financing and is an intermediary lender of Small Business Administration loans.

You can also apply for business credit cards with some of the best rewards programs in the industry. Qualified borrowers can apply for products including the Chase Ink Business Unlimited card and the Chase Ink Business Preferred card.

Card Card Name Annual Fee Introductory Rate Rewards Next Steps

Chase Ink Business Preferred℠

$95 None
  • 3 points per $1 on travel, shipping, internet/cable/phone, and internet advertising (max $150,000 per year)
  • 1 point per $1 on all other purchases
Apply Now

Chase Ink Business Cash℠

$0 0% APR for the first 12 months
  • 5% cash back on internet/phone/cable and purchases at office supply stores (max $25,000 per year)
  • 2% cash back at restaurants and gas stations (max $25,000 per year)
  • 1% cash back on all other purchases
Apply Now

Chase Ink Business Unlimited℠

$0 0% APR for the first 12 months
  • 1.5% cash back on all purchases
Apply Now

Zions Bank

Zions First National Bank was originally founded in 1873 in Salt Lake City. Since its founding, the financial institution has expanded to 122 banking centers across the states of Utah, Wyoming, and Idaho.

Zions Bank is a one-stop financial shop for business owners in Utah. Zions Bank offers many services including business checking accounts and credit cards. Zions Bank also has lines of credit up to $50,000, business term loans up to $100,000, and equipment loans and leases. Commercial real estate loans, equity lines of credit, SBA 7(a) loans, and invoice factoring are also available to qualified borrowers.

America First Credit Union

If you’d rather be a credit union member than a bank customer (read about the reasons why a credit union loan may be better), one of the top credit unions in Utah is America First Credit Union. This financial institution was founded in 1939 and since that time has grown to 130 full-service branches. America First Credit Union is ranked as one of the top credit unions by assets and memberships in the United States.

Business owners in Utah can take advantage of the many financial products America First Credit Union has to offer. In addition to checking and savings accounts, members can apply for business credit cards, unsecured lines of credit up to $50,000, and secured lines of credit with 7-year repayment terms in amounts up to $100,000.

Additional products and services include commercial vehicle loans, equipment loans, term loans up to $15,000, business acquisition and franchise loans, commercial real estate loans, and SBA loans.

To be eligible for membership, you must live, work, attend school, or worship in one of the five counties in Utah that are served by the financial institution. You also qualify if you are an owner, employee, or supplier for the foodservice industry in Utah, are employed by Select Employer Group, are employed by America First Credit Union, or have an immediate family member or household member that meets eligibility requirements.

Utah Non-Profit Lenders

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If you don’t qualify for traditional loans, you may find the financing you need through a non-profit lender. From startups to businesses in underserved communities, these non-profit lenders in Utah can help you get the money you need to start or expand your business.

Utah Microloan Fund

The Utah Microloan Fund — also known as the UMLF — has provided entrepreneurs and business owners with low-interest loans since 1991. The UMLF focuses on distributing funds to new businesses and startups, businesses that lack collateral for traditional loans, and businesses that have credit challenges.

The UMLF has several different loan programs available to business owners in Utah. The traditional UMLF loan has maximum borrowing limits of $50,000 with terms up to 72 months. Interest rates are set at the prime rate plus 4% to 7%. An origination fee of 3% to 6% is added to the cost of the loan.

There are two different options for UMLF’s Seed Funding Loan: an unsecured loan and a loan secured with collateral or a cosigner. When secured with collateral or a cosigner, the maximum borrowing amount is $10,000. With no collateral or cosigner, the maximum amount is $7,500. Both loans have terms up to 36 months and interest set at the prime rate plus 7.5% to 8.5%. Each loan has an origination fee of 3% of the loan amount.

To qualify for a loan, all interested business owners must complete loan orientation and the loan application packet. Once submitted, the borrower will be contacted if the application is approved. Once approved, borrowers will work with the organization to refine business plans and cash flow statements. Business plans and cash flow statements will be presented in front of the organization’s loan committee, who will determine if the loan is approved.

Kiva

Kiva is an online non-profit organization that helps entrepreneurs and businesses around the nation get the capital they need when traditional loans aren’t an option. Through Kiva, you can receive up to $10,000 with 0% interest.

To receive a loan, start by filling out the 20-minute application with Kiva. Once approved, invite your friends and family to lend to you through the online platform to prove your creditworthiness. Then, your loan can be viewed by lenders for up to 30 days. Once you receive the money you need, you’ll have up to 36 months to repay your loan.

To qualify, you must live in the US, be at least 18 years old, and use the loan proceeds for business purposes. Your business must be based in the U.S. You must not have any active foreclosures, bankruptcies, or liens on your credit report. Businesses engaged in direct sales, MLM, illegal activities, and financial investing are disqualified. There are no minimum credit score requirements to apply.

Grants For Utah Businesses

startup grants

There are a few grants available for Utah businesses centered on research and development and technology. It’s important to note that there is a lot of competition for these grants, which are awarded to the most innovative small businesses.

Technology Commercialization & Innovation Program

One grant program is the Utah Governor’s Office of Economic Development’s Technology Commercialization & Innovation Program, or TCIP. Through this program, early-stage companies can receive grants to commercialize cutting-edge technology and bring it to the market.

Grants are awarded in amounts from $50,000 to $200,000 to qualifying small businesses. First-time recipients can request up to $100,000. Companies that have received a TCIP grant in the past can request the maximum $200,000. Past recipients have worked in industries including information technology, outdoor products, and energy and natural resources.

To qualify, businesses must submit an application along with documentation and information. All application packets must include a 10-page PowerPoint, a line item budget, financial projections for the next 5 years, a project overview video, a capitalization table, and current financials.

SBIR-STTR Federal Grants

Business owners in Utah can also consider federal grant programs, such as the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) grants. About $2.5 billion in grants are awarded annually to fund small business research and development. Small businesses that receive these grants can use funds to pay for salaries and benefits, overhead costs, supplies and materials, and consultants and subcontractors.

Money is distributed in phases. In Phase I, businesses receive an average of $150,000 to fund a 6-month project to prove the feasibility and technical merit of their ideas and technology. In Phase II, businesses must receive an average of $1 million to spend on a 24-month project to expand on the results from the previous phase and evaluate the commercial potential of the idea or technology. The third and final phase is not funded through grants, but some federal agencies may offer contracts to commercialize the product.

To qualify for these federal grants, all applicants must have 51% ownership in an American-owned business. All businesses must be for-profit and have no more than 500 employees.

A good resource for business owners in Utah is the Utah Science Technology and Research Initiative SBIR-STTR Assistance Center. This center provides training, workshops, seminars, and resources, as well as proposal evaluation and submission assistance.

What To Consider When Choosing A Lender

business loan reasons

You have an idea of the lenders out there and the loan options available to your business. Maybe you’ve even explored a few options on your own. Before you start sending out applications or head out to your local bank branch, ask yourself the following questions to find the best lender for your financial needs.

Why Do I Need A Loan?

This one is a no-brainer for most people, but the answer to this question could help you narrow down your list of potential lenders. Let’s say that you need a loan to purchase a new commercial property. A lender that specializes in short-term loans, lines of credit, or loans with low borrowing amounts can be crossed off your list. Once you determine how you plan to spend your loan proceeds, you can focus on the lenders that best match your needs.

How Much Money Do I Need?

You can narrow your list down further by calculating the total amount you want to borrow. Let’s say that you need $500,000. A lender that loans no more than $50,000 won’t be a match for you. Remember to also calculate how much you can afford. Not only will this help you avoid taking on too much debt, but this is also a factor lenders consider when deciding whether to approve your loan.

Do I Qualify?

Your credit score is 620, so it doesn’t make sense to apply with a lender that won’t even consider a score below 680. Understand a lender’s requirements and make sure that you meet all of them before applying. Do you have enough annual revenue? Does your time in business align with the lender’s requirements? Do you live in a state that is serviced by the lender? If you don’t meet the requirements of one lender, move on to the next.

Final Thoughts

If you’re a business owner in Utah, there are plenty of financing options for your small business. Determine what type of loan you need, how much money you need (and can afford) to borrow, and evaluate your lending options. Remember, the goal of your loan is to better your business — not add to your financial burden — so take the time to find the right loan to overcome your financial challenge.

What’s Next
    • Learn what you can write off as small business tax deductions
    • Business loan options that don’t require a credit check
    • See which business credit cards topped this year’s list

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The Best Business Loans For Good Credit

As a business owner with good credit, you’re in a great position when it comes to loans and other financing options. A good credit score is one of the most important factors lenders consider when assessing risk. In fact, a solid credit score is one factor that puts you in the “low risk” category. That means you’re more likely to qualify for loan and financing options with lower rates and better terms.

However, having good credit isn’t the only piece to the financing puzzle. Before applying for a business loan, it’s important to go into the process knowing more about lender requirements, types of loans available, and what you need to apply for a loan. Read on to learn more about the business loans available for borrowers with good credit and which options are best for your financial situation.

What Is Good Credit?

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If you’ve ever applied for a personal or business loan or any kind of financing, you know how important credit scores are to lenders. Your credit score is a measure of your risk. A good credit score shows that you’re low risk. You pay your debts on time each month, your credit history is free of major blemishes like bankruptcies, charge-offs, and defaults, and you’re a reliable borrower. Because of that, more creditors are willing to work with you.

So, what makes a good credit score? Generally, a score of 700 or above is considered “good” on a scale of 300 to 850, although some lenders may view a score in the high 600s as a good score.

Having a high credit score helps you qualify for more financing options with lower rates, improved terms, and a lower overall cost of borrowing. As a business owner, having a good credit score is extremely important. Whether you want to hire more employees, acquire a business, build new facilities, or receive cash for an unexpected emergency, you’ll have more options with a good credit score.

In this article, we’ll focus on the best loan options for business owners with good credit scores. If your score is holding you back from receiving these loans, however, you still have options. Check out loan options for bad credit to find financing that’s the right fit for you.

Best Loans For Purchasing Equipment

equipment financing

No matter what type of industry you’re in, there typically comes a time when you need equipment. Whether you need tools to manufacture your products, require a delivery or company vehicle, need new appliances, or must purchase a point-of-sale system, all equipment has one thing in common: it costs money. If you need to purchase equipment to expand your business or to replace outdated or broken equipment, and you don’t have the cash up front, there’s a funding option for you: equipment financing.

If you apply for an equipment loan, a lender provides you with the cash needed to purchase equipment. All you have to pay is a reasonable down payment. With good credit, you may even qualify for $0 down financing. After receiving your loan and making your purchase, you can put the equipment into use for your business immediately. Then, you simply pay your lender back through fixed installments that are applied toward the loan principal and the lender’s interest and fees. Once you make all payments as scheduled, the equipment belongs to you.

If you need to upgrade equipment frequently, you may consider another type of equipment financing. With an equipment lease, you sign a lease for a period of time — on average about two years. You agree to make scheduled payments to the lender through the duration of the lease. Once the lease period ends, you can return the equipment and choose a new model. You’ll then sign another lease. You’ll never take ownership of the equipment unless you pay a lump sum at the end of your lease.

Recommended Lender: Lendio

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Lendio is a loan aggregator that connects borrowers with equipment loans from $5,000 to $5 million. Repayment terms for equipment loans are from 1 to 5 years, and interest rates for the most creditworthy borrowers start as low as 7.5%.

Equipment financing can be used to purchase any type of equipment, including software, furniture and fixtures, commercial vehicles, and even solar panels for your facilities. To qualify for equipment financing, you must be in business for at least 1 year, have a credit score of at least 650, and have at least $50,000 in annual revenue.

Best Loans For Business Expansion

Expansion is a huge milestone for your business. Expansion means that you’re growing bigger and getting better at what you do. Unfortunately, opening another office, upgrading your existing facilities, or purchasing a new commercial building doesn’t come cheap. Instead of cleaning out your bank account, fund your expansion with a Small Business Administration loan.

The Small Business Administration has made it easier for businesses to get affordable loans. Even if you’ve been turned down for a traditional loan, you may be eligible to receive a loan through an SBA intermediary lender. Portions of SBA loans are backed by the government, taking some of the risk off of lenders and opening up more low-interest financing options for small businesses.

Recommended Lender: SmartBiz

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Through SmartBiz, you can receive SBA 7(a) commercial real estate loans from $500,000 to $5 million. Your loan can be used to purchase a commercial property or refinance your existing property.

If you’re expanding your business in other ways, SmartBiz also offers working capital and debt refinancing loans from $30,000 to $350,000. These funds can be used for hiring employees, purchasing inventory or equipment, marketing, and other business expansion plans. Interest rates for SmartBiz’s SBA loans are between 6.75% and 9% with repayment terms from 10 to 25 years.

To qualify, you must be an eligible business based in the US and must meet the requirements of a small business as defined by the SBA. You must be in business for at least 2 years. To qualify for a 7(a) commercial real estate loan, your credit score must be at least 675. For working capital and debt refinancing loans, a minimum credit score of 650 is required. Your credit report must be free of recent bankruptcies, foreclosures, settlements, charge-offs, and defaults on government loans. For commercial real estate loans, the real estate that’s purchased must be at least 51% owner-occupied.

Recommended Lender: Fundera

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You can also apply for SBA loans through Fundera. With Fundera, you can receive between $5,000 and $5 million with repayment terms between 5 and 25 years. Interest rates begin at 6.75%, and you can receive funding as fast as 3 weeks after applying.

Most borrowers that are approved for an SBA loan through Fundera have a credit score of 680, annual revenue of at least $180,000, and a time in business of over 4 years. When applying for an SBA loan through Fundera, the lender will walk you through the process and help you select the SBA program that’s right for you, including 7(a) loans, CDC/504 loans, or Microloans.

Best Loans For Working Capital

merchant cash advance industry

You can’t operate a successful business without working capital. While your incoming cash flow should cover daily expenses in theory, sometimes you may fall a little short. This is when a working capital loan can help.

A working capital loan gives you the money you need to cover your operating expenses, from payroll to debt payments. These short-term loans give you access to the money you need right away and are paid back through regularly scheduled payments.

Recommended Lender: BlueVine

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BlueVine offers two financing options for business owners. The first is a line of credit from $5,000 to $250,000. Proceeds from your line of credit can be used as working capital or to fund any business expense. Repayment terms are set at 6 months or 12 months with rates as low as 4.8%. Monthly or weekly payment options are available.

To qualify for a BlueVine line of credit, you must have a credit score of at least 600. You must be in business for at least 6 months and have at least $100,000 in annual revenue.

Another financing option available through BlueVine is invoice factoring. If your working capital has been affected by unpaid invoices, invoice factoring offers a solution. BlueVine has factoring lines up to $5 million with rates starting at 0.25% per week. The lender provides 85% to 90% of the total of your unpaid invoice up front. Once the invoice is paid, you receive the remaining amount, minus the lender’s fees.

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

Recommended Lender: Breakout Capital

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Another financing option to boost your working capital is a business loan from Breakout Capital. This lender issues loans up to $250,000 with repayment terms up to 24 months. Rates start at 1.25% per month, and you can select from daily, weekly, or monthly repayment schedules. A one-time origination fee of 2.5% of the total loan is charged by the lender. Prepayment rebates are also available if you choose to pay off your loan early.

To qualify, you must be in business for at least 1 year and have a personal credit score of at least 600. Monthly revenue of at least $10,000 is required to receive a Breakout Capital loan.

Breakout Capital also offers FactorAdvantage, an invoice factoring service. Through this service, you can receive up to $500,000 for your unpaid invoices. There are no time in business, personal credit score, or monthly revenue requirements to qualify.

Best Loans For Marketing & Advertising

You have an existing client base, but in order to scale your business and boost your profits, you need more customers. The best way to draw in new customers and clients is with a marketing and advertising campaign.

Unfortunately, effective marketing and advertising cost money — money that may not be in your budget. Instead of putting off marketing your business, consider a term loan to help you fund your marketing and advertising expenses.

A term loan is a loan that provides you with a set amount of money up front which is later paid back through regular installments. Repayment terms are typically spread out over a few years, and payments are made daily, weekly, or monthly toward the principal loan amount and fees and interest charged by the lender.

Since a term loan is for a specific amount of money, it’s important that you know exactly how much you need before applying. Take the time to calculate your marketing and advertising costs to ensure you receive the money you need for your campaign.

Recommended Lender: OnDeck

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OnDeck offers several financing options for your marketing and advertising needs. This lender has short-term and long-term loans available up to $500,000. Short-term loans are repaid within 3 to 12 months and have simple interest rates as low as 9%. Long-term options are available with repayment terms from 15 to 36 months with annual interest rates as low as 9.99%.

To qualify for OnDeck term loans, you must be in business for at least 1 year. A personal credit score of 500 and $100,000 in annual revenue are also needed to qualify. Origination fees of up to 4% are added to your loan, and you can sign up for fixed daily or weekly payments.

If you want a more flexible financing option, OnDeck also has lines of credit up to $100,000 with APRs starting at 13.99%. To qualify for a line of credit, you must be in business for at least 1 year, bring in $100,000 in annual revenue, and have a personal credit score of at least 600.

Best Loans For Cash Flow Problems

No business is immune to cash flow problems. Maybe it’s a slow season or an emergency expense affected your incoming cash flow. Regardless of your financial challenges, you need cash flow to keep your business operating as it should.

If temporary cash flow issues are impacting your operations, consider a financing option such as a merchant cash advance (MCA) a short-term loan to receive the money you need quickly. Merchant cash advances have a reputation for being one of the most expensive forms of financing. However, a financial product like American Express Merchant Financing can provide the benefits of MCAs without the notoriously high fees.

Recommended Lender: American Express Merchant Financing

American Express OptBlue

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Through American Express Merchant Financing, you can receive between $5,000 and $2 million that is repaid over 6, 12, or 24 months. A fixed fee between 1.75% and 20% is charged based on your creditworthiness and other factors, including term length. Your loan is repaid through daily debits or through your receivables, including American Express transactions.

To qualify for American Express Merchant Financing, you must have at least $50,000 in annual revenue and at least $12,000 in annual credit and debit receivables. Your business must accept American Express cards, and you must be in business for at least 2 years.

Recommended Lender: IOU Financial

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If you don’t qualify for American Express Merchant Financing, another short-term option to consider for resolving cash flow problems is a small business loan from IOU Financial. You can apply for $5,000 to $300,000 with repayment terms between 6 and 18 months. A factor rate of 1.15 to 1.31 is charged by the lender.

To qualify, you must sign a personal guarantee. You also need at least 10 deposits each month in your business checking account. A personal credit score of 600, a time in business of at least 12 months, and annual revenue of $120,000 are requirements to qualify for IOU Financial’s short-term business funding.

Best Loans For Cash Shortages

You need to make payroll, but your business banking account is running low. You have upcoming expenses, but the cash just isn’t there. If you’re facing cash shortages in your business, a line of credit can fill in the gaps.

A line of credit is a flexible form of revolving credit. Once approved, your lender will set a credit limit. You can make multiple draws up to and including your credit limit. Most lenders initiate transfers immediately, so you’ll receive the cash you need in your account as quickly as the next business day. You won’t have to wait for approval with each draw, so you’ll quickly and easily receive the money your business needs.

Fees and interest are only charged on the used portion of your credit line. As you make payments, funds will become available to withdraw again as needed.

Recommended Lender: Kabbage

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Kabbage issues lines of credit up to $250,000. Repayment terms are 6 months or 12 months, and your payment is automatically withdrawn each month. Kabbage charges fee rates between 1.5% to 10% for each month you carry a balance.

To qualify for a Kabbage line of credit, you must be in business for at least 1 year. Revenue requirements are: $50,000 annually or $4,200 per month for the last 3 months. There is no minimum credit score required to qualify. Loan approval and your credit limit are based on the performance of your business.

One standout feature of this lender is the Kabbage Card. In addition to taking traditional draws, you can use your Kabbage Card for instant access to capital. Once you use your Kabbage Card, a new loan will be added to your account with the same rates and terms as traditional draws.

Best Loans For Supplies & Inventory

Supplies and inventory are critical for the success of your business. Without your required supplies, your business won’t run efficiently. Without inventory, you won’t be able to service your customers. Your operations may slow down … or even come to a screeching halt.

While your incoming cash flow will often cover the costs of supplies and inventory, there may be times when this just isn’t enough. An emergency expense that comes at the wrong time or a seasonal uptick in sales are just two scenarios where it becomes difficult to handle the burden of purchasing supplies and inventory alone. When this occurs, consider the benefits of inventory financing.

Inventory financing is a loan or line of credit that is used to purchase supplies or inventory to keep your business operating as it should. You’ll receive the upfront cash you need to make your purchase, then repay the loan through regularly scheduled payments. This is an affordable way to purchase your supplies and inventory when your bank account is running low or you don’t want to tie up all your funds.

Recommended Lender: StreetShares

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StreetShares offers several financing solutions for the purchase of supplies and inventory. Through StreetShares, you can receive a Patriot Express line of credit between $5,000 and $250,000 with repayment terms of 3 to 36 months. Interest rates are between 6% and 14%, with a draw fee of 2.95%. Your line of credit is repaid weekly.

Installment loans between $2,000 and $250,000 are also available through StreetShares. You can borrow up to 20% of your annual revenue. These loans come with terms of 3 to 36 months. Interest rates are between 6% and 15% with closing fees up to 4.95%.

To qualify for a StreetShares installment loan or line of credit, you must be in business for at least 1 year and have annual revenue of at least $25,000. A personal credit score of at least 620 is required to receive a StreetShares line of credit.

Best Loans For Emergency Funds

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An emergency always strikes when we least expect it and brings with it expenses that just aren’t in our budgets. Emergency funding needs can put a dent in your bank account and temporarily derail your operations.

If you’re stuck without an emergency fund and shuffling around your finances isn’t a viable option, it’s time to consider a business loan. There are multiple financing options that will work for you  — such as credit cards, lines of credit, and short-term loans — but regardless of what you choose, you need financing and you need it fast.

Recommended Lender: American Express Business Loans

American Express OptBlue

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With an American Express business loan, you can receive $3,500 up to $50,000 with repayment terms of 12, 24, or 36 months. Amex loans come with fixed interest rates starting at 6.98% up to 19.97%. Amex loans can be approved within seconds and funds sent within 3 to 5 business days.

To qualify, you must be the cardholder on an eligible American Express Business Card and be a US citizen that’s at least 18 years old. You must also be pre-approved in order to apply.

Recommended Lender: FundBox

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If you don’t qualify for an American Express business loan, another fast financing option for small business owners is Fundbox. You’ll receive a credit decision for a Fundbox line of credit in just minutes. Once approved, you can make your first draw instantly and receive a deposit as soon as the next business day.

Through Fundbox, you can apply for flexible lines of credit up to $100,000. The lender charges fees starting at 4.66% of the draw amount. Repayment terms are set at 12 or 24 weeks.

To qualify, you must have an active business checking account and at least two months of activity in Fundbox-supported accounting software. If you don’t work with accounting software, you can supply bank statements from the last three months. You should also have a minimum annual revenue of $50,000, and your business must be based in the US.

Best Loans For Starting A Business

All of these financing solutions work well for established businesses, but what if you need money to get your business up and running? Time in business and annual revenue requirements could hold you back from receiving a loan, even if you have a high credit score.

Put your good credit to use by applying for a personal loan to use for business. Because it’s a personal loan, factors such as your time in business or revenues won’t be a factor for approval. Instead, the lender will consider your own personal credit history and income when approving your loan. If you have good credit and enough income to support a loan payment, you can receive a very affordable loan that can be used to launch your business or cover startup costs.

Recommended Lender: LendingPoint

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You can receive up to $25,000 with a LendingPoint personal loan. Repayment terms are 24 to 48 months. APRs for LendingPoint personal loans range from 15.49% to 35.99%. Lending Point charges origination fees between 0% and 6% of the total loan amount.

To qualify for a loan, you must reside in one of the 43 states where LendingPoint operates. Applicants in Washington D.C. are also eligible to apply. Additional requirements include a minimum income of $20,000, a verifiable bank account in your name, and a credit score in the 600s.

Recommended Lender: Prosper

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Prosper personal loans are available in amounts from $2,000 to $40,000. APRs range from 6.95% to 35.99%. Repayment terms are 3 years or 5 years.

To qualify for a Prosper loan, you must have a credit score of at least 640. You must also have a debt-to-income ratio below 50%. You must have a source of income, although there are no minimum income requirements. Your credit report must have less than five credit bureau inquiries within the last 5 months, no bankruptcies within the last 12 months, and at least three open trades.

Recommended Lender: Upstart

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Upstart personal loans are available from $1,000 to $50,000. Repayment terms are 3 years or 5 years with fixed rates between 8.89% and 35.99%.

To apply for an Upstart loan, you must be at least 18 years old. Applicants in Iowa or West Virginia are ineligible to apply. You must have a personal bank account with an institution located in the US, and you must have a full-time job, a job offer within the next 6 months, a part-time job, or another source of income. A minimum personal credit score of 620 is required to qualify.

Further credit requirements include no delinquent accounts, bankruptcies, or public reports. You must have less than 6 credit inquiries from the last 6 months, although student loans, mortgages, and vehicle loans are excluded. Upstart will also consider your DTI when approving your loan.

What To Consider When Choosing A Lender

Now that you have an idea of the types of loans available for your business, the next step — if you choose to move forward — is to find your lender. Maybe you’re torn between a few lenders, or you want to do your own research to find the most affordable loan option. When you’re searching for a lender, ask yourself the following questions.

How Much Money Do I Need?

This simple question will help you narrow down the playing field. If you need $100,000 but a lender has maximum loan amounts of $10,000, move on to the next option. Before you apply, know the amount that you need — and make sure it coincides with the amount that you can afford.

Do I Meet All Requirements?

Even if you meet the credit score requirements of the lender, make sure you meet all other requirements as well. Get the most up-to-date view of your credit score by receiving your free credit score online. Most lenders have basic requirement for age and citizenship. However, others have minimum requirements for your annual income and revenues, time in business, and DTI ratio.

How Will I Use The Loan?

Some lenders have restrictions on how loan proceeds are used. For example, an equipment loan can’t be used as working capital. It can only be used to purchase equipment. Plan how you will use the loan to determine which type of loan best fits your financial needs. Then, find a lender that offers this type of loan.

What You Need To Apply For A Business Loan

Improve Business Loan Application

By this point, you should know the amount of money you need (and can afford) and the type of loan that’s best for your business. You may even have a list of lenders that you’re considering. Before you apply, know what to expect before heading into the application process.

For all loans, you’ll need basic information about yourself and your business. This includes:

  • Business Name
  • Legal Name
  • Contact Information: Email address, phone numbers, address
  • Annual Income
  • Annual Revenue
  • Federal Tax ID
  • Social Security Number

Depending on the type of loan and the amount you’re seeking, you may have to provide additional information and documentation, including:

  • Business & Personal Income Tax Returns
  • Profit & Loss Statements
  • Balance Sheets
  • Debt Schedules
  • Voided Check
  • Business Plan
  • Driver’s License

Requirements vary by lender, so make sure to review and submit all documentation requested during the application process. Also, be sure to keep in contact with your lender to provide additional information and documentation as needed until your loan is approved and funded.

Final Thoughts

Having a high credit score will help you obtain a business loan, but don’t lean solely on your solid credit. Research your lenders, know your options, and find products suitable for your financial needs to ensure you get the low-interest, affordable loan your business deserves.

The post The Best Business Loans For Good Credit appeared first on Merchant Maverick.

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How To Finance A Medical Marijuana Dispensary

Financing any small business is a headache, but acquiring funding for a medical marijuana dispensary can be even more of a challenge. Medical — and recreational — marijuana is legalized in states across the nation, but it is still illegal under federal law. These laws make it more difficult for owners of medical marijuana dispensaries to apply for loans, open merchant accounts, or receive other types of financing to cover operating expenses or to scale their businesses.

However, even though financing may be limited, there are options out there. To fund your business, you have to know where to look and even get a little creative when other options don’t pan out. Whether you need money to expand your business or you’re seeking funding for your startup, we’ll review the financing options available to you and how to qualify. Read on to learn more and to move toward financing your medical marijuana dispensary.

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Medical Marijuana Dispensary Funding Challenges

Obtaining funding for any business is no easy task. You have to find a lender that offers the best rates and terms to receive the most affordable loan. Once you’ve identified your lender, you go through the underwriting process, making sure you have all of your paperwork in order to prove that your business is qualified to receive financing. Challenges may pop up throughout the process. Depending on the lender you work with, it may take weeks or even months to receive financing, from start to finish.

With a medical marijuana dispensary, there are even more hurdles you have to clear on the race to financing. Even though more states are legalizing medical marijuana, it remains illegal under federal law. Most lenders want to avoid the potential legal repercussions of working with businesses in the cannabis industry, as these businesses are considered high-risk. Even opening a checking, savings, or merchant account for most medical marijuana dispensaries is a hassle, while receiving financing through traditional lenders is nearly impossible.

And if you do find a financial institution that will allow you to open accounts, there are many associated costs, including fees for background checks and for regular reports to the Treasury Department’s Financial Crimes Enforcement Network. Businesses that don’t have merchant accounts and work with cash have additional business expenses to protect their earnings — think high-tech video surveillance systems and reinforced windows and doors.

In other words, medical marijuana dispensaries have the same expenses as regular businesses (utility bills, property leases, etc.) as well as additional expenses to keep their business protected. These expenses pile up quickly, but due to legal issues, traditional financing is often not an option. Therefore, medical marijuana dispensaries either have to make enough capital on their own to keep the business moving forward, or these business owners have to seek out other means of financing.

See our guide on best practices for using personal credit cards for business expenses

Can I Get A Dispensary Loan From A Bank?

Banks are insured by the Federal Deposit Insurance Corporation. A bank that works with companies that violate federal law will not be insured by the FDIC. This includes medical marijuana dispensaries. Instead of taking on this risk, most banks opt to simply avoid working with businesses in the cannabis industry.

There are also legal issues that a bank could potentially face when working with businesses in the cannabis industry. For example, a bank could be charged with money laundering for accepting deposits from a medical marijuana dispensary. Although the odds of this law being enforced are slim, lenders simply don’t want to take that risk.

For those reasons, most banks will not loan money to medical marijuana dispensaries or other businesses in the cannabis industry. While a FinCEN report showed that over 400 banks in the U.S. operated accounts with marijuana businesses in early 2018 — up 20% from early 2017 — marijuana businesses still do not have access to a full range of banking and financial services offered to other businesses, such as loans, credit cards, and merchant accounts.

When most business owners can’t receive funding from banks, they turn to another great resource: the Small Business Administration. The SBA provides educational materials, training, and low-interest, long-term loan options when small businesses can’t receive traditional loans. Do medical marijuana dispensaries receive access to these same loans?

Unfortunately, the SBA does not work with medical marijuana dispensaries. A policy went into effect on April 3, 2018, that prohibits SBA intermediary lenders from providing loans to businesses in the marijuana and hemp industries.

Though this news may be understandably frustrating if you’re seeking an affordable loan, there are financing options available to you. You just won’t find them at a bank or through the SBA.

Equity Financing For Medical Marijuana Dispensaries

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One option that you may consider to fund your medical marijuana dispensary is equity financing. With equity financing, an investor or group of investors will provide you with the capital your company needs in exchange for ownership interest in your business.

Debt refinancing — traditional loans, lines of credit, and other financial products — requires you to make regular payments along with interest and fees. With equity financing, you’ll receive the money you need without having to make these regular payments. However, the tradeoff is that your investor will own a stake in your company. Once your business becomes profitable and successful, your investor will be able to take a percentage of your profits for the life of your business, unless you buy them out.

The benefit of equity financing is that you won’t have to worry about paying interest or regular payments right away. The drawback is that you are giving up ownership, and in some cases, the investor may be able to have a say in the operations of your business. For example, if later down the road you decide to make a large purchase to expand your business, the equity investor may disagree. With equity financing, you no longer have full control over your business.

The Best Loans For Marijuana Businesses

If equity financing isn’t for you and traditional bank financing and SBA loans are off the table, how do you get financing for your medical marijuana business? Alternative lenders have made it easier than ever to receive funding. While rates and terms may not be as favorable as traditional financing, solid revenues and a high credit score can help you score affordable loans to fund operations or expansion of your business.

While you may find alternative lenders are more willing to work with your business, just know ahead of time that some lenders may have restrictions on financing businesses in the cannabis industry. Before applying, do your research to find lenders that work with medical marijuana dispensaries and other high-risk businesses.

You also need to consider what type of financing you need for your business. Whether you need a flexible line of credit or financing to purchase new equipment, alternative lenders have options available for you.

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Short-Term Loans

When you receive a short-term loan, you’ll receive one lump sum that can be used for any business purpose. A short-term loan can be used as working capital, to purchase equipment, for hiring new employees, or for other business expenses.

Although some short-term loans are true to their name and have shorter terms of 12 months or less, some lenders have repayment terms up to 3 years. Depending on the lender you choose, you may have daily, weekly, or monthly payments.

One way that short-term loans differ from other loan options is that most do not have an interest rate. Instead, a multiplier known as a factor rate (or factor fee) is used by the lender. This factor rate is a one-time fee that is added to the cost of the loan and replaces traditional interest. Like interest rates, your factor rate is typically determined by a combination of factors such as the performance of your business and your personal and business credit histories.

One of the benefits of short-term loans is that you often receive money quickly. Some lenders provide funding in as little as 24 hours, while others may approve and fund your loan in 3 to 5 days.

Equipment Financing

If you need capital to purchase new equipment, equipment financing is an option that’s available to you. With equipment financing, you can purchase nearly any type of equipment for your business, from vehicles to point-of-sale systems to furniture and fixtures.

There are two types of equipment financing. The first is an equipment loan. When you receive an equipment loan, you’ll pay 10% to 20% of the total cost of the equipment. The lender will pay the rest of the costs so that you can take possession and put the equipment into use immediately. If you have good credit, you may qualify for $0 down financing. However, putting at least a small percentage down, even when it’s not required, helps lower the cost of borrowing and your payment amounts.

After you’ve received your equipment, you’ll pay the borrower on a scheduled basis — typically weekly or monthly. Your payments will go toward the balance of the loan as well as the interest charged by the lender. Once you have made all payments as scheduled, you take full ownership of the equipment.

The second type of equipment financing is an equipment lease. With an equipment lease, you may also have to pay a down payment. Once you make the down payment, you can use the equipment through your lease period. Once the lease period ends, you return the equipment and sign a new lease for updated equipment.

With an equipment lease, you never own the equipment unless you pay the remaining balance at the end of your lease. A lease may be a good idea if you plan to upgrade any of your equipment regularly. Equipment leases may also come with lower down payment requirements and lower monthly payments. However, you’re essentially renting the equipment and you may end up spending much more over the long term with leasing.

Lines Of Credit

If you need a flexible form of financing, a line of credit is an option to consider. With a line of credit, you don’t receive just one lump sum. Instead, the lender will set a credit limit for your account. You can make multiple draws from your line of credit up to and including the credit limit.

With a line of credit, interest or a fixed fee will only be charged on the borrowed amount. Fees and interest vary by lender and are usually based on your creditworthiness or business performance.

Even if you have credit challenges, you may qualify for a line of credit. Some lenders base their approvals solely on cash flow and other performance factors.

A line of credit is good for any small business because it is so flexible. Funds can be used for any business purpose, and you won’t have to wait for approval. Once you initiate the draw, the lender typically transfers the funds to your banking account immediately, and you can access your funds as soon as the next business day.

Lines of credit are also flexible in how they’re used. You can use funds to cover operating expenses, hire new employees, handle an emergency situation, or for any other business purpose.

Merchant Cash Advances

If you haven’t been in business long, have a low credit score, or don’t qualify for other loan options, you may consider applying for a merchant cash advance.

Even though you can receive funding quickly through a merchant cash advance, these loans often have high interest rates and short repayment terms. This is why it’s more important than ever to do your homework to find a lender with the best rates and terms.

When you take a merchant cash advance, you agree to sell future revenue to the lender. The lender pays you a lump sum amount, and a factoring fee is added to the amount of the loan. Other fees may also be added.

The lender will then withdraw money from your account on a regular basis. Most lenders take payments daily, while others may have weekly or monthly schedules. These withdrawals will be made until the loan balance and all fees have been repaid.

Some merchant cash advances have fixed payments. Others deduct a specific percentage of your sales. When sales are up, your payment is higher. When sales are down, your payments are lower.

The funds from merchant cash advances can be used for any business purpose, including the purchase of supplies, inventory, and equipment or for use as working capital.

Crowdfunding Your Medical Marijuana Dispensary

go fund me for business start up

Another option for financing your medical marijuana dispensary is crowdfunding. With the rapid growth of the internet, crowdfunding has become a popular option for many small businesses, even those in controversial industries.

Crowdfunding is a way to raise money from multiple investors in exchange for equity or rewards. With crowdfunding, you’ll promote your campaign online by sharing with friends and family and posting links to social media. Anyone can donate to help you reach your fundraising goal.

There are two types of crowdfunding campaigns. The first is equity crowdfunding, which is when you give up equity in your business in exchange for investments. The second is non-equity crowdfunding. With this type of campaign, you won’t give up ownership of your company but will instead offer a reward or benefit to investors.

The tricky part of crowdfunding is that medical marijuana dispensaries are prohibited from posting on many of the most popular crowdfunding platforms. However, there are a few platforms that allow businesses in the marijuana industry to launch and promote campaigns.

One crowdfunding platform to consider is Fundable. Through Fundable, you have the option of launching a rewards campaign, an equity campaign, or both. It’s important to note that equity campaigns on Fundable can take years to complete. There is no limitation on the length of your equity campaign. However, you must pay a hosting fee of $179 per month through the duration of your campaign.

The Best Financing Options For Startups

As we’ve already established, finding financing for your medical marijuana dispensary can be a challenge. While there are options available for established businesses, what if you’re brand new to the industry or haven’t even opened your doors yet?

If you need financing to get your business off the ground, there are funding options for startups. The first step is to determine what expenses you’ll have and how much money you’ll need before exploring your financing options.

The Costs Of Starting A Medical Marijuana Dispensary

A medical marijuana dispensary has many of the same expenses as any other startup business, with a few added expenses since this is still such a new and controversial industry.

Before you even get your business started, you will have to apply for licenses and permits. Application and licensing fees range from a few hundred dollars to several thousand. In the state of Colorado, for example, licensing fees are $20,000. One of the first things you should do before starting your business is to learn about the laws, requirements, and fees specific to your state.

Because you’ll operate a storefront, you’ll need to rent, lease, or purchase commercial space. If utilities aren’t included in your monthly rent, these additional expenses will add to your total startup costs. You may have to do some remodeling to make the space suitable for your business, which will add in more costs.

Even if you plan to run a very small dispensary, you’ll still need staff. Whether you’re hiring one person or ten, you’ll need to consider the costs of hiring and training staff members and managers.

Additional purchases for your dispensary include a POS system, furniture, fixtures, and a high-tech security system. One of the most important expenses is your inventory, which is a recurring cost you should consider when calculating your total business expenses.

When planning how to fund these expenses, there are a few financing options to explore. One option may work well to best fit your needs, or you may consider combining a few options to fully fund your startup business.

Crowdfunding

Crowdfunding is a way to raise funding for your startup business. For a medical marijuana dispensary, an equity-based campaign is typically the best option. Even so, it may take several months or longer to raise the money you need to start your business.

Unlike other businesses, you can’t just go to any crowdfunding site. Marijuana dispensaries are prohibited from using some of the most popular crowdfunding platforms. However, as I mentioned above, Fundable is one option to consider. You can also explore options that are centered solely on the cannabis industry, such as Fundanna and CannaFundr. These are relatively new options, so it’s important to do your research, explore all associated fees, and know what you’re getting into before signing up.

Alternative Lenders

Alternative online lenders could help you receive the money you need to fund your medical marijuana dispensary. These lenders are typically more flexible to work with than traditional lenders, although interest rates and fees may be higher and terms not as favorable. Alternative lenders provide a variety of financing options for you, including short-term loans and lines of credit.

Before applying, make sure that you choose a lender that works with businesses in the cannabis industry and other high-risk businesses. Some lenders have restrictions on lending to medical marijuana dispensaries, so make sure to choose a lender that is willing to work with you. There are even online lenders that specialize in financing businesses in the cannabis industry.

Personal Loans For Business

If you have a solid credit score and steady income, you may qualify for a personal loan that you can use to finance startup expenses.

This is an option that many startups choose because the revenue, time in business, and business credit score aren’t taken into consideration for loan approval. However, you do have to disclose how the funds will be used. Some lenders may not loan money due to the industry you’re in, so you may have to shop around for a lender willing to work with your situation.

Investors

One way to finance your startup is to find an investor. Seek out private equity firms, venture capitalists, or angel investors that will provide the funds you need in exchange for a stake in your company.

Credit Cards

A business credit card is a good option for any business. A credit card can be used to pay recurring expenses, cover an emergency, or pay for startup expenses. There are plenty of great credit card options for good and fair credit borrowers. If you have bad credit, you may also qualify for unsecured or secured credit cards, although your credit limit will be lower and interest rates higher.

What You Need To Qualify For Medical Marijuana Dispensary Business Financing

The requirements needed to qualify for medical marijuana dispensary financing are similar to requirements for any other type of business.

Your requirements will vary based on the lender you select, as well as the type of financing you seek. For example, applying for a business credit card may require basic information, such as your name, the name of your business, contact information, and annual revenue. Applying for a loan or line of credit may require additional information and documentation.

Before you gather your documents, though, there is some prep work that can be done on your end. Calculate how much money you need for your business. Then, figure out if your business is able to afford the loan.

Next, pull your free credit score online. If you have credit challenges, working to build your credit may help you qualify for more options at better rates. If you’re in a time crunch to receive your financing, there are bad credit loan options available, but you should expect higher fees and interest and a more expensive overall cost of borrowing.

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Once you’ve established how much money you need (and can afford) and where you stand in terms of credit, it’s time to start shopping for lenders. After you’ve narrowed down your selection, understand the requirements of each lender. Again, this varies but you should generally expect to present the following:

  • Personal Information: Name, Social Security Number, and contact information
  • Business Information: Business name, address, and Federal Tax ID
  • Business & Personal Credit Score
  • Personal Background Check
  • Business Licenses & Permits
  • Business & Personal Bank Statements
  • Profit & Loss Statement
  • Income Statement
  • Balance Sheet
  • Detailed Business Plan

Final Thoughts

Operating or opening a medical marijuana dispensary comes with its challenges. While many options available to other businesses aren’t open to you, this doesn’t mean that you won’t be able to find financing. With a little research and creativity, you can find a lender that is willing to work with you to help make your business a success.

Want to get started with a loan for your medical marijuana business right away? Try LoanBuilder.

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Low Interest Rate Loans: Top Options This Month

Imagine this scenario: You’re a business owner. You’ve been in business for a year or two, and your business is thriving. Until this point, you’ve not taken out a loan. However, your growing business is at a point where it needs extra capital. Maybe it’s time to hire new employees, purchase equipment, or relocate to a larger building.

Now, picture this: You’re ambitious, you have a solid business plan, and you’re ready to launch your business. You need capital to fund your startup costs, but banks won’t even give your business plan a second glance.

Do either of these situations sound familiar? Business loans are notoriously difficult to receive. In addition to a high personal credit score, your business must have a solid credit score, your annual revenue must hit a certain threshold, and most loans require a time in business of at least two years.

If you don’t meet these requirements, what do you do? Do you have any funding options? Are you stuck with business loans that cost an arm and a leg after high interest and fees? Do you wait months — or years — until you can qualify?

Actually, there’s a better solution. If you have at least a fair credit score, you can apply for a low interest personal loan that can be used to fund your startup, cover your operating expenses, or pay for your expansion.

Ready to learn more? Read on to find out more about personal loans, what you need to qualify, and our picks for the best loans for your credit score.

Lender Rate Required Credit Score Next Steps

8.16% – 35.99% APR

620

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6.95% – 35.99% APR

640

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15.49% – 35.99% APR

600

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9.95% – 35.99% APR

580

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discover personal loans

6.99% – 24.99% APR

660

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6.95% – 35.89% APR

600

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6.26% – 14.87% APR

660

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What Is A Personal Loan?

When you receive a personal loan, a bank, credit union, or online lender will provide you with a lump sum of money. The total borrowing amount is based on the amount you request, your credit score and history, and your ability to pay back the loan. You may qualify for an unsecured loan, which is not backed with collateral. If you have a low credit score or request a high borrowing amount, you may receive a secured loan that is backed by collateral,  an asset of value used to guarantee the loan.

In addition to the amount you borrow, fees and the interest charged by the lender will be added onto the loan. You’ll then repay the loan, plus interest and fees, over a set period of time (typically 2 years or longer). The loan is paid back in installments until the balance, fees, and interest have been repaid.

Personal loans can be used for a variety of purposes. Some borrowers may use the loan to consolidate debt, pay off credit cards or high-interest loans, cover an emergency expense, or for other personal financial needs. However, personal loans can also be used for startup costs and small business expenses.

Receiving an affordable business loan can be extremely difficult. Lenders review your business credit score, personal credit score, time in business, and annual revenues. If you’ve only been in business for a short time or you haven’t yet built a business credit history, your options may be limited  — and expensive.

However, if you have a solid credit score, you can receive an affordable personal loan with great rates and terms. Your personal loan can be used to pay startup costs, purchase equipment, hire new employees, or for working capital.

Personal loans are based on your personal credit score, credit history, and income. Your business will not be a consideration for approval, so taking out a personal loan could be a smart financial move if you face challenges that make it difficult to receive a small business loan.

It is important to remember that not all personal loans can be used for business expenses. If you plan to use a personal loan for business purposes, make sure that the lender has not placed limitations prohibiting loan proceeds to be used for this purpose. The recommended options in this article can all be used for business purposes.

Typical Interest Rates & Fees

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When you receive a personal loan, you not only pay back the amount that you’ve borrowed, but you also pay interest to the lender. Banks, credit unions, and other lenders want to work with low-risk borrowers. These lenders evaluate multiple factors to determine the risk level of each loan applicant.

A low-risk borrower would be someone with a high credit score, a solid credit history free of major blemishes, an annual income large enough to cover the cost of the loan, and a low debt-to-income ratio. A high-risk borrower would be an applicant with a low credit score, a spotty credit history, income challenges, and a high DTI.

Being a high-risk borrower comes at a price, in the form of interest. If a high-risk borrower is approved for a loan, the interest rate will be much higher – think 30% or more for personal loans. On the other hand, if you’re a low-risk borrower, you’ll receive a lower interest rate, which means a lower overall cost of your loan.

Borrowers with excellent credit scores can expect to receive an interest rate of around 6%. Based on your creditworthiness and the interest rates of your lender, this number may rise.

That’s why it’s so important to shop around for options. Many lenders offer a prequalification tool that you can use before applying for your loan. This will give you an idea of whether you’re approved and how much you can expect to pay. We’ll discuss this in more detail later in this article.

Another step you can take before you apply for a personal loan is to find out your credit score. There are multiple websites that allow you to access your credit score at no cost. Pull your score, look over your report, and make sure you have a good understanding of your credit history. If you have some credit challenges, you can take a few easy steps to boost your score before applying if you want to receive the best interest rates. While there are loan options available for borrowers with fair or poor credit, you may pay hundreds (or even thousands) more for your loan than a low-risk borrower.

Other costs may include fees charged by the lender. Some loans, such as Discover Personal Loans, come with no additional fees. However, other options may include fees such as:

  • Origination Fees
  • Application Fees
  • Late Payment Fees
  • Credit Insurance Fees
  • Prepayment Fees

Lenders are required to disclose all fees associated with their financial products, so make sure that you review all paperwork and fee schedules carefully to ensure you’re getting the most affordable option.

The Best Loans For Excellent Credit

Discover Personal Loans

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Discover has moved beyond just credit cards to provide qualified borrowers with affordable personal loans. With Discover, you can receive between $2,500 and $35,000 with fixed rates of 6.99% to 24.99% based on creditworthiness. Repayment terms of 36, 48, 60, 72, and 84 months are available so you can build a loan that best fits your financial needs.

One of the biggest benefits of Discover Personal Loans is that there are no origination fees. In fact, if you pay your loan on time each month, there are no additional fees. With Discover, you can receive a same-day decision, although approvals for some borrowers may take additional time. If you decide that you don’t want to take the loan after acceptance, you can return all funds within 30 days without having to pay any interest.

To qualify for a loan, you must be at least 18 years old and a U.S. citizen or permanent resident. A minimum household income of $25,000 is required. Applicants must have a credit score of 660; however, the average credit score of borrowers of a Discover personal loan is reported as 750.

SoFi

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SoFi is a popular lender for personal loans because of its high borrowing limits. You can apply for a loan between $5,000 and $100,000 through SoFi. The fixed rate APR range is between 6.99% and 14.99%. There are no origination fees, prepayment penalties, late fees, or hidden fees with a SoFi loan. Repayment terms are between 3 and 7 years.

To qualify for a SoFi personal loan, you must live in a state serviced by the lender. You must be employed, have sufficient income, or have an offer for employment that begins within the next 90 days. While there is no hard cut-off for credit score requirements, borrowers must have a solid credit history with a credit score in the high 600s.

The Best Loans For Good Credit

Prosper

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With Prosper, you can apply for personal loans of between $2,000 and $40,000. Repayment terms are set at 3 or 5 years. APRs range between 6.95% and 35.99% and are based on creditworthiness of the borrower. Origination fees (between 2.41% and 5%) apply when accepting a Prosper loan.

To qualify for a Prosper loan, you must have a personal credit score of at least 640. Other credit requirements include a DTI below 50%, no bankruptcies within the last year, fewer than five inquiries over the last 6 months, and at least three open trades on your credit report. If you’ve borrowed from Prosper before, you must meet all of the previous conditions, as well as no previous charge-offs of Prosper loans. If you’re a repeat borrower, you must not have been declined for a loan from Prosper within the last four months as a result of delinquency or returned payments on a Prosper loan.

The underwriting and loan verification process may take up to 7 business days. Once approved, funds are transferred to your bank account and should be received within 1 to 3 business days.

Upstart

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Upstart offers loans of $1,000 to $50,000. Interest rates are between 8.89% and 35.99% for qualified borrowers. Repayment terms are 3 years and 5 years. According to Upstart, 99% of approved applicants receive their funding in just one business day after accepting their loans. A one-time origination fee of 0% to 8% of the loan amount will be deducted from the loan before it is issued. There are no prepayment penalties if you choose to pay your loan off early.

What’s unique about Upstart is that your credit score isn’t the only factor used to approve your loan. This lender looks at your credit score, years of credit history, your education and area of study, and job history to determine if you qualify.

However, this lender still has credit requirements. All applicants must have a FICO or Vantage score of at least 620 to qualify, although Upstart will work with borrowers with limited credit histories. Credit reports should be free of bankruptcies, public records, and delinquent accounts. You must have fewer than 6 credit inquiries on your report within the last 6 months, although vehicle loans, mortgages, and student loans are exempt from this requirement. Upstart will also consider your debt-to-income ratio (DTI) before your loan is approved.

You can be prequalified with Upstart within minutes of submitting your application. The underwriting process generally takes 24 to 48 hours. Once you’re approved, you should receive your loan proceeds within 2 business days.

Lending Club

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Through Lending Club, you can apply for personal loans between $1,000 and $40,000. Your loan can be repaid over 3 years or 5 years. Lending Club’s APRs are between 6.95% and 35.89%. The annual interest rate and a one-time origination fee of 1% to 6% of the loan balance are included in the APR. There are no additional fees when you receive a Lending Club personal loan.

To qualify for a Lending Club personal loan, you must have a credit score of at least 600. As with other personal loans, a higher credit score yields a lower interest rate, APR, and overall cost of borrowing. The entire process from application to approval takes about 7 days, while funding may add an additional few days to the timeline.

The Best Loans For Fair Credit

Lending Point

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Lending Point offers personal loans of $2,000 to $25,000. Interest rates are between 15.49% and 30%. Origination fees are between 0% and 6% when taking out a Lending Point personal loan.

While the interest rate may seem high, Lending Point loans are aimed at borrowers with fair credit scores. To qualify for a loan, all borrowers must have a credit score in the 600s. Borrowers must have a minimum annual income of $20,000. All borrowers must be located in one of the 34 states where Lending Point does business. Applicants in Washington, D.C. are also eligible to apply.

Lending Point loans can be approved immediately. Once approved, additional information and documentation are required for underwriting. In most cases, the underwriting process can be completed and the loan approved within hours. After approval, you may receive your funds in your bank account as soon as the next business day.

Avant

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Avant loans are available in amounts from $2,000 to $35,000, although limits vary by state. Term lengths are between 2 years and 5 years, with APRs of 9.95% to 36.99%. An administration fee of 0.95% to 4.75% is applied to your loan.

To qualify, you must have a minimum credit score of at least 580, although most borrowers have a credit score between 600 and 700. Avant loans are available to borrowers in all states except for Colorado, Iowa, Vermont, and West Virginia.

After applying for an Avant loan, you may receive an immediate loan offer. Verification, underwriting, and funding your loan takes only a few business days.

What You Need To Qualify For A Loan

The great thing about all of the loan options discussed in this article is that you can receive them all from the comfort of your home or office. You don’t have to spend hours in a bank with a huge folder full of documents. Instead, you’ll be able to apply for your loan, complete the underwriting and verification process, and receive loan proceeds online.

The information and documentation needed to receive your loan vary by lender. For all the loans mentioned above, you must be a citizen or permanent resident of the U.S. All applicants must be at least 18 years old. You must reside in a state where your lender conducts business. You must also have verifiable income, although limits vary by lender. A checking account is also required for direct deposit of your funds.

No matter what lender you apply with, some basic personal information is always required. This includes your full legal name, date of birth, Social Security Number, and contact information. You will also need to provide information about your annual income and employment.

While this information may be sufficient to prequalify you for a loan, additional information and documentation are typically required during the underwriting process. Some of the most common requirements include:

  • Copy Of Driver’s License
  • Personal Bank Statements
  • Personal Tax Returns
  • Personal Credit Score & Report
  • Proof Of Address: Lease agreement, voter registration, utility bill, etc.

How To Check Your Eligibility

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You’re shopping around for lenders, and you’re ready to make a commitment. Before you dive into the application process, first find out if you qualify for the loan. Lenders have made this easier than ever by offering ways to prequalify directly from their websites.

You should have an idea what types of loans you qualify for before even taking this step by reviewing your credit score and report. If your credit score is in the low 600s and a lender requires a score of 680 to qualify, you’ll know to look at other lending options.

Once you’ve reviewed your score and report and have an understanding of a lender’s requirements, you can fill out a prequalification form on each lender’s website. On this form, you enter basic data such as your name, birthdate, and Social Security Number. You may also need to input the total loan amount you seek, as well as your annual income. Once you’ve submitted the form, you may receive an approval instantly and can proceed with the full application. In some cases, you may be declined for a loan, while other lenders may require additional information.

When you’re shopping around for loans in this way, most lenders only perform a soft credit pull. Make sure this is the case each time you submit a prequalification form. Multiple hard inquiries can not only lower your credit score but can also disqualify you from receiving loans due to a high number of credit inquiries.

Once you’ve been prequalified, most lenders provide you with a tentative loan amount and interest rate. It may be wise to shop around to find the most affordable loan option, also taking into account any additional fees added to the cost of the loan. Once you’ve found the best option for your financial situation, proceed with applying for the loan.

Final Thoughts

Finding a loan for your small business can be tricky. But even when one lender shuts the door, there’s probably another way in (even if it takes a little creativity). With a solid personal credit history, you can find an affordable loan option for your small business via a personal lender — if you take the time to research your options. Good luck and happy borrowing!

The post Low Interest Rate Loans: Top Options This Month appeared first on Merchant Maverick.

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What Is A Confession of Judgment? Should I Sign One?

As you might expect, any financial agreement will be a trek into the frightening realm of legalese. If you aren’t up on your jargon–and even if you are–you’re likely to run into some unfamiliar terms. One of the more ominous ones you may encounter in the alternative lending world is the confession of judgment.

Is it as bad as it sounds? At the risk of spoiling the big reveal of this blog post, “yes.” While this post is no substitute for legal advice, we can provide some basic information about what a confession of judgment is, where you’re likely to encounter one, and whether it’s usually a good idea to sign one. Read on and we’ll try to break it down for you.

Collateral & Personal Guarantees

When you apply for a loan or cash advance, your funder needs to prepare for the possibility that you will be unable or unwilling to pay back your balance in full. Usually, they will require some form of collateral. With traditional secured loans, this usually means putting up an asset you own, ranging from real estate to heavy equipment to a cash deposit. If you default on your loan or advance, your funder can then recoup some of their loss by keeping your collateral.

A confession of judgment isn’t collateral, per se. In fact, it’s usually paired with a form of unsecured “collateral” called a personal guarantee. A personal guarantee is essentially a promise to pay back your loan or MCA with personal assets should your business be unable to. If that gives you pause, it should; putting your personal assets at risk raises the stakes for you as a borrower since it’s removing the distinction between yourself and your business. Sounds like a pretty good deal for your funder, though, right?

On paper, it looks like a solid win, but enforcing a personal guarantee can be an ordeal for lenders. In many cases, they’ll need to bring a lawsuit against the guarantor to recoup their losses. That’s where the confession of judgment comes in.

Confession Of What?

So let’s say a funder is taking on a high-risk borrower for an unsecured loan or MCA. They think there’s a reasonable chance the borrower will default, but they don’t want to sink the money and time into a lawsuit to enforce the personal guarantee. As a condition for the loan or MCA, the borrower may have to sign a confession of judgment.

A confession of judgment allows the funder to go after the borrower’s personal assets as though they’d successfully received a judgment against them in court. That means the funder bypasses most of the due process the borrower normally be afforded: no trial, no hearing, no opportunity for the borrower to defend himself or herself. The funder simply needs to file the confession of judgment with their county clerk or appropriate agency. The courts will then inform the borrower that a judgment has been made against them.

As you can imagine, confessions of judgment are controversial. Not every state uses them (they’re more prevalent in the Mid-Atlantic states) and even among those states they may not be applicable to all financial contracts in your jurisdiction (most of those state only allow them for commercial transactions). They may be valid only for specific types of debt and for a specific amount of time. A confession of judgment can apply to debts currently outstanding or those that will become due in the future. Be sure to speak to a lawyer about any specific questions you have about how your jurisdiction adjudicates confessions of judgment.

Should You Sign A Confession Of Judgement?

No. Not if you can help it. You should always think long and hard before signing any of your legal rights away, and a confession of judgment is no different. Depending on your jurisdiction, it can severely impede your ability to protect yourself from collection efforts.

On the other hand, if you’re able to pay off your loan or MCA without any issues, the confession of judgment won’t ever really come into play. It’s only filed if your funder is unable to collect on your debt. If there’s no need to start a collection action against you, it’s simply another piece of paper you signed.

But again, you should really avoid signing one if you can possibly help it.

What If I’ve Already Signed One?

Don’t panic! If you’re making your payments on time, it’s unlikely that you’ll even need to think about your confession of judgment again. A confession of judgment has specific triggers that need to be met before it’s valid. In most cases, this trigger will be missing payments.

If your funder has actually filed a confession of judgment against you, the picture isn’t as rosy. In most states, however, you’re not completely out of options even if you reach this stage. You may still be able to negotiate a settlement with your funder, for example, or even have your confession of judgment vacated. The latter may require proving that the terms required to trigger the confession of judgment were never meant. It’s also possible for the borrower to be negligent in making it clear that you’re signing important rights away when they initially presented the confession of judgment to you. Be sure to speak with a lawyer to find out what solutions are possible in your case and your state.

How Do I Avoid Signing A Confession Of Judgement?

While personal guarantees are pretty common in the alternative lending market, confessions of judgment are significantly less so. It’s generally funders that deal with high-risk borrowers who will employ them, and even then they may not require them for every borrower. If your funder tries to get you to sign one, make sure you’ve exhausted all your other options before waiving your legal rights and putting your personal assets at risk.

Even if your credit rating or the age of your business has limited your options to merchant cash advances, you can still take your business to a funder who won’t lock you into quite so punishing terms.

Need some other options? We can get you started.

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

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Business Loans For HVAC Companies

business loans for hvac companies

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

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

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

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

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

Loans For Marketing & Advertising

business loans for HVAC

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

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

Medium-Term Loans

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

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

Recommended Option: Fundation

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

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

Loans For Equipment Purchasing

business loans for hvac companies

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

Equipment Loans

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

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

Equipment Leases

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

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

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

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

Recommended Option: Lendio

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

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

Loans For Business Expansion

business loans for hvac companies

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

SBA Loans

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

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

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

Loan Program Description More

7(a) Loans

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

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Microloans

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

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CDC/504 Loans

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

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Disaster Loans

Loans used to rebuild or maintain business following a disaster. 

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Recommended Option: SmartBiz

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

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

Loans For Emergency Funds

business loans for hvac

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

Business Credit Cards

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

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

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

Recommended Option: Chase Ink Business Unlimited

Chase Ink Business Unlimited


chase ink business unlimited
Apply Now 

Annual Fee:


$0

 

Purchase APR:


15.24% – 21.24%, Variable

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

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

Loans For Working Capital

loans for hvac businesses

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

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

Short-Term Loans

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

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

Recommended Option: PayPal LoanBuilder

Review

Check Eligibility

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

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

Loans For Covering Payroll

 

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

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

Lines Of Credit

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

Recommended Option: OnDeck

Review

Visit Site

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

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

What To Consider When Choosing A Lender

business loans for hvac businesses

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

Why Do I Need A Loan?

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

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

Am I Qualified?

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

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

Do The Rates & Terms Meet My Needs?

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

What You Need To Apply For HVAC Business Loans

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

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

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

Final Thoughts

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

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

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

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19 Reasons To Get A Business Loan (And How To Get Started)

business loan reasons

There are so many good reasons to get a business loan that you probably haven’t even considered half of them. For example, have you ever thought about taking out a loan to hire a new employee or getting a loan for the sole purpose of building your business’s credit? Those are both valid reasons to apply for business financing, and there are many other reasons that might not have ever crossed your mind.

While many small businesses are debt-averse — afraid to apply for financing because they don’t think they have good enough credit, or unsure if they can afford repayments — it’s a simple fact that you need money to make money. In some ways, living debt-free can actually hinder your business’s growth or even its ability to stay afloat. You might also be surprised at the wide variety of financing products available for almost any type of business pursuit.

Even if you’ve never applied for financing before, a business loan is definitely something to think about if you are short on funds or are considering a new opportunity or investment that could advance your business.

Read on for a look at 19 reasons you might want to take out a business loan.

Or, skip down to the “Types of Business Loans” section to see if what type of loan you should pursue for your particular business need.

1. Start A Business

Want to get your brand-new business off the ground with a running start? A startup loan can help you do just that. A few startup-friendly lenders will lend to brand-new businesses with no time in business, while others will want to see that you have 6 months’ worth of revenue.

However, startup loans are not by any means easy to get for spanking new businesses lacking in experience, especially if your business is still in the “idea stage.” If this sounds like you, you might consider a crowdfunded loan or small business grant in lieu of traditional financing.

2. Increase Working Capital

Working capital—the money required for day-to-day business operations—is a big reason businesses might need to apply for financing. For myriad reasons, your business may simply be short on cash. Sporadic cash flow, business growth spurts, and seasonal sales fluctuations are just a few reasons businesses apply for a working capital loan.

In many circumstances, you might not know exactly how much money you need, but expect you’ll need some extra working capital in the near future. In such cases, you might be wise to apply for a short-term business line of credit that you can draw from as needed.

3. Purchase Inventory

Businesses new and old, large and small, commonly apply for financing to cover the cost of purchasing inventory or raw materials to make products. A healthy inventory allows you to have enough product on-hand to meet demand and keep customers happy.

Retail businesses, in particular, often require financing to replenish stocks, particularly is your store sees a big sales up-tick during certain seasons. For example, a company that sells a popular holiday gift might take out a short-term loan to purchase product ahead of the holiday season, and then repay that loan with the proceeds of their seasonal sales.

4. Purchase Equipment

Almost all businesses require equipment of some sort — especially businesses involved in manufacturing, as well as those in the food and service industries. Whether you need professional gym equipment or even a business vehicle, such assets can represent a major expense to a new, struggling, or expanding business.

Purchasing equipment may necessitate a business loan, or perhaps you’d rather charge it on your business credit card if your credit limit is high enough. One popular way to buy business equipment is equipment financing, as this type of loan typically does not require any collateral other than the equipment itself.

5. Hire New Talent

According to the National Small Business Association, data going back as far back as 1993 shows a strong connection between businesses’ ability to hire employees and their ability to get financing. Indeed, payroll is a significant expense businesses must contend with, including not just wages, but healthcare and other benefits, as well as employee training. In some cases, businesses even have to reduce their number of employees or scale back employee benefits if they don’t have sufficient access to financing.

While taking out a loan to hire someone is always a risk, it’s true that employees are a business’s greatest asset; if the employee is worth their salt, they will eventually justify the expense of the loan.

6. Expand Products/Services

Businesses in the growth stage, as well as stable businesses trying to increase revenues and/or stay competitive with peers, will need to expand their offerings from time to time. Regardless of how you’re going to achieve a product or service expansion, an installment loan or another type of business loan can help you make the necessary investments to keep your offerings fresh and relevant.

7. Open A New Location

Your business is growing fast and you need to open a new location. Expanding to a new location is a major undertaking requiring a lot of capital, but one that can pay off tremendously in time.

If you have at least two years’ time in business, you may be eligible for a long-term business expansion loan with low interest rates. Businesses purchasing real estate to open a new location be eligible for a commercial real estate mortgage such as those offered by the SBA through the  SBA CDC/504 program. There is even such a thing as real estate crowdfunding for businesses.

Or, say you own an online business and want to establish your first physical location, you might consider a startup loan to help get your new operations up and running.

8. Pay Taxes

Ideally, you will set aside enough money throughout the year to pay your business taxes when the tax man comes a knockin’. But alas, life doesn’t always work out that way, which is why small businesses frequently take out loans to pay taxes.

Rather than get in trouble with the IRS for not paying your taxes, you are much better off using a business loan or even a cash advance to pay your taxes.

9. Create A Safety Net

A safety net is a cash or credit “cushion” you can use to fall back on during slim times. Perhaps you own a seasonal business or simply have cash-flow problems from time to time; even though you don’t require any extra working capital at the present moment, you feel good knowing it’s available if and when you need it.

You’re probably especially aware of the need for a safety net if you’ve been caught without one in the past, and had to pay overdraft bank fees or get an expensive short-term loan to cover unforeseen shortfalls.

A revolving line of credit, working capital loan, or even a business credit card can all help provide a safety net for a future rainy day. If there are no rainy days on the immediate horizon, you will have some peace of mind knowing you’re prepared for anything.

10. Refinance Another Loan

While it may seem strange to take out a loan to pay off another loan, debt refinancing is a popular and sometimes necessary reason to take out a business loan. You might choose to refinance your business debt because you are offered a loan with better rates and fees, or you might choose to consolidate multiple loans into one loan.

If you’re considering refinancing a loan you are currently paying on, check out our Complete Guide To Refinancing Small Business Debt.

11. Buy A Business

A business acquisition loan, or a loan to buy a business, is another popular category of business loans. You can take out this kind of loan to expand your current business’s offerings with the purchase of another business, or to buy a business even if you don’t have an existing business (in which case you will probably need a startup loan).

Depending on your business credentials, the health of the business you want to purchase, and other factors, you may be able to get a business acquisition loan through a bank or the SBA. You might also finance your business purchase through a business expansion loan or a startup loan from an online lender. There are also franchise loans available to individuals looking to purchase a new or existing franchise.

12. Buy Out A Partner

business loan vs personal loan

Sometimes it just doesn’t work out with a business partner. But just because your partner agrees to be bought out doesn’t mean you’ll necessarily have the money to do so. In these circumstances, you can get a business loan to execute a partner buyout.

There is not really a specific type of loan for partner buyouts but you can use many standard business loans for this purpose, including an SBA standard 7(a) loan.

13. Cover Construction Costs

Perhaps you want to expand or improve your physical business location(s) with renovations or improvements, or maybe you want to construct a brand-new building for your business. Either way, a commercial real estate loan—also called a commercial mortgage or commercial construction loan—is the type of financing you need.

You can use a commercial construction loan, typically obtained through a bank or credit union, to pay for construction costs such as labor, materials, and land development. Hard money loans are another option to pay for business construction.

14. Cover Unpaid Invoices

Businesses with a lot of outstanding invoices can free up pending earnings using a type of loan called invoice factoring.

The financer fronts you the money that your customers owe you, and then you repay them as the customers pay off their debts. With this type of financing, your business does not necessarily need to have good credit, as the invoice factor is more concerned with your customers’ credentials than with your business’s.

15. Buy Insurance

Insurance is a major business expense. Business insurance requirements vary by state and industry. Liability insurance, property insurance, employee healthcare insurance, malpractice insurance, and flood insurance are just a few types of insurance your business might need. For certain business loans, you even need insurance in order to get the loan in the first place. For example, you may need life insurance and various other types of insurance to qualify for an SBA loan.

While, ideally, insurance costs will be included in your budget as a percentage of your gross sales, a business loan or line of credit can help your business pay your insurance policy during times you cannot afford to do so.

16. Cover An Unexpected Expense

Remember that safety net we talked about earlier? Well if you don’t have it, you could have no choice but to take out a loan after-the-fact to cover an unexpected business expense that you didn’t budget for. This could be anything from replacing some expensive equipment that failed unexpectedly to making repairs after a natural disaster. Fortunately, an emergency business loan can help your business cover the expense of just about anything life can throw at ya.

17. Advertise Your Business

Marketing/advertising is a business expense that can cost a lot of money upfront but will hopefully pay off in the long run. SEO and online advertising, commercials, billboard advertising, radio ads, and promotional materials are all types of marketing for which you could need a loan, especially if you’re hiring a marketing agency to try to achieve big results.

18. Build Credit

A lot of small businesses don’t have much of a business credit history, even though the business owner herself might have good credit. Taking out a business loan is one way of establishing a business credit history rather than using your personal credit for your business. Building business credit will allow you to separate your personal and business credit profiles, and will also put you in a good position if you need to ask for a business loan in the future.

For more information on this and other ways to build your business credit history read my Ultimate Guide To Improving Your Business Credit Score.

19. Take Advantage Of A Business Opportunity

Every now and again, your business may be presented with an awesome opportunity that is just too good to pass by—even if you can’t afford the whole thing up front. Business success requires a lot of pragmatism and planning, but there is also some degree of risk-taking and, dare I say it, magic. Whatever that special something is, if you get a “spidey sense” that a certain opportunity will help take your business to the next level, it can pay off handsomely to trust your intuition and go out on a limb to make that investment.

Of course, going out on a limb in this case likely means taking out a business loan. Just make sure you’re not so focused on the opportunity that you rush things and say yes to the first loan offer you come across. It’s absolutely essential to compare multiple loan offers to make sure you are getting the best deal.

Types of Business Loans

I’ve discussed many types of business loans in this post, and it can be confusing to sort through all the different loan categories if you don’t know what you need. To help simplify things, I’ve made a chart with brief explanations of different loan types discussed, and below that, I included longer descriptions of some popular loans you should know about.

Resource Description

Startup Loan

Financing for businesses 6 months old or younger.

Crowdfunded Loan

Funds sourced from a network of backers or investors. 

Small Business Grant

Free funds granted to businesses, normally for a specific project. 

Working Capital Loan

Financing to cover daily operating expenses of running a business.

Business Line of Credit

A credit facility from which your business can borrow money at any time. 

Short-Term Loan

Usually a higher-interest loan that you pay back quickly, typically within a year. 

Business Credit Card

Credit card used for business expenses.

Equipment Financing

Self-securing loan to finance major equipment purchases.

Installment Loan

A standard type of business loan also called a term loan, repaid in regularly scheduled installments.

Long-Term Business Expansion Loan

Usually a large, low-interest loan, repaid over 5 or more years.

Real Estate Crowdfunding

Crowdfunded capital to purchase real estate for a business.

Merchant Cash Advance

Expensive but quick source of business financing for merchants who need fast funds.

Business Acquisition Loan

Loan to purchase a business.

Franchise Loan

Loan to open a new franchise or purchase an existing franchise.

SBA 7(a) Loan

Standard business loan backed by the U.S. Small Business Administration.

Commercial Real Estate Loan

Long-term loan to purchase commercial real estate for a business.

Hard Money Loan

Shorter-term real estate loan similar to a mortgage, requiring the property you’re purchasing as collateral. 

Invoice Factoring

Service which converts your small business’s outstanding invoices to cash.

Emergency Business Loan

Fast loans to cover business funding emergencies. 

Installment Loan

Term loans, also called “installment loans” are a broad category of business loans. This type of funding is paid back in periodic installments, with interest. It may be a short- or long-term loan. Higher-quality term loans typically give you a longer amount of time to repay the loan, and let you pay via monthly installments (vs. weekly or daily installments with short-term loans). However, you will need at least 2 years in business, plus good credit and strong revenues, to qualify for a long-term business loan, particularly if you borrow from a bank; online lenders have less strict requirements.

Long- and medium-term loans are useful for established businesses making long-term investments in fixed assets like property or renovations, though they can also be used for working capital.

You can get term loans from a bank or credit union, though the lenders below offer reasonably quick installment loans as well:

Lender Borrowing Amount Term Req. Time in Business Min. Credit Score Next Steps

smartbiz logo

$30K – $350K 10 – 25 years 2 years 650 Apply Now

$2K – $5M Varies 6 months 550 Apply Now

$25K – $500K 6 months – 5 years 2 years 620 Compare

lending club logo

$5K – $300K 1 – 5 years 12 months 600 Compare

Short-Term Loan

Short-term business loans—installment loans that are repaid in 3 years or less, or sometimes in a matter of months—usually come in smaller amounts with higher rates when compared to long-term loans. Short-term loans also tend to require weekly or daily repayments. Although they are more expensive and less desirable than long-term loans in a lot of ways, short-term loans are relatively fast and easy to get and don’t have as stringent borrower requirements in terms of credit score, income, or time in business.

Because they have such a short repayment schedule, short-term loans are good for short-term problems, such as one-time expenses/investments.

The following lenders offer good terms and reasonable rates if you need a short-term loan:

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 – $300K 6, 9, 12, 15, or 18 months x1.15 – x1.31 1 year 600 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

Merchant Cash Advance

Merchant cash advances are not technically loans; rather, they are advances on your future sales or revenue. With a cash advance, you’ll receive a lump sum, which you’ll then begin repaying out of your daily credit card sales.  The interest charged on MCAs is usually calculated in terms of a factor rate rather than interest rate—for example, you might have a factor rate of 1.3, which means you’ll have to repay 1.3x the amount you borrowed. A typical factor rate for an MCA is between 1.2 and 1.4.

An MCA is good for an emergency situation where you need a large sum of money quickly and/or have bad credit, but you have a healthy daily cash flow. It does not help you build business credit because it’s not actually a loan and these lenders don’t usually report to credit agencies.

Generally, we don’t recommend MCAs if you’re eligible for another type of financing, but the following cash advance providers are reputable:

Lender Borrowing Amount Min Credit Score Time To Funding Next Steps

$5K – $500K 550 1-3 Days Apply Now

$2K – $5M 550 1-2 Days Apply Now

$5K – $500K 500 2-5 Days Apply Now

$5K – $250K 500 2-5 Days Apply Now

Business Credit Card

Business credit cards are useful the same way personal credit cards are useful—they allow you to pay for large or small expenses even if you don’t have the cash on hand, while also earning you rewards and building your credit history. Of course, you can get yourself into trouble if you don’t pay off the balance in a reasonable amount of time. With that said, business credit cards are super handy for any type of business expense that doesn’t exceed your credit limit, particularly if you can find a card with a 0% introductory rate, like the ones below.

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

Even if you don’t have an expense looming on the immediate horizon, a business card is just good to have in case you need it.

Business Line of Credit

A business line of credit is an amount of money available for you to draw from as needed. You only have to pay back what you borrow (plus interest). Similar to term loans, you can get a line of credit from a bank or online lender. Not unlike a business credit card, a line of credit is useful to have just in case you need to make up for any type of shortfall or gap. An LOC can come in handy especially if you have a seasonal business or a business with occasional cash flow problems. Additionally, a line of credit, like the ones offered by the lenders below, can help you build business credit.

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

Invoice Factoring

Invoice financing, sometimes called invoice factoring, is when you sell your business’s unpaid invoices to a credit facility. The facility fronts you the amount of the unpaid invoice (minus a percentage they charge as a fee), and you then repay the lender as your customers repay you. Note that you do still need to repay the lender even if your customer never pays you.

Invoice financing is a useful type of financing for businesses with a lot of unpaid invoices that want to free up some cash. The borrower requirements are usually pretty relaxed, as invoice finance companies are more concerned with your customers’ creditworthiness rather than your business’s.

Equipment Financing

Equipment financing is useful for the purchase of any type of equipment or machinery your company needs but can’t afford outright. This type of “self-securing” financing does not require any collateral other than the equipment itself, and you usually don’t need to have excellent credit or much else in the way of borrower credentials. If you default on the loan you could lose the equipment, but if you make all your payments, you will eventually own the equipment.

We recommend the following equipment financers:

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

Do You Need A Business Loan? Next Steps

If you’ve decided you need a business loan, it’s time to take the next steps to secure one.

1. Compare the different types of small business loans discussed above and determine which type of loan best suits your need. Or, read more about common types of business loans.

2. Take a look at our free guide to small business loans.

3. Calculate how much you can afford to borrow.

4. Take a look at our favorite lenders.

Once you complete your initial research by taking these steps, you should have a very good idea of what to look for in a loan and which type or types of financing are best for your situation. You’re now ready to start applying!

To save time applying to multiple loans, you might consider using a lending matchmaker service like Lendio, which allows you to compare multiple loans tailored to your needs.

Final Thoughts

Applying for business financing can be daunting, given all the myriad types of loan products out there, and the possibility of being rejected for financing. You might also be worried about your ability to make payments on the loan.

However, if you have a good reason to apply for a business loan, there is a very decent chance that there is a lender willing to lend to you with feasible, realistic terms. With those funds, you’ll be able to address whatever needs your business has while building up your business credit profile with each repayment.

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 – $300K 6, 9, 12, 15, or 18 months x1.15 – x1.31 1 year 600 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

The post 19 Reasons To Get A Business Loan (And How To Get Started) appeared first on Merchant Maverick.

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Financing And Loan Options For Manufacturing Companies

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

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

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

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

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

How To Finance A Manufacturing Company

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

Purchasing Equipment

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

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

Equipment Financing

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

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

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

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

Recommended Option: Lendio

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

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

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

Purchasing Materials

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

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

Lines Of Credit

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

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

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

Recommended Option: FundBox

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

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

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

Business Expansion

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

SBA Loans

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

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

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

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

Recommended Option: SmartBiz

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

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

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

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

Cash Shortages

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

Invoice Factoring

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

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

Recommended Option: BlueVine

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

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

Hiring, Training & Covering Payroll

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

Term Loans

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

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

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

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

Recommended Option: OnDeck

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

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

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

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

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

Marketing & Advertising

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

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

Business Credit Cards

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

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

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

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

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

Recommended Option: Chase Ink Business Preferred

Chase Ink Business Preferred



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Annual Fee:


$95

 

Purchase APR:


17.99% – 22.99%, Variable

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

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

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

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

Does The Government Offer Loans For Manufacturing Companies?

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

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

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

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

The Best Loan Options For Starting A Manufacturing Business

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

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

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

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

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

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

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

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

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

What To Consider When Choosing A Lender

5 C's of Credit: What Lenders Look For

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

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

What Is The Loan Used For?

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

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

How Much Money Do I Need?

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

Do I Qualify?

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

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

Do The Rates & Terms Work For My Business?

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

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

What You’ll Need To Apply For A Loan

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

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

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

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

Final Thoughts

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

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

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

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Business Loans And Other Financing Options For Wholesale Distribution Companies

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

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

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

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

Why Take Out A Loan For A Wholesale Distribution Business?

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

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

Purchasing Equipment

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

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

Equipment Financing

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

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

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

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

Recommended Option: Lendio

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

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

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

Business Expansion

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

SBA Loans

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

Loan Program Description More

7(a) Loans

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

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Microloans

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

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CDC/504 Loans

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

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Disaster Loans

Loans used to rebuild or maintain business following a disaster. 

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

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

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

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

Recommended Option: SmartBiz

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

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

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

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

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

Purchasing Inventory

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

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

Lines Of Credit

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

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

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

Recommended Option: Kabbage

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

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

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

Cash Shortages

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

Invoice Financing

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

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

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

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

Invoice Financing Invoice Factoring

Uses invoices as collateral for a line of credit

Sell invoices for immediate cash

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

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

You are responsible for collecting invoice payments

Factor is responsible for collecting invoice payments

Recommended Option: BlueVine

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

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

Emergency Funding

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

Business Credit Cards

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

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

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

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

Recommended Option: Chase Ink Business Unlimited

Chase Ink Business Unlimited


chase ink business unlimited
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Annual Fee:


$0

 

Purchase APR:


15.24% – 21.24%, Variable

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

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

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

The Best Loan Options For Starting A Distribution Business

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

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

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

SBA 504 Loans

Borrowing Amount

$500 – $50,000

Term Lengths

Up to 6 years

Interest Rates

6.5% – 13%

Borrowing Fees

Possible fees from the loan issuer

Personal Guarantee

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

Collateral

Collateral normally required, but depends on the lender

Down Payment

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

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

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

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

$500,000

2.9% – 18.72% factor rate

550

Apply Now

$250,000

9% – 36% factor rate

500

Apply Now

$500,000

9.4% – 99.7% APR

500

Apply Now

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

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

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

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

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

lending club logo

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

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

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

What To Consider When Choosing A Lender

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

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

How Will I Use The Loan?

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

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

How Much Money Do I Need?

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

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

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

Do I Meet All Borrower Requirements?

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

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

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

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

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

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

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

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

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

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

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

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

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

Final Thoughts

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

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

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

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