Entrepreneurs looking to build their companies from the ground up often face difficulties getting traditional debt-based financing. Banks, and even many alternative lenders, prefer to do business with companies that have at least six months of operation under their belt, and preferably two to three years. And that’s before you factor in things like your creditworthiness.
One way around the debt-financing conundrum is to enter the world of investor financing. While equity financing is probably the more well-known method of investor financing, another option is revenue-based financing.
What Is Revenue-Based Financing?
Revenue-based financing grants investors a regular, ongoing percentage of a company’s income in exchange for a cash infusion. The investors receive scheduled payments until they’ve collected an agreed-upon amount of money from the new business.
Because this model relies on the business generating revenue, investors will want to see that you’re capable of producing the strong margins necessary to both continue to grow and pay them back. That means businesses planning on a slower growth model, or those that may not be revenue-positive for an extended period of time, are generally not a great fit for revenue-based financing, which is most frequently seen in the tech sector and adjacent businesses.
Funding amounts typically range between $50,000 to $3 million, with repayment expected in three to five years. Repayment caps, which are expressed as a flat multiplier, represent the total amount your investor is expecting to reclaim from you. This rate typically ranges from x1.35 to x3, although higher caps aren’t unheard of. In some cases, the investors may instead use a date or sustained rate of return as cut-off points.
How Revenue-Based Financing Works
Let’s say you’re an enterprising tech entrepreneur who has a great new app idea with explosive growth potential.
You’re even generating a little bit of revenue from your early customers, but need money to grow. You approach an investor or investment group that offers revenue-based financing, and they like what they see (your average monthly revenue has been $16,000, with strong gross margins). You’re not profitable yet, but you’re on the right track. The investor clears you for $1 million in revenue-based financing.
Interestingly, the $1 million generally will not be handed over to you in a lump sum but will function a bit more like a line of credit. In other words, you can draw upon it more than once, so long as your total draw doesn’t exceed the limit (note, however, that there may be restrictions on when and under what circumstances you can draw).
Let’s say you managed to secure a cap of x2 and eventually use all of your “credit.” The total amount you’d be expected to repay would be $2 million ($1 million x 2). You and your investor settle on a payment plan of 6% of your monthly sales, which have risen to an average of $40,000. You’d be paying around $3,200 a month. Assuming your revenue stays at that amount, you’d be paid off in a little over five years. If your revenue increases, you’d be paid off sooner. If it decreases, it would take longer.
Revenue-Based Financing VS Merchant Cash Advances
If you think revenue-based financing sounds a little bit like a merchant cash advance, you wouldn’t be too far off the mark. At their core, both are hedging on your future sales. Both are collecting a percentage of those future sales. Both have indeterminant term lengths due to being revenue contingent. And both are relatively costly ways to finance your business.
That said, there are a few differences between them, namely in terms of scale and scope. Merchant cash advances tend to be based solely on your credit and debit card sales, not your revenue. Payments are usually made daily rather than monthly, and the expected time until settlement is usually much shorter. At this time, merchant cash advances are also available to more companies than revenue-based financing, which tends to be aimed specifically at high-growth businesses like tech startups.
Revenue-Based Financing VS Venture Capital
Revenue-based financing sits adjacent to other types of investor-sourced financing like venture capital. Both tend to heavily favor high-growth industries like tech, and both tend to cater to entrepreneurs who normally would have trouble obtaining debt-based financing.
That’s where most of the similarities end. Venture capital is equity-based financing, meaning that you’re selling shares, or at least the option to buy shares. In other words, you’re giving up some of your ownership in your company. This model typically assumes that you intend to sell your company somewhere within a five to seven-year window. Revenue-based financing, on the other hand, does not transfer ownership to the investors. You’re also not expected to sell your company (in fact, doing so would likely complicate your arrangement).
Venture capital financing typically takes place over a series of rounds, with your company being able to access additional rounds of funding after they’ve hit specific milestones. Revenue-based financing generally isn’t as regimented, although there may be conditions upon when you’re able to draw on your funds.
When Revenue-Based Financing Is Right (Or Wrong) For Your Business
Revenue-based financing, like most investor-based financing, is not as widely available as debt-financing. This means most businesses won’t have the luxury of deciding whether or not it’s right for them–it simply won’t be an option.
For businesses that do fall into the revenue-based financing niche, you’ll need to weigh the opportunity cost of not taking the money against the financial cost of taking it. Will the growth financed with these funds, minus the burden it puts on your revenue, outpace the growth you would achieve without it?
Let’s look at some pros and cons:
Advantages Of Revenue-Based Financing
You don’t have to give up equity in your business.
Payments are a proportion of your revenue, so they increase or shrink with your business.
You’ll have a longer repayment term than you’d be able to easily find on the alternative market.
You may be able to access higher borrowing amounts than you would be able to with most loans.
Your credit rating and time in business aren’t as big factors as they would be with many other forms of financing.
Disadvantages Of Revenue-Based Financing
Only certain types of businesses are eligible for this model.
It’s not cheap. You can easily end up paying back twice as much as you borrowed, or more.
You won’t be able to raise as much money as you potentially could with venture capital.
You need to have revenue.
It’s not well-regulated.
What You Need To Qualify
Besides being in an industry supported by this kind of financing (namely tech), you’ll need to meet a few other qualifications.
You don’t need to be profitable, but you do need to be generating revenue with gross margins of 50% or more. Your gross margin is equal to your revenue minus the cost of the goods you sold. Take that number and divide it by your revenue. If it’s 0.5 or higher, you may be a candidate.
But not so fast! You’ll also need to demonstrate that you’ve hit a revenue threshold for three or so consecutive months. That number may differ from investor to investor, but it’s usually somewhere around $15,000. You also don’t want to be servicing any debt, so make sure you’ve settled any loans before seeking revenue-based financing.
And last, but certainly not least, you’ll need to find an investor or investment group that offers revenue-based financing.
Where You Can Find Revenue-Based Financing
Using equity financing as a model, you may expect it to be really difficult to find investors dealing in revenue-based financing. While it’s a relatively new model for financing with a limited number of players, there are a surprisingly large number of revenue-based financing investment groups that prominently advertise their services online. This includes entities like Alternative Capital, Decathlon Capital, and Lighter Capital. The ones with a strong web presence may even allow you to apply online. As a general rule, we recommend dealing with lenders and investors who are transparent and disclose the terms of their services upfront.
Learn About Other Financing For Businesses
With revenue-financing being an option only for a small minority of businesses, most of you will probably want some idea of the alternatives available to you if you don’t qualify. Luckily, you haven’t even come close to exhausting the possibilities.
Check out our other features for entrepreneurs:
How to Get A Small Business Loan: The Step-By-Step Guide
6 Financing Options for Up & Coming Entrepreneurs (Plus 4 Expert Tips To Get You Started)
14 Types of Alternative Financing for Small Businesses
What is a Merchant Cash Advance?
The post Revenue-Based Financing: What It Is & When It’s The Right Choice For Your Business appeared first on Merchant Maverick.
Interest in Cannabidiol, commonly known as CBD, has skyrocketed in recent years as people have turned to this cannabis-derived substance for a variety of medical ailments. While the FDA has approved CBD as a treatment for seizures caused by two forms of epilepsy, many use CBD to treat a variety of different conditions from anxiety to pain disorders, though the FDA has not yet approved it as a treatment for these conditions. Nonetheless, the 2018 federal legalization of hemp and hemp-derived products (with restrictions) has sparked a boom in CBD-related commerce.
Unfortunately, an opaque thicket of legal and regulatory complications still makes it difficult for a CBD business to get approved for a loan. In this article, we’re going to delve into the factors that complicate a CBD business’s quest for funding and help direct you to the types of loans a CBD business can qualify for â and where to look for them.
Why Most Lenders Refuse To Loan To CBD Businesses
If you’re running a CBD business, it can be hard to obtain a business loan. You’ve likely already discovered this if you have a CBD business, and you’ve tried to secure funding for it.
Until the enactment of the 2018 Farm Bill, hemp (which legally must contain 0.3% or less of THC, the psychoactive component of cannabis that produces the “high”) was just as illegal in the US at the federal level as psychoactive cannabis, as the Controlled Substances Act did not differentiate between the two. This means that until just two years ago, it was illegal for federally-insured financial institutions to lend to sellers of CBD, despite the existence of various state laws establishing state-legal markets for both CBD- and THC-containing products.
Even though growing and cultivating hemp has been fully legal for two years, lending institutions haven’t built up much institutional memory when it comes to navigating the complexities that still exist surrounding the sale of products derived from the Cannabis sativa plant. Hence, many banks still shy away from lending to CBD companies, while other lenders might deal with some sectors of the CBD industry but not others.
Regardless of the headaches involved, it is possible for you to get a loan for your CBD business. Let’s discuss the types of loans best suited for companies dealing in CBD products.
Best Types Of Loans For CBD Businesses
The type of loan you’ll want to look for will depend on the kind of expenses you intend to put the money toward. Let’s discuss the different types of loans a CBD business would typically pursue.
Equipment Loans
With an equipment loan, the equipment you use the loan to buy is used as collateral for the loan. If you’re in the business of growing hemp, you may need an equipment loan to purchase machines to harvest and extract the flower. If yours is a smaller boutique operation, and you want to grow indoors, you could use an equipment loan to purchase grow lights, inline fans, and other hydroponic supplies. Once you’ve fully repaid the loan, the equipment will be yours to keep. However, if you default, say goodbye to the supplies.
Merchant Cash Advances
A merchant cash advance can be a good option for a CBD startup without any business history or a CBD business struggling to qualify for a traditional business loan. Merchant cash advances provide you with a short-term cash infusion. In exchange, you repay the advance either by sending the lender a percentage of your sales on a daily basis (though some providers may let you pay on weekly or monthly) or by repaying a fixed amount on a daily (or weekly/monthly) basis.
Merchant cash advances are not typically recommended as an option of first resort due to the pricey fees charged and the fast repayment required. But for the CBD business unable to qualify for a traditional loan, a merchant cash advance can be a workable short-term funding solution.
Lines Of Credit
If you don’t need a large lump sum of cash and instead want a credit line you can draw from similar to a credit card, a business line of credit may work for your CBD business.
With a revolving line of credit, the total amount you can borrow (referred to as a credit facility) gets replenished as you repay the money you’ve actually borrowed. This way, you only borrow the money you need while keeping a financial safety net in place that you can draw from should a pressing need arise. The main caveat here is that a line of credit can be difficult to qualify for â perhaps even harder to qualify for than a traditional business loan. CBD businesses with at least six months of business history are much more likely to qualify.
Term Loans
We’ve discussed alternatives to “regular” business loans here, but depending on where you look (we’ll get to that part in a moment), you may, in fact, be able to qualify for a traditional business term loan.
You might be looking to expand your operations significantly or engage in other money-intensive projects. In that case, a term loan will cover your needs more effectively than some of the “alternative” types of loans, many of which involve smaller amounts of money and shorter repayment terms. Of course, without any business history, traditional business loans are quite difficult to obtain, so CBD startups may need to look for another type of funding.
Where To Find CBD Business Loans
As I’ve mentioned, banks tend to be skittish when it comes to dealing with anything related to the historically-stigmatized (not to mention criminalized) Cannabis sativa plant. If you have a good working relationship with your current bank, you may want to discuss the possibility of getting a loan for your CBD business with them, particularly if they have a track record of being progressive on other issues. Don’t be surprised if they turn you down, however â and if you have reason to believe that even broaching the subject with your bank might jeopardize your existing relationship with them, skip this step altogether and look elsewhere for funding.
As it happens, you’re much more likely to find an online lender willing to work with your CBD business. Try seeking a loan from one of the following online sources:
Cannabis Lenders
A simple online search will turn up a number of companies offering funding for qualifying cannabis-related businesses. While some of these lenders specialize in recreational or medicinal marijuana and not CBD businesses specifically, they may still be willing to work with you. Contact a cannabis lender to see if yours is the sort of business they’d like to work with (and vice versa).
High-Risk Lenders
Other online lenders offer loan products to borrowers considered “high-risk.” These lenders may be more likely to lend to you than your standard online lender. Read our article about high-risk business loans to get a better idea of this part of the lending industry.
Crowdfunded Loans
Some online lenders specialize in crowdfunded loans. Getting a crowdfunded loan â also known as peer-to-peer (P2P) lending or debt crowdfunding â involves having a lending platform offer your proposed loan terms to a crowd of loan investors. You then pay back these investors with interest.
Individual investors may be more inclined to work with a CBD business than larger, more cautious lending institutions. That’s why debt crowdfunding sites are worth checking out for owners of CBD businesses. Check out our explainer piece on debt crowdfunding to learn more.
How To Make Sure Youâre Getting A Good Deal
Unfortunately, there are plenty of shady business loan servicers out there that gravitate toward businesses considered high-risk. To assess whether a given lender is legitimate and whether the loans they offer are reasonable, you’ll need to do your due diligence:
Check The Lender’s Online Presence
Any fly-by-night outfit can create a cheap website touting its lending services. A genuinely convincing online presence is harder to fake, however. Check for any social media accounts associated with the company. Search for news articles and press releases that mention the company. Look at the company’s About page on its website (it should have one!) and see if it seems legit. See if you can find names and/or profiles of the people who run the company. Lastly, look for user reviews and comments about the company. While most every lender has its detractors, you should find at least some evidence of a legitimate company by reading customer feedback.
Examine The Full Cost Of Borrowing
When considering a lender’s loan products, it’s important to look at more than just what your monthly payments will be. Look out for any extra fees you might find yourself on the hook for, including:
Origination fees
Closing fees
Application fees
Packaging fees
Referral fees
Guarantee fees
Assessment fees
Prepayment penalties
Check Reviews Of The Lender
It’s always helpful to read a professional reviewer’s opinion of a lender, as you’ll gain insight from the research done on the company’s history and from comparisons to the leading lenders in the field. To that end, check out our full list of small business loan reviews, You can filter your search and get results fitting your business situation by entering your time in business, your credit score, and other factors. Pretty cool, huh?
We’ve also got a handy guide to the top small business lenders of 2020, along with our small business loan comparison chart.
Other Resources For CBD Businesses
Here are some additional resources for those of you in the CBD industry or the cannabis industry more generally. If you’re just starting out or if you want to build up your current operation, have a look!
Everything You Need To Know About Finding A CBD Merchant Account & The 6 Best CBD Payment Processors
How To Finance A Medical Marijuana Dispensary
Need A Merchant Account For Your Medical Marijuana Dispensary?
Need A High-Risk Merchant Account? Here’s The 6 Best Payment Processors To Work With
What Are High-Risk Business Loans & Where Do I Get One?
The post How To Get A Loan For Your CBD Business (Without Getting Scammed In The Process) appeared first on Merchant Maverick.
Crowdfunding has risen in prominence over the past decade to become a major source of business financing for companies and entrepreneurs around the world. However, while services such as Kickstarter and Patreon garner the lion’s share of attention, there’s another type of crowdfunding available â one that applies crowdfunding principles to traditional forms of lending. This hybrid method of raising capital is becoming known as debt crowdfunding.
Perhaps you’re already considering debt crowdfunding as an option for your business, startup, or creative project, or you’re simply curious about the concept. Either way, it’s important to understand what debt crowdfunding is, how it differs from other forms of crowdfunding, and how you can use it to raise funds for your business.
What Is Debt Crowdfunding?
Debt crowdfunding is sometimes referred to as “peer-to-peer (P2P) lending” and “crowdlending,” as it combines the concepts of crowdfunding and lending. A crowdfunded loan works similarly to a traditional business loan from a bank or other lending institution in that money is sent to the borrower by a lending institution. In exchange, the borrower repays the loan with interest over a specified period.
However, there are some key differences between traditional loans and crowdfunded loans. With the latter, your borrowed funds are disbursed by a debt crowdfunding platform, not a bank or other financial institution. And while the crowdfunding platform sends you the funds, the money comes from individual investors who pledge to provide a portion of your loan funds. When you repay the crowdfunding site with interest, the funds are then distributed back to the individual investors.
Considering how difficult it has become to qualify for a bank loan since the financial collapse of 2008, it’s little wonder that businesses have been turning to debt crowdfunding in greater numbers. Debt crowdfunding allows you to market your funding campaign to individual investors rather than relying on the hope that a large, opaque institution finds your business worthy of support.
How Debt Crowdfunding Works
With debt crowdfunding, potential borrowers submit a loan proposal to a crowdlending website. The platform assesses your proposal to judge its suitability. If your application is approved, the platform then offers you rates and fees that correlate with the degree of risk your loan poses to potential investors. The riskier the investment, the more money the peer lenders will want in return, leading to higher interest rates for your loan.
As we explain in our piece on P2P lenders, the primary advantages of P2P loans over traditional business loans provided by a bank or credit union are thus:
Application Process Is Simpler & More Convenient:Â Unlike a bank loan, which typically involves a lengthy application process and may require such things as business visits, debt crowdfunders let you apply online, usually without requiring even a phone conversation.
Quicker Approval & Funding:Â Ordinary small business term loans take much longer to get funded than the average P2P loan, making debt crowdfunding a good funding option for businesses needing funding relatively quickly.
While operating on the same basic principles, debt crowdfunding sites vary greatly in terms of the types of businesses to which they cater. For instance, Funding Circle lends to small businesses with at least two years of business history, while StreetShares requires less time in business and has a particular focus on veteran-owned business. Meanwhile, Kiva US is devoted to startups with no business history at all and offers loans with no interest whatsoever, but it has a lengthy application process and a long wait to get funded (one to three months). Point being, no two P2P lenders are the same, so do your due diligence before applying for a crowdfunded loan.
Check out our explainer article on debt crowdfunding for an in-depth analysis.
Debt VS Equity Crowdfunding
Equity crowdfunding bears considerable resemblance to debt crowdfunding. Both types of fundraising involve the solicitation of investments in the security of your business. The difference is that a P2P loan is just that â a loan. You pay the lender back on a fixed schedule with interest, and that’s that.
With equity crowdfunding, the investor receives an ownership stake in your business. This sort of fundraising was only recently legalized when the JOBS Act was signed into law in 2012 (the provisions took some time to go into effect). It legalized the advertising and solicitation of securities, thereby allowing businesses to launch equity crowdfunding campaigns.
Investors seeking hot equity investments often look for early-stage ventures with exponential growth potential to get in on the next big thing. Debt investors, on the other hand, simply expect to be paid back plus interest. For this reason, debt crowdfunding is a viable option for a greater proportion of small businesses out there than equity crowdfunding. To plenty of small business owners, this is probably just as well, considering debt crowdfunding doesn’t require you to relinquish any control over your business and forfeit a portion of all your future profits.
Debt VS Rewards Crowdfunding
Rewards crowdfunding à la Kickstarter, Indiegogo, and Patreon is a beast of a different nature. Legally, rewards crowdfunding isn’t investing, so it’s not regulated as such, making it a less complicated and more straightforward prospect overall.
With rewards crowdfunding, you invite backers to contribute financially to your venture, and in exchange, you offer them rewards. A reward could be a prototype of a new consumer product you’re manufacturing, tickets to a viewing of your film, access to exclusive episodes of your podcast, etc. It’s a way to get your potential customer base excited about contributing to your success.
Since it doesn’t entail you taking on debt, rewards crowdfunding looks pretty good as an alternative to a loan. However, keep in mind that with rewards crowdfunding, your ability to raise funds is dependent on your ability to make your funding campaign go viral. It’s a very competitive arena, and in some cases, you’ll be competing for attention with campaigns backed by crowdfunding agencies. What’s more, funding is anything but rapid â your typical rewards crowdfunding campaign is open for 30-60 days. (Patreon-style ongoing campaigns are different, as you’re essentially selling subscriptions.) And with Kickstarter, in particular, if you don’t meet your funding goal within the time frame you initially set, you don’t get any of the funds pledged to you â it’s all or nothing.
For the right kind of business venture, rewards crowdfunding can work swimmingly while keeping you out of debt. Just know that it isn’t well-suited to many types of small businesses, requires thoughtful promotion, and is not quick.
When Debt Crowdfunding Is The Right Choice For Your Business
Making debt crowdfunding work for your small business requires that you have a) a defined need for money, b) a strategy for what to do with it, and c) a plan to pay it back. Compared to other forms of crowdfunding, debt crowdfunding is both likelier to succeed and (generally) a swifter method of funding. Furthermore, you’ll probably get more flexible terms and a lower interest rate on a P2P loan than you would with a bank loan (along with an easier application process and a quicker time to funding).
If you’ve got a great working relationship with your bank, you might consider trying to get a loan from them instead. And if you’re involved in an exciting project or cause with lots of potential for viral success, one of the sexier forms of crowdfunding might ultimately prove more lucrative for your business. However, that still leaves a wide swath of small businesses that stand to benefit from debt crowdfunding.
For more information on debt crowdfunding and how it compares to rewards- and equity-based crowdfunding, check out our article on the different types of business crowdfunding.
Not The Right Fit? Your Best Alternatives
Let’s look at some other funding alternatives and see how they measure up with P2P loans.
Personal Loans
Don’t have enough business history to qualify for a crowdfunded business loan? Consider a personal loan instead.
With good credit, you may be eligible for a lower interest rate with a personal loan than with a business loan. However, borrowing amounts tend to be smaller, too. Still, if you need fast financing for business expenses, personal loans are definitely an option you should consider.
If you like this idea, check out our piece, How To Get A Personal Loan For Your Business.
Business Credit Cards
If you have a good credit score, a business credit card is probably the easiest way to secure business funding. Business credit cards give you access to a revolving line of credit to use on business expenses.
Just as with most P2P lenders, business credit card issuers report your payments to the credit bureaus, thus building your business credit. This may increase the odds that you’ll qualify for business loans in the future.
In terms of convenience, there are few easier funding options than business credit cards. And unlike P2P loans, using a business credit card can earn you rewards or cash back. Just keep in mind that you might pay a higher APR with a business credit card than with a P2P loan.
Interested? Check out The Best Business Credit Cards for the rundown on your best options.
Merchant Cash Advances
Let’s say your poor credit score and/or lack of business history make you unable to qualify for either a loan or a business credit card. You may still be able to get a merchant cash advance, which is a sales agreement that will have you selling your future revenue at a discount to a merchant cash advance company.
A merchant cash advance should not be an option of first resort, as the fees are very high, and the repayment periods are quite short. An MCA can easily send you into a debt spiral if you’re not prepared to handle it. However, if your business is capable of generating the revenue necessary to pay it back, an MCA might be just the thing to keep your business going.
Read our piece on merchant cash advances for more information.
Final Thoughts On Debt Crowdfunding
Debt crowdfunding has become increasingly prevalent in a world where bank loans are harder than ever to come by. If you think a P2P loan makes sense for your business, do your due diligence and compare your available options.
If you’ve ever taken out a crowdfunded loan, drop us a comment and let us know about your experience!
The post What Is Debt Crowdfunding & When Is It The Right Choice For My Small Business? appeared first on Merchant Maverick.
If you’ve been reading this website for a while, then you know that we began as a place focused on demystifying the world of credit card processing for small businesses. You might wonder, then, what we’re doing writing an article about a cash-only business. The fact is, we see both advantages and disadvantages to such a business, and we want to share some of our thoughts with you.
While most businesses do take some cash payments, some businesses are particularly suited to be cash-only. These businesses tend to be small and provide the services or sell their merchandise in person; the items sold also tend to be of smaller value. Below we have compiled a non-exclusive list of such businesses as well as a general overview of advantages and disadvantages for taking only cash payments.
Credit Card Processing Doesn’t Have To Be Expensive
Each of the above companies provides excellent customer service and fair pricing.
Why Would You Want A Cash Business, Anyway?
It is no secret that we are moving towards a cashless society, where customers carry little to no cash and make purchases through credit, debit, or cash cards. However, if you look carefully, you’ll notice that cash-based businesses are still lurking everywhere. Any kid can set up a lemonade stand or mow a neighbor’s lawn. Typically, you would pay them in cash. Same with a street musician or a hotdog stand by the sidewalk. Most likely, you will pay cash to your babysitter and maybe your dog walker too.
Cash-only businesses are typically new or “temporary” or side hustles, and they take only cash because they want to minimize start-up costs, they do not accept returns, and they do not have the time or desire to listen to pushy salespeople to learn the ins and outs of payment processing or buy any related equipment. In other words, they take only cash because cash is easy.
The Best Cash Businesses
Some businesses are especially suited as cash-only business. Below is a non-exclusive list to give some examples of such businesses.
Coffee, food cart, or food truck operator
Bakery, deli, or lunch stand
Small restaurant
Lawn mowing service
Laundromat
Vending machine operator
Errand service
Farm stand/farmer’s market vendor
Arts and crafts show vendor
Street artist (face painter, caricature artist, street musician, or similar)
Babysitting services
Pet services (pet sitting, pet grooming, pet training, dog walking. etc.)
Personal trainer or fitness instructor
Handyman services
Music teacher/tutor
Hair/nail salon or barbershop
Note that these businesses tend to be single-person operations that can be set up easily and quickly. With some notable exceptions like a laundromat, they tend to be mobile, with no physical business address. The goods or services they sell are usually lower priced, and customers do not usually demand refunds after purchase.
Advantages of Going Cash Only for Payments
Most businesses take cash in addition to other forms of payments. For this article, though, we truly mean cash only. This means no credit or debit cards, cash cards, gift cards, cash transfers (Venmo, Zelle), or personal checks. The business takes paper bills or coins, and that’s it.
We start below by discussing some advantages of going cash only.
Lower Costs & Overhead (No Processing Fees)
Compared with taking credit cards, taking cash saves your business money. In order to process credit cards, you would need to buy or lease the equipment to read the cards. After you get the equipment, you would have to spend time (or money to hire someone) to maintain the equipment.
In addition to needing equipment, each swipe/dip/tap of a payment card costs you money to process. The cost is percentage-based, so it’s difficult to know ahead of time how much each use of a payment card would cost you. As well, some processors charge additional monthly or per incidence fees. These charges can add up and affect your profitability, especially if you operate a small business with narrow margins.
When you take only cash, all of the above issues go away. You won’t need any equipment except a cash register or maybe just an old fashioned calculator. You won’t have to deal with recurring monthly charges for services you may or may not need. Best of all, you won’t have to pay a processing fee every time a customer pays you, so your profit margin stays intact.
No Risk Of Funding Holds
When you take cash, you get your money right away. With payment cards, your account won’t be funded until 24 or maybe up to 72 hours later. Even after that, with card payments, you are at risk for chargebacks. A customer could reach back several months after a purchase to demand their money back so that your sales are not always final until many months after the purchase. Your processor could freeze your account if you have too many chargebacks or even terminate your account altogether. With frozen or terminated accounts, you might not get back the charges in those accounts at all.
With cash, you’ll never have to worry about any of these issues. You get your money right away, and, unless a customer complains and you decide to refund their purchase, you’re never obligated to pay back what you have already taken in.
Simplified Accounting
If you take cash, you can simplify your business’s accounting needs.
There are two ways to keep your books: the cash method and the accrual method. The cash method doesn’t have anything to do with taking incoming payments only in cash. It merely means that you book a sale or expense when you actually receive or pay for the goods or services.
For instance, if you receive an order for widgets on August 31, send the order out, and receive your payment on September 15, then you book the sale on September 15. If you purchase office supplies on August 31 and pay the invoice on September 15, you book the expenditure on September 15. The cash method is considered the simpler of the two accounting methods. It gives you a realistic understanding of how much you have in the bank but does not take into account future income or expenditures.
With the accrual method, you book the sale or expense when you make the sale or incur the expenditure, even if you don’t receive the payment or don’t pay out the money until later. For example, if you receive an order of widgets on August 31, you will book this sale for August 31, even though you give your customer 30 days to pay so that they won’t have to pay until September 30. Likewise, for a purchase you make on August 31, you will book the expenditure on August 31 instead of waiting for when you actually pay, possibly 30 days later. With the accrual method, you must track your business’s finances with accounts receivables and payables.
If you take cash payments only, no matter which accounting method you use, you can simplify your accounting. With the accrual method, your accounts receivables are always up to date because you have already received the money and won’t have to keep track of them after that. If you use the cash method, you won’t have to deal with money you expect to receive in the future because, even though the method doesn’t require you to book the sale until you actually receive the money, you do, in fact, receive the money right away because you are paid in cash at time of sale.
Disadvantages Of Going Cash-Only for Payments
Even though becoming a cash-only business can reduce certain overhead and administrative headaches, they create inconveniences as well.
Lost Customers
Most customers today no longer carry a large amount of cash and prefer instead to pay with a credit or debit card. Going cashless means that these customers won’t be able to make purchases at your business unless they either have the cash on them or can access a nearby ATM. Even assuming these customers heed the cash-only sign at the door and manage to get the cash to complete the purchase on their first visit to your store, they might not come back because they might not want to deal with the inconvenience of paying with cash again.
Few Growth Opportunities
Taking only cash can reduce your business’s growth opportunities. Cash might make sense when your customer must physically be present to get that cup of coffee or get their pet groomed, but if you have the type of business where you can sell online or even take phone orders, then taking only cash could limit your business’s growth opportunities. Many customers today prefer the convenience of shopping online. In addition, online sales can reach customers who live far from your store. Going cash-only means you might be missing these customers who can help your business grow.
Need For Stringent Cash Handling Policies
When it comes to money, some people cheat.
Handling cash means you will have to deal with counterfeits. Despite security features such as colored ink, raised printing, watermarks, and similar, counterfeit currency are still in circulation. In fact, the US Department of Treasury estimates that $70-200 million dollars in counterfeits could be in circulation today. If you take cash only, you and your employees who handle cash payments should be trained on how to spot counterfeits.
Like it or not, while we would like to think that our employees are honest and law-abiding, some do steal, and having a drawer full of cash can fatally tempt these unscrupulous employees. So, if you have a cash-only business, you would have to have strict cash handling policies that are enforced regularly and stringently. You might even have to invest in surveillance equipment to catch those employees who steal.
Limited Automation/More Potential For Errors
Sometimes, cash shortages are caused by inaccurate counting instead of theft. With a cash-only business, the person at the cash register must count carefully, both when taking in cash and counting back cash to give change. While this might not be difficult under normal circumstances, if you operate a business with rush times like lunch periods, having to count cash for every customer could make you more error-prone.
In contrast, if you take payment cards, only the exact amount would be processed, and you would eliminate a source of counting error.
Potential For IRS Audits
Like it or not, the IRS knows that it’s easier for cash-only businesses to underreport earnings and avoid paying taxes. Of course, not every cash-only business tries to avoid paying taxes, but enough have done so that the IRS typically audit cash businesses more often. Even if you report all your cash earnings honestly, you must carefully document all your transactions. Otherwise, it could be difficult to establish a pattern of honesty to convince the IRS that you haven’t underreported.
Other Considerations If You Want To Go Cash Only
So far, this article has focused on how going cash-only may affect the way you take in payments, but there are other considerations to take into account before you jump into a cash-only business.
Inventory & Employee Tim-Tracking Software: Even though you might only need an old fashioned cash register for a cash-only business, you might be missing out on the other conveniences of a modern point of sale system. For instance, some modern point of sale systems include inventory management software that automatically deducts items from your inventory as you make a sale. Other systems allow an employee to punch in and out to track their hours for payroll. If you use an old-fashioned cash register, these software systems would not be available to you.
Not Exempt From Paying Taxes: It is, of course, perfectly legal for you to pay your employees in cash. However, you must still deduct your employees’ income, social security, and Medicare taxes. Failure to do so will subject you to fines by the IRS.
Difficulty Obtaining Bank Loans: If you wish to borrow money to expand your cash-only business, you might have trouble borrowing from a bank. Unless you have excellent accounting records, it would be difficult for you to show a bank that you have adequate cash flow to repay the loan. Under those circumstances, they might decline to lend to your business.
Inability To Obtain A Merchant Cash Advance:Â In the same vein as getting a loan, some financial services companies offer something called a merchant cash advance. The advance is paid back by deducting a percentage from future credit card charges. For instance, PayPal has something called PayPal Working Capital and Square has Square Capital. If you do not process credit cards, then you cannot avail yourself of these programs. While getting a merchant cash advance is not the cheapest way to finance a business, it might be crucial to providing cash flow in a pinch.
Newer Tech Allows Coin-Operated Machines To Take Payment Cards: Finally, just because you run a traditionally coin-operated business like a laundromat or vending machines doesn’t mean that you are stuck in a cash-only world. Payment card readers designed for laundromats now exist. The newer vending machines can also take payment cards. In other words, while coin-operated businesses are traditionally cash only, you won’t have to settle for that if you wish to take payment cards as well.
Is A Cash Business Right For You?
Though we are transforming into a cashless society, for certain types of business, going cash-only might still make sense. While there will be inconveniences to you and your customers, an all-cash business is still the fastest and the easiest type of business to set up because it requires zero setup cost. For small businesses that sell items of lower cost to customers who visit in person, accepting only cash might make a lot of sense.
However, even if you prefer to take only cash, you might wish to consider adding payment cards as a convenient option to your customers. You can require that every use of the card be in excess of a certain amount, and, with mobile processors like Square, as long as you have a cell phone, you can quickly set up an account to take credit card sales even if you operate a seasonal, low volume business like a farm stand by the side of the road.
At the end of the day, with the different types of credit card payment processors available today, going cash-only is merely a choice, not a necessity. Is going cash-only a viable option for your business? If you are currently operating a cash-only business, how is your experience so far?
One of the wealthiest states in the nation, Maryland is considered one of the best U.S. states to live and work in. Being one of the 13 original colonies, Maryland is also among the nation’s oldest states; however, that doesn’t mean it rejects the new. Its largest city, Baltimore, was named by Forbes as one of the “Top 10 Rising Cities for Startups” in 2018, and Governor Larry Hogan recently described Maryland as being among “the top states in the country for entrepreneurial business growth,” touting the success of his administration’s “Open For Business” initiative.
Maryland’s proximity to Washington D.C. is an advantage for small businesses that are eligible for federal contracts, and its GDP is well above the national average. Maryland ranks second per capita and fourth overall in Small Business Innovation Research Program (SBIR) awards. Maryland also has a growing and highly educated workforce, meaning there is a great selection of talent available for hire.
While Maryland presents a lot of opportunity for businesses, it is not without its downsides. Maryland can be a costly place to run a business, when you take into account the state’s high rent, high business taxes, and high labor costs. If you’re not one of Maryland’s independently wealthy (though MD does have a disproportionately high number of such residents), it can be a struggle to obtain enough startup capital to open a new business in Maryland, or to keep your existing small business afloat in the face of high operating costs.
For Maryland entrepreneurs who need a business loan, I’ve put together this resource with the best loans for Maryland small business owners. These include the best online loans, bank loans, grants, and other small business resources. I highly encourage you to read on if you are a Maryland entrepreneur in need of business financing.
Online Business Lenders For Maryland Businesses
Online business loans are the quickest and easiest way Maryland business owners can obtain business financing. Though these loans typically have higher borrowing fees and shorter repayment terms compared to a traditional bank loan, their convenience makes them worth it for some business owners—particularly for business owners who need capital ASAP or who can’t qualify for a loan from a bank or credit union. If you have a newer business or less-than-excellent credit, an online loan is likely your best financing option.
Read this section to learn about some of our favorite online lenders that extend loans to businesses in Maryland.
Lendio is an online loan aggregator, aka a loan marketplace, where businesses in all 50 states can search for and apply to multiple online loans with a single application. Lendio does not originate loans, but rather, they will connect you to their lending partners that meet your needs. It’s a good place to start if you’re not sure how much financing you might qualify for or which type of financing (bank term loan, short-term loan, line of credit, merchant cash advance, etc.) would best suit your business needs.
Lendio’s borrower qualifications vary since they work with a wide range of lenders, but Lendio recommends applicants meet the following minimum borrower requirements:
Time in business: 6 months
Credit score: 550
Business revenue: $10K/month
We like Lendio for the excellent lenders they work with and the broad range of business financing products they provide access to, from short-term loans to long-term SBA loans, and many others in between. Lendio can connect qualified borrowers with loans as large as $5 million and, the average time to funding is 2â7 days.
Breakout Capital
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Must be in business at least 12 months with a revenue of $10,000 per month.
Must have a personal credit score of 600 or above.
Businesses with fair credit and/or unpaid invoices
Breakout Capital, also available to businesses in all 50 states (and D.C.), is a short-term lender that distinguishes itself by being transparent and reputable in a sea largely made up of unscrupulous, predatory lenders. Their terms and rates are clearly disclosed and they have excellent customer service in case you have any questions.
Breakout’s financing products include short-term business loansup to $250,000, and FactorAdvantage invoice factoring loans up to $500,000. FactorAdvantage loans are a combination of invoice factoring and Breakout Capitalâs business loans. Breakout loans are flexible in that they act similar to a line of credit, making it easy to borrow more capital after you repay your first loan.
To qualify for a short-term business loan with Breakout Capital, you need:
Time in business: 1 year
Credit score: 600
Business revenue: $10,000/month
Regarding FactorAdvantage, because this loan is designed to be used in conjunction with invoice factoring services, Breakout Capital does not require any specific time in business, revenue, or credit score. Funds are typically received within one business day after the final closing contracts for the loan are signed.
AMEX Business Loans
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Time in business: 24 months
Business revenue: $50,000 per year
Personal credit score: Good to excellent
Other: Must accept Amex cards or have an Amex business credit card (depends on the type of financing you are applying for)
Established businesses that use or accept American Express
American Express Business Loans are available to businesses in all 50 states. They are not pricey credit card advance loans, but rather, they are actual term loans, including both short-term and medium-term loans. You do, however, need to either have a business AMEX card or accept AMEX cards at your business in order to qualify.
AMEX loans are convenient, fast, and reasonable in terms of their terms and fees. Depending on which loan you apply for, you can qualify for financing up to $50K (medium-term “Business Loans” product), $750K (short-term “Working Capital” loan), or $2 million (short-term “Merchant Financing” loan, similar to cash advance). The time to funding is typically about 2 days.
To qualify for AMEX business financing, you’ll need the following requirements:
Time in business: 2 years
Credit score: N/A
Business revenue: $50K/year
Youâll also need to be an American Express business credit card holder for Working Capital and Business Loans. For Merchant Financing, youâll need to accept American Express cards. Depending on the product, you may also need to do at least $12,000 in card-based sales annually.
OnDeck
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Time in business: 12 months
Business revenue: $100,000 per year
Business industry: Must not be in a restricted industry
OnDeck is the largest and probably the most well-known online small business lender, offering short-term loans and revolving lines of credit to eligible businesses in all 50 states. OnDeck is a hugely prolific, publicly traded company that has relatively few negative complaints considering their enormous footprint. Like the other online lenders on this list, OnDeck has the advantages of being fast, convenient, and willing to lend to businesses that cannot qualify for a bank loan. OnDeck offers short-term loans up to $500K and lines of credit up to $100K.
Here’s what you need to qualify for an STL or LOC from OnDeck:
LoanBuilder is actually part of PayPal’s business loan arm, but unlike PayPal Working Capital loans, you do not need to be a PayPal business in order to qualify for a LoanBuilder loan. In fact, you need very little in terms of qualifications to qualify for a LoanBuilder loan—businesses with less than a year in business and sub-600 credit scores can qualify.
LoanBuilder offers short-term loans up to $500K, with no origination fee.
An interesting benefit of LoanBuilder is that you can tinker with your loan amount and repayment term to “build” your own perfect loan before accepting the loan offer.
Here’s what you need to qualify for a LoanBuilder loan:
Time in business: 9 months
Credit score: 550
Business revenue: $42K/year
Funding can be as fast as the next business day after you turn in all your documents and sign the contract. As with the other lenders on our list, LoanBuilder serves all 50 states.
Prosper
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Time in business: N/A
Business revenue: N/A
Personal credit score: 600 – 680
Personal income: $20,000
LendingPoint does not operate in Colorado, Connecticut, Iowa, Louisiana, Maine, Maryland, Massachusetts, Nevada, New York, North Dakota, Rhode Island, South Carolina, Vermont, West Virginia, Wisconsin, and Wyoming
Prosper is a personal loan option available to borrowers in Maryland (and all other US states, except Iowa and West Virginia). Because these are personal loans, you can use them for almost any purpose you like, including to fund a business. You also don’t need any business qualifications in order to qualify for a Prosper loan, making this option suitable for startups, even if your business is only in the idea stage. You will, however, need to have at least fair personal credit.
Prosper sells term loans from $2Kâ$40K with monthly repayments. Though you can’t get a large loan through Prosper, the monthly repayments are a refreshing attribute, as most other online loans require daily or weekly repayments.
To qualify for a Prosper loan you’ll need:
Time in business: N/A
Credit score: 640
Business revenue: N/A
Usually, the time it takes from application to funding is a week or less. However, because Prosper has a peer-to-peer model wherein investors choose which loans they want to fund, it can take up to 14 days for investors to decide if they will fund your loan.
SmartBiz
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Must be in business at least 2 years.
Must have a personal credit score of 650 or above.
Must have a business credit score of 150 or above.
SmartBiz, available in all 50 states, combines the best of both worlds when it comes to business loans: the convenience of an online application, and the low-cost and comfortable repayment schedule of a long-term loan. Specifically, SmartBiz offers SBA loans up to $5 million, including general business loans and commercial real estate loans. SmartBiz also partners with banks to sell non-SBA bank term loans up to$200K.
SmartBiz’s main benefit is its efficient, simplified SBA (Small Business Administration) loan application process. If you can qualify for a bank or SBA loan, SmartBiz offers a quicker application as well as a speedier time-to-funding. Also, while SmartBiz isn’t as easy to qualify for as some online loans, you may still qualify even if you have fair personal credit, and there is no specific revenue requirement.
Borrower qualifications vary somewhat depending on which type of loan you apply for:
Time in business: 2â3 years
Personal credit score: 650â675
Business credit score (on certain loans): 150
Business revenue: N/A (but sufficient to support repayments)
Time-to-funding can take from one to several weeks, depending on how fast you submit all the necessary documents. Still, this is faster than applying for a bank/SBA loan through traditional channels.
Banks & Credit Unions In Maryland
Whereas online loans are ideal for Maryland businesses that have subprime credit or not much time in business, bank loans are more appropriate for established businesses with excellent credentials. If you apply for financing through a bank or credit union, you might qualify for a longer-term loan with low interest, especially if your bank is an SBA (Small Business Administration) loan partner. As mentioned, some reputable online lending companies such as Lendio and SmartBiz have the option of connecting you with bank loans, including SBA loans—a type of government-backed business loan offered by certain banks.
The following are some popular Maryland business bank loan options. We don’t have too much information about local Maryland banks, as we don’t typically review local banks in depth. Nevertheless, choosing a local bank versus a large national bank can have its advantages in terms of more responsive and personalized customer service, so it’s definitely worth checking out these options on your own.
Howard Bank
Howard Bank, Baltimore’s largest independent bank, is an SBA-preferred lender and also offers non-SBA business loans. Howard Bank offers business loans for a variety of business purposes, such as working capital and equipment financing, as well as commercial real estate loans.
Howard is a strong option to consider if you want to choose a local Maryland bank for your business financing needs. Howard Bank also participates in Baltimore County’s Small Business Loan Fund, discussed in more detail below.
In addition to Baltimore County, Howard Bank also has numerous other branch locations throughout central Maryland.
T.D. Bank
T.D. Bank, N.A. is the American branch of Canadian bank Toronto-Dominion Bank. This New Jersey-based bank division operates in 15 states, including Maryland, as well as Washington D.C.
Maryland small businesses with good credit may find T.D. Bank to be an excellent smaller alternative to the “Big 4” banks, as they offer low interest rates to qualified borrowers. T.D. bank also participates in Baltimore County’s Business Small Loan Fund, discussed in more detail below.
Chase Bank
In 2018, J.P Morgan & Chase unveiled plans to open more than 70 locations in Maryland, D.C., and Virginia. Chase already has locations in the Capitol but will open its first Baltimore-area branch in 2019 (in Hunt Valley).
For businesses looking for the convenience of a large, national bank, Chase offers excellent business financing solutions to small and large businesses (including startups), with low interest rates. However, you will need good credit to qualify for Chase’s financing products, which include business term loans, SBA loans, and lines of credit. Chase also offers its customers some excellent business credit cards.
See our Chase Business Loans review for more information on Chase’s business loan requirements.
Baltimore County Small Business Loan Fund
Baltimore’s Small Business Loan Fund is a partnership between the County of Baltimore and some of the area’s leading banks, including T.D. Bank, Howard Bank, Wells Fargo, Bank of America, PNC Bank, and others. These are real estate and fixed-asset loans with a maximum amount of $1 million, or 40 percent of the project cost, whichever is lower. To qualify, applicants must obtain a loan commitment for at least half of the project cost from a participating Baltimore bank. You can find a full list of participating banks on Baltimore County’s website.
Nonprofit Lenders In Maryland
Nonprofit lenders may be able to offer low-interest loans to qualified small businesses. While not all Maryland businesses will be eligible, the good news is that Maryland has at least several nonprofit organizations that offer low-interest small business loans to businesses that don’t qualify for bank financing. There are also government-funded loans specifically for nonprofit organizations in the state of Maryland.
Baltimore Community Lending, Inc.
Baltimore Community Lending, Inc. is a certified nonprofit Community Development Financial Institution. This enterprise’s wholly owned subsidiary Baltimore Business Lending, LLC provides capital to startup and emerging small businesses in the city of Baltimore that have good credit but lack the equity or collateral to obtain traditional financing. Loans are made via partnerships with approved microlenders and technical assistance providers.
NIMBL is a loan from the state of Maryland available to nonprofit organizations only. Specifically, this program is for nonprofits that have been approved for other government grants or contracts but have not received the funds yet (hence the “bridge” loan designation). This program provides interest-free loan up to $25K to qualified nonprofits in the state of Maryland. You can find more information about this program on the Maryland Department of Commerce website.
Rockville Economic Development, Inc.
Rockville Economic Development, Inc. (REDI) was founded in 1997 as a nonprofit entity to support existing small businesses as well as to attract new businesses to the city of Rockville, MD. REDI offers several different loans and grants to Rockville businesses; Rockville businesses should check REDI’s website to see which financing programs they might be eligible for.
In addition to these nonprofit loans for businesses in the city of Rockville, other cities and counties in Maryland, including Frederick, Montgomery, and Baltimore, have similar low-interest or interest-free loan programs for businesses in those areas.
Small Business Grants In Maryland
Generally, grants for for-profit businesses are hard to come by and even harder to get approved for. However, Maryland seems to have an exceptional number of government-funded grant programs designed to promote economic development in the state. I’ve highlighted some of the most relevant programs below, and you can find a full list of all state business grant programs on Maryland’s Department of Commerce website.
Video Lottery Terminal Fund
Maryland’s Video Lottery Terminal Fund (VLT) uses proceeds from the state’s video slot machines to assist small, minority, and women-owned businesses located throughout the state of Maryland (and especially in the areas surrounding Maryland casinos). You can find more information on this grant on Maryland’s Department of Commerce website.
Rockville Small Business Impact Fund
The Rockville Small Business Impact Fund is a new program that will offer financial assistance to qualified, small- and medium-sized businesses in Rockvilleâs performance districts, particularly start-ups and businesses lacking access to the capital they need to sustain growth.
Per the program’s website:
During the Impact Fundâs pilot year, it will support private-sector solutions to community challenges through a grant focused on fostering economic vitality and community engagement in Rockville Town Center.
Montgomery County MOVE Program
MOVE is a one-time grant for businesses that are new to Montgomery County and lease up to 10,000 square feet of office space for a minimum of three years, excluding retail and restaurant industries. (Rockville, MD has a comparable program.) Eligible businesses may receive a grant of $8.00 per square foot for Class A or B space, and up to $4.00 per square foot for Class C space. You can contact the Montgomery County Economic Development Corporation for more information on this grant.
Advantage Maryland
Advantage Maryland (also known as MEDAAF) is a broad, state-funded program that funds grants, loans, and investments to support economic development initiatives in the state of Maryland. Only businesses in eligible industries and priority funding areas will qualify. Contact the Maryland Department of Commerce for more information.
Export MD Program
The Export MD grant is designed to reimburse Maryland businesses for international marketing expenses. Funded in part through a cooperative agreement with the SBA, Export MD awards eligible Maryland businesses with up to $5,000 in reimbursement for expenses associated with an international marketing project—for example, trade show fees, airfare, translation of brochures, and website development. Maryland DOC accepts applications for this grant on a monthly basis.
Loans & Resources For Startups In Maryland
Brand-new companies have special hurdles when it comes to obtaining startup capital and other startup necessities. Fortunately, there are both state-funded and private nonprofit organizations in Maryland to help you find startup capital, register your business, and get your business off the ground!
Maryland Business Express
Hosted on the Maryland Department of Commerce website, Maryland Business Express is an online resource that provides a comprehensive set of resources for individuals who want to start a business in Maryland. You can do everything from register your business, to establish tax accounts for your business, to obtain Maryland business licenses online.
In other areas of the same website (Maryland DOC), you can also find loan and financing resources for Maryland business startups.
Maryland Capital Enterprises, Inc.
Maryland Capital Enterprises, Inc. (MCE) is a nonprofit lender providing small business loans to startups in Maryland. These loans of up to $50K are for for-profit startup businesses that have tried to obtain capital from a bank but were unable to. Visit the program’s website for more info.
Frederick County Small Business Loan Guarantee
The Frederick County Small Business Loan Guarantee program provides funds for the purchase of real estate, machinery, equipment, inventory, working capital, and renovation of real estate to startup businesses located in a Frederick County priority funding area (priority funding areas cover most municipalities and major transportation corridors in the county). The loan guarantee is for up to 80% of the loan with a maximum of $50,000.
Baltimore County Boost Fund
The Baltimore County Boost Fund provides loans of up to $250K to small businesses (classified by SBA standards) in Baltimore County and can be used for startup funds, as well as other business expenses. Baltimore-area small businesses are eligible, as are minority-owned businesses, woman-owned businesses, and veteran-owned businesses in Baltimore. Baltimore County also has a few other loan programs startups in the area may qualify for.
What To Consider When Choosing A Lender
There’s a lot to consider when choosing a small business lender. Among the most important factors are :
How much you’ll pay for the loan (in interest and other fees)
Time-to-funding
Repayment schedule
Lender reputation
Ease of application
Do you qualify?
Generally, you want to choose the lowest-interest loan you qualify for, but you’ll also want to consider the lender’s overall reputation and whether you can comfortably afford the loan repayments. If you are time-pressed (and who isn’t?) you should also take into account how fast the loan will come through, and how convenient the application process is.
Different types of loans have different pros and cons you’ll need to weigh—for instance, an online loan you qualify for today might be easy to apply for and will hit your account within a couple of days, but carry a high interest rate or factor rate, with a short repayment term. You may have to wait a couple of years before you can qualify for a bank or SBA loan, but it will have a lower interest rate and more comfortable repayment schedule.
In order to choose the best loan you qualify for, you’ll need to consider multiple offers from different lenders. As mentioned, using a loan aggregator service like Lendio one good way to compare different business loans at the same time.
Of course, you’ll also want to make sure you even qualify for a loan before you start seriously considering them, or you’ll just be wasting your time. Be sure to check your credit score and also check that you meet a lender’s borrower requirements—which are almost always clearly stated on their website—before applying.
Final Thoughts
It’s safe to say that Maryland is indeed “open for business,” as its business-forward mayor states. While Maryland does have a relatively high cost of doing business compared to many other states, there are numerous loans and even grants available to Maryland businesses.
The D.C.-adjacent state has a lot going for it when it comes to attracting small businesses, including a wealthy populace, potential for government contracts, access to a major seaport, and many government programs to promote economic development, particularly for businesses owners who struggle to qualify for traditional means of capital. Whether you choose to go the bank loan route, apply with an online lender, or try to qualify for government-backed financing, you have many financing options at your disposal as a business owner (or aspiring business owner) in the Old Line State.
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Coffee shops are vital places. Not only do they sell brewed happiness, without which I could not function, but they are important for communities as well. A coffee shop is where people meet up, whether to catch up with friends, go on a first date, or conduct a casual business interview. Thanks to the WiFi revolution, coffee houses have also become destinations where remote workers and freelancers can connect from their laptops and students can study for exams.
Coffee shops these days even have significance in the culinary world. Ten or fifteen years ago, you could go to a coffee shop to get a coffee and a muffin. No one had heard of third-wave coffee, latte art, single-origin pour-overs, acai bowls, or even avocado toast, but today, these are probably standard fare at the most happening coffee shop near you.
The high customer demand for an enhanced coffee house experience means lucrative opportunities for local business owners who want to enter the coffee shop business. By opening a coffee shop, you have the potential to create a unique business that could become one of the hottest destinations in your city. But first, you’ll need to do your research on how to establish a successful coffee shop, and perhaps most importantly, figure out how you’ll fund your business venture.
In this post, I describe the main steps for opening a coffee shop. I also outline the best ways to finance a new coffee shop business, with suggestions for recommended lenders in each category.
Preparing To Start A New Coffee Shop Business
If you’ve decided you want to open your own coffee shop (or are at least pretty sure), here’s what you need to do to get started.
1. Decide Whether To Buy A Franchise
Becoming a franchisee isn’t for everyone, but it might be right for you. There are a lot of benefits to purchasing a turnkey business where most of the elements you need to run the business are already in place. You might want to at least consider which coffee shop franchises you could potentially open in your area, and the costs associated with franchise ownership vs. the costs of opening and operating an independent coffee shop.
2. Determine What You’ll Sell
What do you envision your coffee shop’s menu looking like? Do you want to sell only coffee/espresso drinks and pre-made pastries, or have a larger offering that would require a kitchen where food is prepared onsite? Will you serve lunch or just snacks? What about mugs, t-shirts, or other non-food merch? It’s important to have at least a general idea of what you’ll sell early on in the process because this will determine what type of business space you’ll need, as well as your overall vision for your business.
3. Choose A Name & Theme
Next to your menu, the overall vibe and branding of your coffee shop will play a huge part in determining your success. A lot of thought must go into your business’s name and logo, both of which should reflect your theme. If you want to set your business apart from other offerings in your area, it will need to have a unique appeal. In marketing, this is called your business’s “unique value proposition” or “unique selling proposition.” Determining your UVP now will also help you down the road when you’re applying for financing — and also when marketing your business with signage, on social media, etc.
4. Create A Business Plan
Your business plan is essential in guiding the development of your business. In fact, it’s a document that most lenders will require when you apply for financing. Your plan will describe your UVP, and will also have information about how you intend to run your coffee shop. The plan might include specific information about how much financing you need, projected profits, information about ownership and management, relevant market research, competitors in your area, and other details. You should be able to find some sample business plans for coffee shops online to help you get started.
Some more things to consider when creating your coffee shop business plan include:
Business hours
Floor plan, including the layout of outlets for laptops, whether you’ll have community tables, etc.
Decor—Will you go eclectic hodgepodge or streamlined/modern? Keep your theme in mind.
What type of music you’ll play
Whether you’ll appeal to kids with offerings such as board games and kids’ drinks
Community events you might host—For example, open mic night, family board game night, jazz night, etc.
5. Find A Location
An essential component of starting any business is finding a place to set up shop. Maybe there is a vacant business space in town that you’ve already been eyeing, or perhaps you aren’t sure where to look yet. The design of the space itself needs to meet your needs, while the location in relation to other places of interest is just as important. Foot traffic, proximity to competitors, and convenience for university students are all aspects to consider. You should also consider whether you want to have the sort of space where people can feel comfortable working all day, or if you’d rather have minimal seating so people will be on their way shortly after making their purchase. Depending on your budget and theme, you might consider choosing a former coffee shop or restaurant space so that you won’t have to do extensive remodeling.
Funding Your Coffee Shop
Assuming you don’t have personal savings to open your business, you’ll need to get creative in order to secure financing for your brand-new business—traditional lending institutions such as banks and credit unions will usually want to see that you have at least two years in business. However, once you have a solid business plan and prospective location for your coffee shop, it will be easier to find parties who are willing to lend to you. Prospective business owners with good credit and business experience will have the most options, but there are even options for startups with bad credit.
1. Family & Friends
While most of us aren’t blessed enough to have a wealthy aunt willing to fund our wildest dreams, if you do have such an aunt, now is the time to hit her up. You can even hire a lawyer to draw up a contract for a loan between you and your aunt (I’m starting to feel like I know her now—let’s call her Aunt Judy), or use a service like LoanBack that formalizes loan contracts between friends and family.
If you don’t have an Aunt Judy but have personal and/or business contacts that might be willing to invest smaller amounts in your business, you might consider using a platform like Kiva. Kiva lets you crowdfund a small business loan up to $10K, provided you meet their terms and have a certain number of friends/family members from your personal network willing to back your loan.
2. Short-Term Business Loan
Most traditional business loans, which are repaid in installments over a number of years, require you to have at least a couple of years in business. An alternative business lending option available to newer businesses (and sometimes even startups) is a short-term loan. These loans can potentially carry high interest rates and you could be required to repay your loan in a matter of months, or sometimes even weeks. However, STLs can be a viable lending option for businesses that don’t have much time in business or business revenue, and many such lenders don’t even require you to have good credit.
Recommended Option: Lendio
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Time in business: 6 months
Business revenue: $10,000 per month
Personal credit score: 550
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Lendio is an online loan marketplace where you can apply for and compare multiple business loans at once — including short-term loans — potentially up to $500,000. Lendio offers terms as long as 1â3 years, which is a more comfortable repayment frequency compared to many of the predatory short-term lenders you’ll find online. If you don’t have much business experience and aren’t sure what business loans you might qualify for, Lendio is a good place to start. When you can compare multiple loan offers as you can with Lendio, it is much easier to choose the best loan you qualify for.
Lendio Borrower Requirements:
Lendio’s borrower requirements vary depending on which of their lender partners you’re applying with, but the majority of loans in Lendio’s marketplace have these minimum requirements:
Time In Business: 6 months
Credit Score: 550
Business Revenue: $10K/month
3. Personal Loan
A personal loan can be used to fund a business startup such as a coffee shop, as long as the terms of the lender allow you to do so. Personal loans typically have an upper borrowing limit of $30Kâ$50K and carry higher interest rates than a business loan. You also usually need to have good personal credit. You do not need to have good business credit or any particular business credentials.
Recommended Option: LendingPoint
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Time in business: N/A
Business revenue: N/A
Personal credit score: 600 – 680
Personal income: $20,000
LendingPoint does not operate in Colorado, Connecticut, Iowa, Louisiana, Maine, Maryland, Massachusetts, Nevada, New York, North Dakota, Rhode Island, South Carolina, Vermont, West Virginia, Wisconsin, and Wyoming
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LendingPoint is a reputable online lender offering personal loans that can be used for business. These loans are quick and easy to apply for, and you can qualify even if you have a fair personal credit score in the 600s. These are smaller loans—the upper borrowing limit is $25K—but they are accessible to almost anyone with decent credit. You will have between 2â4 years to repay, which is pretty good for an online loan.
LendingPoint Borrower Qualifications:
Time In Business: N/A
Credit Score: 600
Business Revenue: N/A
Personal Income: At least $20K/year
4. Short-Term Line Of Credit
Like short-term loans, short-term lines of credit are also open to young businesses that are just getting started. With this type of business financing, you only have to repay what you borrow, similar to a credit card. The downsides are that you’ll have to pay back the principal pretty expediently, with potentially high interest rates and other fees. Nevertheless, a line of credit can be an important source of working capital or expansion funds for a new business. It’s also a smart choice if you don’t know exactly how much money you’ll need.
Recommended Option: Fundbox
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No time in business requirements, but must have used a compatible accounting or invoicing software for at least 2 months, or a compatible business bank account for at least 3 months.
Business revenue: $50,000 per year
No specific personal credit score requirement
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Fundbox is a short-term LOC you might want to consider once you’ve opened up shop and have at least a couple months of coffee-brewing under your belt.
Fundbox offers one of the quickest and easiest business lines of credit with Fundbox Direct Draw. The main requirement for this revolving line of credit is to have been using Fundbox-compatible accounting software for at least two months. Fundbox will use your software account information to evaluate the health of your business, but there are no time-in-business requirements or specific credit score requirements. They will want to see that you’re on course to make at least $50K/year, however. You can borrow up to $100K (depending on how much they approve you for) and will have 12â24 weeks to repay the principal.
Fundbox Direct Draw Borrower Qualifications:Â
Time In Business: N/A
Credit Score: N/A
Business Revenue: $50K/year
Other: Use of compatible accounting software for 2+ months
5. Startup Loan
A startup loan is a loan specifically for startup businesses with 6 or fewer months in operation. Often, these loans do not have any time-in-business requirements. Similar to a personal loan, a startup lender will want to look at your personal track record as far as credit history, and may possibly even delve into your job history and education level. It is pretty difficult to get this type of loan from a bank, but there are several online lenders that cater to startups.
Recommended Option: Upstart
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Time in business: N/A
Personal credit score: Minimum 620
Business revenue: N/A
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Upstart is an online lender aimed at younger borrowers, though applicants of any age can apply. Upstart helps fund startup businesses, as well as personal expenses and debt refinancing. Through Upstart, you can borrow up to $50K to finance your coffee business, with up to 5 years to pay back the loan. The main criterion Upstart cares about is your personal credit score, but having a strong job history and/or a college degree will also help you secure a loan with a good interest rate.
Upstart Borrower Qualifications:
Time In Business: N/A
Credit Score: 620
Business Revenue: N/A
6. Vendor Financing
Some popular coffee shop POS systems offer vendor financing. That is, a POS vendor may offer users of their point of sale system or payment processing service a business loan. These financing products usually have a low barrier to entry and are suitable for coffee shops that have recently opened. Typically, the main requirement is that you are an active user of the vendor’s product.
Recommended Option: Shopify Capital
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Shopify monitors your account and extends a financing offer if your business is eligible. To qualify, you must:
Be located in the United States
Have Shopify Payments enabled
Have a profile that is considered low-risk
Process a certain amount of gross merchandise volume (GMV)
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If you use Shopify Payments at your coffee shop, you may be eligible to get a short-term loan or merchant cash advance through Shopify Capital. You cannot apply for this loan; rather, Shopify will let you know if you are eligible. You can borrow a maximum of $500K, and Shopify will deduct a portion of your sales each day until the cash advance is fully remitted (paid off). With a STL from Shopify Capital, you have up to a year to pay it off. We like Shopify POS system a lot, but if you use another POS system, you will not be eligible for Shopify financing.
If you use Square as your coffee shop POS, Square Capital is a similar financing product you may be eligible for. Or, if you let customers pay with PayPal, PayPal Working Capital is an option.
Shopify Capital Borrower Requirements:
Time In Business: N/A
Credit Score: N/A
Business Revenue: N/A
Other: Have a US-based Shopify Payments account, with a low-risk profile, and process a certain amount per month
7. ROBS
Rollovers As Business Startups (ROBS) is a strategy to leverage your retirement account to start a new business. Because this method is technically a rollover, you won’t be penalized for removing funds from your 401(k), IRA, or another retirement account prematurely. Also, since you’re not borrowing money, there is nothing to pay back and no borrowing fees. The downside is that if your business fails, you could lose your investment, and potentially your chance to retire comfortably if you don’t have any other savings. A ROBS is a somewhat complicated transaction, but a ROBS provider will help you set up the new account to fund your business in exchange for a setup fee and a monthly service fee.
Recommended Option: Benetrends
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Varies based on the type of financing you seek.
Must have a personal credit score of 660 or above.
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Benetrends’ financing options include ROBS as well as loans. Benetrends’ popular ROBS “Rainmaker” plan has financed more than 15,000 small business owners to date and is one of the top ROBS plans out there. Benetrends has clear, fair terms and excellent customer service. This ROBS provider charges a one-time $4,995 setup fee, and an ongoing monthly service fee of $130/month.
Benetrends Rainmaker Borrower Qualifications:
The only borrower requirement is that you have an eligible retirement account with at least $50,000. Eligible accounts include:
401(k)
403(b)
Traditional IRA
Thrift Savings Plan (TSP)
Simplified Employee Pension (SEP)
Keogh
Ineligible plans include Roth IRAs, 457 Plans for non-governmental agencies, and distribution of death benefits from an IRA other than to the spouse.
8. Purchase Financing
Similar to purchase order financing, purchase financing is an alternative lending product that allows you to repay your vendors for business purchases in installments. The purchase financing company pays your invoices upfront, and then you repay the financing company in installments. Purchase financing lets newer businesses, such as a coffee shop startup, acquire the materials and equipment needed to open up shop, without having to pay for their supplies all at once. You can think of purchase financing as somewhere between a line of credit and a credit card.
Recommended Option: Behalf
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No specific time in business, revenue, or credit score requirements.
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Behalf is a purchase financing company that offers financing for business purchases, at interest rates of 1%â3% per month. Behalf pays your merchants, and then you repay Behalf in weekly or monthly installments over a period as long as 6 months. This service has a very simple application, with transparent terms and no hidden fees. You can borrow up to $50K, depending on how much you are approved for.
You can use Behalf to fund purchases for most inventory or services, such as coffee beans or business consultant fees, but you cannot use the service for things like paying off existing debt or covering payroll.
Behalf Borrower Requirements
Time In Business: N/A
Credit Score: N/A
Business Revenue: N/A
Note that even though there is no stated credit score minimum, Behalf does do a hard pull on your credit during the application score, and will evaluate your business finances as well.
9. Credit Card
A business or personal credit card has its limitations, as your credit limit probably won’t be high enough to pay for all your startup costs. However, a credit card is a lot easier to get than a business loan, and if you play your cards right (ha ha) you might not have to pay any financing fees at all. Credit cards offer more cash-back and other rewards than ever before, particularly for business cards, and many cards also offer a 0% introductory APR for the first year. Moreover, opening a business credit card will help your new businesses establish and build your business credit profile.
Recommended Option: Chase Ink Unlimited
Chase Ink Business Unlimited
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Annual Fee:
$0
Purchase APR:
15.49% – 21.49%, Variable
Required credit: Good, excellent
Bonus offer: $500 cash back if you spend at least $3,000 on purchases in the first 3 months
Purchase intro APR: 0% for the first 12 months
Balance transfer intro APR: 0% for the first 12 months
Foreign transaction fee: 3%
Rewards:Â
Unlimited 1.5% cash back rewards on all purchases
Notable perks & benefits:
Employee cards at no additional cost
Travel and purchase coverage
More card details (click to expand)
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There’s a lot to like about Chase’s newest business card, Ink Business Unlimitedâ . This card offers unlimited 1.5% cash-back on all purchases, combined with no annual fee, a $500 credit if you spend $3K in the first 3 months, and a 12-month 0% introductory APR. This card also carries other useful benefits such as purchase protection against damage and theft, and additional employee cards at no extra cost.
Ink Business Unlimitedâ Eligibility
To be eligible for this card, you need to have good to excellent credit.
If your credit score isn’t your strong suit, no worries. Check out this list of Business Credit Cards For People With Bad Credit.
Opening Your Cafe
Now that you have your business vision, location, and funding in place, it’s time to get ready to open to the public. If you take all of these steps, you should have everything you need to run a successful business, including a demand for your product.
1. Assemble Your Professional Team
Starting a business usually requires you to hire professionals such as accountants, attorneys, architects, and business consultants. At the very least, you will want to have an accountant you trust, as this person can also act as your business consultant in many ways. Professional fees can be high, but can save you a lot of money and headaches down the road.
2. Begin Remodeling
Unless you are building from scratch, you will most likely need to do at least some remodeling to your coffee shop business space to make it fit your needs and vision. At the very least, you’ll need to add signage and repaint. Be thoughtful when choosing the decor, from floor to ceiling. If you need to do extensive remodeling, an SBA 504 Commercial Construction loan might help you finance the renovations. Of course, if you are renting, there will likely be limitations on what changes you can make to your business space.
3. Acquire Equipment & Materials
Before you can start brewing, baking, and all that, you’ll need the proper equipment and raw ingredients. This will require careful consideration, particularly when choosing vendors for coffee beans and other food and drink materials. Make sure you do your research and do plenty of taste tests, because the worst thing a coffee shop can have is yucky-tasting coffee. When selecting vendors for your coffee beans and other raw ingredients, be sure to consider things that your customers might care about, such as whether the coffee comes from sustainable farms or is organic.
In terms of coffee shop equipment, you may have the option to lease or buy. Equipment financing is one way a lot of restauranteurs acquire kitchen equipment, and one you might consider also. Proceeds from SBA 504 loans can also be used to purchase kitchen equipment.
4. Create A Buzz With Marketing
There are so many innovative ways to start creating a buzz around town before your coffee shop even opens. Some of these include:
Giving out samples of your coffee at local events
Updating your building’s exterior with signage and other eye-catching improvements
Setting up a direct mail campaign in targeted regions
Alerting the media to your grand opening
Social media marketing (more on that in a minute)
Essentially, you want people to be excited about your coffee shop before it even opens. Fortunately, social media and the internet makes this easier than ever.
5. Bolster Your Web Presence
Your business website and social media profiles need to be in place before your coffee shop opens. If you don’t have the time or budget to hire a web designer, you can still create a functional and attractive website using a website builder such as Squarespace or Wix. Posting to Instagram and other social sites before the grand opening will also help you create a buzz and establish an online presence.
Here are a couple of resources that will help you build your online presence for your coffee shop:
Guide to creating/maintaining a web presence
Guide to social media marketing
6. Hire & Train Employees
Your employees and the level of customer service they provide will ultimately make or break your coffee shop. You will need to be smart and careful in your hiring process, and train the employees thoroughly so they know not only your processes but also the atmosphere you are trying to create. It’s important to value your employees and offer competitive wages and perks, even if that means cutting costs somewhere else; if you pay minimum wage, employees will ultimately be grumpy with one foot out the door. By establishing a positive corporate culture and showing employees you value them, you will create an awesome team that will take your business to the next level.
7. Choose A POS System
Your point of sale is where you make all your money, so it’s super important that you choose a good one! You do not want a system that is unreliable or only pairs with a crappy merchant service provider that charges exorbitant swipe fees. Thus, you will need to test out multiple systems and read reviews before selecting a system. You’ll also need to figure out which features you need and which you can live without. Many modern cloud-based POS systems are essentially complete business management software programs, with built-in inventory management, employee management, accounting integration, loyalty software, and even more functions. You also have the choice to go all out with POS hardware add-ons such as digital menu boards and self-order kiosks, or keep it simple with a single iPad register.
More important than having a POS with all the bells and whistles, it is essential that the POS system you select integrates with a high-quality merchant services provider (or choice of merchant service providers). Your merchant service provider will determine what percentage of your credit card sales you’ll hand over, how issues such as chargebacks are handled, and how much you’ll pay to exit the contract if you’re not happy with the level of service.
To start your POS research, I recommend reading our article on the best POS systems for coffee shops.
Final Thoughts
There are so many things to consider when starting any business, particularly a business in the restaurant industry. However, as long as you have a solid business plan and financing in place, the rest is really just details. Opening a coffee shop is a practical choice for a lot of prospective business owners, as there will always be demand for good coffee and a place to drink it. Not only that, but it’s also a choice that will allow you to express your individuality and become a vibrant part of the local community in a way that many business types aren’t suited for.
If all this sounds good to you, I encourage you to get started so you can open the go-to coffee shop in your city before someone else does.
Oh, and don’t forget the free WiFi!
The post How To Start And Fund A Coffee Shop appeared first on Merchant Maverick.
The state of Michigan has one of the fastest growing economies in the nation, a welcome relief to residents following the fallout from the 2009 recession. Cities like Detroit are bouncing back from this bleak period, unemployment is lower than it was in the early 2000s, and more people are opening or moving their companies to Michigan.
Michigan is ranked top in the nation for auto manufacturing, and other industries are emerging throughout the state. This includes cybersecurity, defense, aerospace, and agribusiness. Michigan is earning a reputation as one of the most business-friendly states in the nation.
It isnât just large companies that are headquartered in the state, either. More residents are opening their own small businesses to pave the path for a successful future. If youâre reading this, youâre one of those entrepreneurs ⦠or the thought of business ownership has at least crossed your mind. One of the most important factors in owning and operating a successful business is having access to capital and resources. Fortunately, the state of Michigan has many opportunities for business owners — whether youâre just getting started or you own an established business.
In this post, weâll take a look at the funding opportunities open to Michiganders. From national online lenders to local credit unions, nonprofit lenders, and startup resources, weâll cover it all to help you get the capital you need to start or grow your small business.
Online Business Lenders For Michigan Businesses
The internet has made our personal and business lives easier than ever, so it should come as no surprise that you can get capital for your business straight from your computer. Online lenders make it quicker and easier to receive business financing.
Not only is the lending process so much more convenient, but online lenders typically have less stringent requirements for qualifying. For example, getting a bank loan is difficult, even for established businesses owned by people with high credit scores. But many online lenders will approve borrowers with less-than-perfect credit scores and histories, newer businesses, and businesses that arenât bringing in high revenues just yet.
Many online lenders provide capital to small business owners in Michigan, but you can start your search for capital with these options:
Lendio
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Time in business: 6 months
Business revenue: $10,000 per month
Personal credit score: 550
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The loan aggregator Lendio lets you shop your financing options without spending hours filling out applications. Lendio has over 75 lending partners in its network â lenders you can reach with just one application.
Through Lendio, you can apply for the financing you need for your business, including:
Small Business Administration (SBA) Loans: $50,000 to $5 million
Term Loans: $5,000 to $2 million
Short-Term Loans: $5,000 to $200,000
Lines Of Credit: $1,000 to $500,000
Credit Cards: $1,000 to $500,000
Equipment Financing: $5,000 to $5 million
Commercial Mortgages: $250,000 to $5 million
Accounts Receivable Financing: Up to 80% of receivables
Startup Loans: $500 to $750,000
Merchant Cash Advances: $5,000 to $200,000
Borrower requirements, rates, and terms are based on a number of factors, including the type of financing you receive, the lender you work with, and your creditworthiness and/or business performance. Turnaround times also vary, but you may be able to receive funding in as little as 24 hours. Filling out an application to receive offers through Lendioâs network has no impact on your credit score. However, a hard pull on your credit may be performed once you select a lender offer to pursue.
OnDeck
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Time in business: 12 months
Business revenue: $100,000 per year
Business industry: Must not be in a restricted industry
Personal credit score: 600
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OnDeck offers small business owners two financing options: term loans and lines of credit.
With an OnDeck term loan, you may apply for up to $500,000. With the short-term loan option, you have 3 to 12 months to repay your loan. This option is best for funding marketing campaigns, purchasing inventory, or hiring new employees. Short-term loans from OnDeck come with a simple interest rate that starts at 9%.
Long-term loan options are also available. These loans have repayment terms of 15 to 36 months. Long-term loans are best for larger projects, such as business expansion, opening a new location, or purchasing equipment. The annual interest rate for long-term loans starts at 9.99%.
Both short-term and long-term loans have an origination fee of 0% to 4% of the loan amount. Payments are made daily or weekly and are automatically deducted from your business bank account.
To qualify, you must meet these requirements:
Time in business of at least 1 year
At least $100,000 in annual revenue
Personal credit score of 600 or above
The other financing option available through OnDeck is a line of credit. You may qualify for up to $100,000 to use for any business purpose, including paying for unexpected expenses and managing gaps in revenue. The APR for OnDeck lines of credit starts at 13.99%. Payments are made weekly and are automatically deducted from your business bank account.
OnDeck lines of credit come with no draw fees. However, there is a $20 maintenance fee charged each month. This fee will be waived for 6 months if you make a draw of at least $5,000 within 5 days of opening your account.
To receive a line of credit from OnDeck, you must have:
Time in business of at least 1 year
At least $100,000 in annual revenue
A personal credit score of 600 or above
IOU Financial
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Must be in business at least 12 months.Â
Must make at least $120,000 per year and have an average daily balance of $3,000 over a 3-month period.
Must have a personal credit score of 600 or above.
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If you need up to $500,000 to fund your small business, try applying for a loan from IOU Financial. With IOU Financial, you can prequalify in just minutes. In fact, 85% of all applicants are pre-approved for funding, according to the lender. You can receive funding in as little as 24 hours through IOU Financial.
With this loan option, you can receive $10,000 to $500,000 with terms between 6 and 12 months. Fixed daily or weekly payments are automatically debited from your business bank account.
Once youâve paid off 40% of your loan, you may qualify for a loan renewal for additional capital for your business. There are no prepayment penalties, and you can save money on interest by paying your loan off early.
To qualify for funding through IOU financial, you must meet these requirements:
Own at least 80% of your business
Time in business of at least 1 year
At least 10 monthly deposits in your business bank account
Annual revenue of at least $100,000
Average ending balance of at least $3,000 per day in your business bank account
Credibly
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Must be in business at least 6 months with a revenue of $15,000 per month.
Must have a personal credit score of 500 or above.
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Credibly is an online lender that offers three financing options for small business owners. You may qualify to receive a working capital loan, a business expansion loan, or a merchant cash advance (MCA).
Crediblyâs working capital loans are available up to $400,000 with repayment terms of 6 to 18 months. Instead of your traditional interest rate, Credibly uses a factor rate to determine the cost of borrowing. Learn more about factor rates and how they affect the cost of your loan.
Daily or weekly payments are automatically deducted from your bank account to repay your loan. Despite its name, these loans donât have to be used for just working capital and can be used for other business purposes.
To qualify for a working capital loan, you must have:
Time in business of at least 6 months
Personal credit score of 500 or above
An average of $15,000 or more in monthly deposits
If youâre ready to grow your business, consider applying for Crediblyâs business expansion loan. This loan program provides up to $250,000 with terms of 18 or 24 months and interest rates starting at just 9.99%. Weekly payments are automatically deducted to repay your loan.
To qualify for this financial product, you must have:
Time in business of at least 3 years
Personal credit score of 600 or above
Average of $15,000 or more in monthly deposits
Average daily balance of at least $3,000
Finally, you may qualify for a merchant cash advance. This is a little different from a loan because the lender agrees to purchase a percentage of future receivables. Daily repayments are made from your bank account based on a percentage of your sales.
With this financing option, you can receive up to $400,000. Terms are typically 3 to 18 months and factor rates start at 1.15.
To qualify for an MCA, you must have:
Time in business of at least 6 months
Personal credit score of 500 or above
Average of $15,000 or more in monthly deposits
Kabbage
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Must be in business at least 12 months and make at least $50,000 annually (or $4,500 for the last 3 months).
No specific credit score requirements.
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If flexibility is the most important factor for your small business financing, consider applying for a Kabbage line of credit. Instead of one lump sum, youâll have access to a revolving account you can draw from whenever you need capital. You can use your line of credit for emergency expenses, revenue gaps, working capital, or for any other business purpose.
Kabbageâs lines of credit are available up to $250,000 for qualified borrowers. Repayment terms are 6 months for draws under $10,000. For loans of $10,000 or above, you can choose from 6- or 12-month terms. Kabbage charges a monthly fee between 1.5% and 10% of your principal loan amount. If you pay your loan off early, you can save money on fees. If you havenât made a draw on your line of credit, you wonât be required to pay any fees.
Kabbage bases its approval decisions on the performance of your business, so even business owners with credit challenges may be approved. You can be approved in just minutes for up to $100,000. Lines of credit exceeding $100,000 require manual approval by the lender.
To receive a line of credit from Kabbage, you must meet these minimum requirements:
A business that is at least 1 year old
At least $50,000 in annual revenue OR at least $4,200 per month for the last 3 months
LendingPoint
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Time in business: N/A
Business revenue: N/A
Personal credit score: 600 – 680
Personal income: $20,000
LendingPoint does not operate in Colorado, Connecticut, Iowa, Louisiana, Maine, Maryland, Massachusetts, Nevada, New York, North Dakota, Rhode Island, South Carolina, Vermont, West Virginia, Wisconsin, and Wyoming
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Sometimes, you have to get a little creative with your small business funding. One option to consider is taking out a personal loan to use for business expenses.
Why choose a personal loan instead of a business loan? For starters, your time in business, business credit score and history, and annual revenues will not be a requirement to qualify. This is great if youâre a new business, have low revenues, or havenât yet established business credit. Instead, lenders like LendingPoint will evaluate your personal credit history, income, and other factors when determining whether you qualify for funding.
LendingPoint has personal loans from $2,000 to $25,000 for qualified borrowers. Youâll have 24 to 48 months to repay your loan, with payments due twice per month. APRs start at 15.49%.
To qualify for a personal loan through LendingPoint, you must meet these requirements:
Be at least 18 years old
Have a U.S. ID and SSN
Have at least $20,000 in annual income
Have a verifiable personal bank account
Have a personal credit score of at least 585
Banks, Credit Unions, & Nonprofit Lenders In Michigan
Prefer to go the more traditional route? Banks, credit unions, and nonprofit lenders throughout the state of Michigan offer financial solutions for your small business. If you donât have a relationship with a financial institution or you just want to shop around your options, try these lenders first.
Comerica Bank
Comerica Bank has provided financial services since 1849. Today, Comerica has over 400 banking centers nationwide. In the state of Michigan, banking centers can be found in cities including Dearborn, Detroit, and Battle Creek.
For small businesses, Comerica offers financial services including:
Lines Of Credit: $10,000 to $500,000
Term Loans: Up to $500,000
Commercial Real Estate Loans: Bridge loans, land acquisition loans, development loans, commercial construction loans
Equipment Leases: Up to 100% financing
SBA Loans: Up to 90% financing
Letters Of Credit
Comerica also offers corporate lending services for public and private companies, including working capital loans, asset-based loans, and acquisition financing.
Lake Michigan Credit Union
Lake Michigan Credit Union is one of the largest credit unions in the state with branches located in areas including Grand Rapids, Kent County, Kalamazoo County, and Saginaw County.
In addition to business checking and savings accounts, you can apply for financing options through LMCU, including:
SBA Loans
Lines Of Credit
Business Credit Cards
Commercial Real Estate Loans
Secured Term Loans
Letters Of Credit
To apply for financing, you must be an LMCU member. Members must meet one of the following requirements:
Live, work, or worship in the Lower Peninsula
An immediate family member is a member of LMCU
Opportunity Resource Fund
Opportunity Resource Fund is a nonprofit community development financial institution (CDFI) that provides financial support to small businesses throughout the entire state of Michigan.
Through Opportunity Resource Fund, qualified borrowers may receive funding for starting or growing a small business. Business loans are available in amounts from $10,000 to $250,000 with flexible terms and competitive interest rates.
This nonprofit lender considers several factors when approving loan applications. The first is collateral. All loans must be secured with collateral including real estate, inventory, accounts receivables, equipment, or a personal guarantee. Loans also require an equity investment of 10% to 15%.
Opportunity Resource Fund also requires borrowers to meet certain social criteria. This includes aspects such as demonstrating alternative business practices, providing employment to low-income individuals, and empowering woman- and minority-owned businesses.
Applications are available to download on the Opportunity Resource Fund website. If youâre interested, you can also fill out the online form to learn more about the application process and timelines for submissions and approvals.
Small Business Grants In Michigan
Reaching out to an online or local lender isnât your only option when you need capital to start or expand your business. You can also look to small business grants to get the funding that you need.
Grants differ from small business loans and other types of financing because grant funds do not have to be repaid. Why, then, isnât every small business owner leaning on grants?
The problem is that grants are few and far between. While you can search online and find multiple lenders in your area, finding grants is a bit more difficult. Even when you do come across grants, youâll often find that you wonât qualify. Grants typically have very specific requirements, and many are only open to certain industries or women- or minority-owned businesses. There is also a lot of competition from other small businesses pursuing the same grants.
This isnât meant to be discouraging. Itâs simply a warning not to rely solely on receiving grants to fund your business. However, thereâs no harm in applying for grants that you do qualify to receive. To kick off your search for a grant, check out these options that are open to small business owners in Michigan.
Community Ventures
The Community Ventures initiative is led by the Michigan Economic Development Corporation. Through this program, employers can receive wage reimbursements of up to $5,000 for each eligible âstructurally unemployedâ employee that is hired. A structurally unemployed employee is defined as:
Someone with a lack of education or functional literacy
Someone with a long-term disconnection from employment
Low income hires
Ex-offenders
At-risk youth
Reimbursements are given in monthly installments until the $5,000 per employee limit is reached. These funds are used to offset costs for training and hiring participants in the CV program. Businesses are required to report each month on hired and retained talent for up to one year. If youâre interested in learning more, you can contact the MEDC Customer Assistance Center by phone or email.
NEIdeas
If you live in Detroit, Hamtramck, or Highland Park, you could receive $10,000 for your small business through the NEIdeas $10k Challenge. A total of 26 winners are each awarded $10,000 for coming up with the best ideas for growth.
To qualify, businesses must meet the following requirements:
Be an existing, for-profit business
Majority owner must be a legal U.S. resident at least 18 years old
Business must be in good standing with the IRS
Businesses must be based in Detroit, Hamtramck, or Highland Park
Gross annual revenues should not exceed $750,000
Home-based businesses and regional businesses based in Southeast Michigan can also apply. Franchises are ineligible to enter.
Program guidelines can be found on the NEIdeas website. Applications can be submitted online, mailed, or turned in to an NEIdeas Ambassador.
SCIP/TCA
Michigan Corporate Relations Networkâs Small Company Innovation Program Technology and Commercialization Assistance (SCIP/TCA) program is designed to help businesses grow through collaborations with local universities. Through this program, small businesses can receive matching grants up to $40,000 to fund the cost of research projects at any public university in Michigan.
Any existing, LARA-registered business in Michigan that plans to remain in the state is eligible to apply. Getting accepted into the program is not a guarantee of funding. All guidelines for the program can be found on the Michigan Corporate Relations Network website. Applications for the program are also available online.
Loans & Resources For Startups In Michigan
Taking the leap into entrepreneurship is an exciting time, but it can also be intimidating, especially if you have no prior experience running a business. Fortunately, there are many resources available to Michiganders, including educational materials, workshops, mentorships, and funding opportunities.
SCORE
SCORE, a resource partner of the SBA, is one of the leading resources for small business owners. There are hundreds of SCORE chapters across the nation that provide essential resources to small business owners for free or for a low fee. SCORE chapters are located throughout Michigan in cities including Kalamazoo, Grand Rapids, and Detroit.
Through your local SCORE chapter, you can receive free business mentoring from an expert. You can meet with your mentor face-to-face or connect through email or video chat. You can also pick up business tips through SCOREâs webinars that are held every week. If you miss a webinar, donât worry — SCORE offers an on-demand library of recorded webinars. You can also educate yourself on a variety of business topics through SCOREâs on-demand online courses. Workshops, events, and educational materials are also offered through this organization.
Michigan Small Business Development Center
The Michigan Small Business Development Center offers great resources for startups and established businesses. There are multiple business resource centers, regional centers, and satellite offices throughout the state in cities including Hastings, Kalamazoo, Lansing, Dearborn, and Detroit.
All resources through the Michigan SBDC are free or low-cost. Services include business consultations, workshops, training sessions, templates, and educational materials.
Michigan Womenâs Foundation
The Michigan Womenâs Foundation provides capital and resources to women-owned businesses in the state of Michigan. Women that own startups or established businesses are eligible for the programs available through MWF. Programs offered include business consulting, training and educational sessions, and portfolio management. The Michigan Womenâs Microloan Fund also provides loans of $2,500 to $50,000 with 5-year terms and an 8% interest rate to qualified business owners.
What To Consider When Choosing A Lender
The good news is there are many lenders both online and in the state of Michigan that are ready to give your business the capital it needs. The bad news? You have to narrow your selection down to one, preferably the lender that offers the best, most affordable financing for your small business.
Sorting through your options to choose the right lender doesnât have to be too difficult or time-consuming, though. When searching for your lender, keep the following points in mind.
Application Process
The application process varies across lenders. With some lenders, a little bit of business and personal information and a few bank statements are all it takes to get approved. Other lenders, however, may have more extensive documentation requirements and a lengthier, more complicated application process.
If time is of the essence and you donât want to go through a difficult application process, choose an online lender with a more simplified process.
Speed Of Approval
You have an emergency that needs to be taken care of immediately. In this scenario, waiting weeks to get the capital you need could be damaging to your business. Or maybe your situation looks a little different. You donât have an immediate need for funding, and you have time to shop around for the best rates and terms available to your business, so time to funding may not be as important.
Evaluate your situation to determine if time to funding is an important factor for you. If so, work with a lender that approves applications quickly. Some lenders can even have the funds in your bank account in as little as 24 hours.
Loan Restrictions
How do you plan to use your funds? This could be a determining factor in what lender you select. Letâs say you need capital to hire new employees. Lenders that offer equipment financing for fixed asset purchases could be crossed off your list.
Borrowing Limits
The type of financing and the lender you choose may be based on how much capital you need. For instance, if you need $500,000 to fund your new expansion or a new location, lenders that have $250,000 borrowing limits wonât be a good fit.
Rates & Terms
Itâs always important to make sure youâre getting the best rates and terms for your situation. If you have credit challenges or youâre a new business, your options may be more limited. However, if you have a solid credit score, an established business, and a steady flow of revenue, youâll have more lending options available to you.
No matter what options are available, always make sure youâre getting the best rates and terms. Think of the long term and not just the short term. Sure, you could have funds in your account in just one day with one lender, but high fees and interest rates and shorter repayment terms could spell trouble in just a few months.
Unsure if youâre able to afford a small business loan? Learn how to know if youâre ready to take on this financial responsibility.
Borrower Requirements
You may think a lender is right for you, but are you right for the lender? Every lender has different requirements for its borrowers, and you need to meet all of these to get approved for financing.
Before you start shopping lenders, start by getting your free credit score online and reviewing your credit history. Negative items like unpaid tax liens and recent bankruptcies may prohibit you from working with some lenders and qualifying for certain types of loans.
Youâll also need to know your time in business and annual revenues and have proof to present to the lender if needed. Also, be aware of documentation requirements and make sure that you have everything you need to be approved for a loan.
One last thing to remember is that meeting a lenderâs minimum requirements does not guarantee that your application will be approved.
Final Thoughts
While no one is ever guaranteed success, having access to capital and the right resources can boost your chances of owning and operating a successful, profitable business. As youâve read, there are plenty of opportunities available for Michiganders. Whether youâre in the planning stages of your startup or you want to take your small business to the next level, know and understand your financing options, evaluate the needs of your business, do your research, and move forward when you know that the return-on-investment will outweigh the risk of taking on debt.
If you didnât find what youâre looking for in this post, check out some of our additional resources to help you find the right financial solution for your small business.
Minority Business Loans
Best Small Business Loans For Veterans
The Best Small Business Loans For Women
The 7 Best Business Loans For Bad Credit
The post The Best Business Loan And Financing Resources For Michigan Small Businesses appeared first on Merchant Maverick.
Colorado is one of the fastest-growing states in the nation. Not only is its population burgeoning, but its economy is flourishing and only expected to grow into the future. Professional and business services, the tech industry, and agriculture are among the sectors that will continue to bring new jobs and contribute to the stateâs economy.
It isnât just big business thatâs helping the economy grow, either. Small businesses play an extremely important role throughout the state. Unfortunately, these smaller businesses — businesses just like yours — may struggle to find the financing and resources they need to be successful.
The good news is that there are plenty of financing options available to small business owners. The key is knowing where to find them. Instead of spending hours wading through lenders, scratching your head over interest rates and terms, or struggling to get the capital you need, keep reading this post — weâve taken the guesswork out of small business financing. From online and traditional lenders to grants and more, read on to learn about the resources available to Coloradans.
Online Business Lenders For Colorado Businesses
You probably already use the internet for business — from communicating with clients and suppliers via email to placing orders for inventory and paying utility bills. Why not use it to find financing for your business?
Online lenders make it more convenient than ever to apply for small business loans and financing. You can fill out your application, submit your documentation, and even receive funds in your bank account — all without ever leaving your home or office.
It’s possible to get the financing you need in as little as 24 hours by working with an online lender. Even if youâve had trouble qualifying for financing in the past, there are online options available to you. Start by checking out these recommended lenders.
Lendio
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Time in business: 6 months
Business revenue: $10,000 per month
Personal credit score: 550
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Lendio makes shopping around for financing easier than ever. A single application connects you with over 75 lending partners, allowing you to compare rates and find the most affordable financing options in just minutes. Applying with Lendio is free, thereâs no obligation, and your credit score isnât affected by checking your offers.
No matter what type of small business financing you need, you can connect with the right lender through Lendio. Financial products available through Lendio include:
Small Business Administration (SBA) Loans: $50,000 to $5 million
Term Loans: $5,000 to $2 million
Short-Term Loans: $2,500 to $500,000
Lines Of Credit: $1,000 to $500,000
Equipment Financing: $5,000 to $5 million
Commercial Mortgages: $250,000 to $5 million
Accounts Receivable Financing: Up to 80% of receivables
Startup Loans: $500 to $750,000
Business Credit Cards: $1,000 to $500,000
Merchant Cash Advances: $5,000 to $200,000
Rates, terms, and borrower requirements vary. You may receive your funds in as little as 24 hours based on the product you select.
SmartBiz
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Must be in business at least 2 years.
Must have a personal credit score of 650 or above.
Must have a business credit score of 150 or above.
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If you donât qualify for a low-interest bank loan, there may be an alternative: Small Business Administration loans. The SBA guarantees a portion of the loans provided through its various loan programs, so lenders feel more confident in financing small businesses. Meanwhile, youâll get the benefit of a low-interest, long-term loan, even if youâve been turned down by banks and traditional lenders in the past.
Navigating the SBA application process can be a challenge, but SmartBiz has simplified it through its online marketplace. You can prequalify in minutes, receive funds quickly, and easily move through the SBA loan process by working with SmartBiz.
Through SmartBiz, you can apply for a loan used for working capital or to refinance debt. Loans are available for $30,000 to $350,000 with interest rates of 8.25% to 9.25%. Repayment terms are up to 10 years.
Funds for these loans can be used to refinance existing debt, purchase inventory or equipment, launch a marketing campaign, hire new employees, or cover operating expenses. Loan funds canât be used to pay unpaid taxes.
To qualify for this loan, you must meet these minimum requirements:
At least 2 years in business
U.S. citizen or legal permanent resident
Personal credit score of 640 or above
Cash flow to cover loan payments
No bankruptcies or foreclosures within 3 years
No defaults on government-backed loans
No outstanding tax liens
If you want to purchase, expand, or refinance your commercial property, you can apply for an SBA 7(a) commercial real estate loan. Through SmartBiz, you can apply to receive $500,000 to $5 million with interest rates of 7% to 8.25%. Repayment terms are up to 25 years.
These minimum requirements apply to all borrowers:
At least 51% of the property is occupied & used by your business
Time in business of at least 3 years
Personal credit score of 675 or above
Cash flow to cover loan payments
Purchase price exceeds $500,000
U.S. resident or legal permanent resident
No bankruptcies or foreclosures within the last 3 years
No outstanding tax liens
No defaults on government-backed loans
Funds from these loans canât be used to purchase investment properties or to fund new construction costs.
OnDeck
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Time in business: 12 months
Business revenue: $100,000 per year
Business industry: Must not be in a restricted industry
Personal credit score: 600
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OnDeck offers two loan options for small business owners in Colorado: term loans and lines of credit. Letâs start off by looking at the options for OnDeckâs term loans.
With a term loan, you can receive a lump sum in amounts up to $500,000. OnDeck offers short-term loans with terms of 3 to 12 months and simple interest rates starting at 9%. This means that your interest rate is a percentage of your loan amount. If you borrow $20,000 at a simple interest rate of 9%, youâll pay $1,800 in interest — or a total of $21,800 before any additional fees are applied.
Short-term loans are best for projects with an immediate return, such as seasonal hiring, inventory purchases, or launching a marketing campaign.
OnDeck also offers long-term loans. These loans have terms of 15 to 36 months with annual interest rates starting at 9.99%. Long-term loan funds are best for expanding your business, making large-scale inventory purchases, or buying equipment.
To qualify for a term loan, you must have:
Time in business of at least 1 year
At least $100,000 in annual revenue
Personal credit score of 500 or above
If you want a more flexible form of financing, apply for OnDeckâs line of credit. You can receive up to $100,000 with APRs starting at 13.99%. A line of credit is best for filling revenue gaps or paying unexpected expenses.
You only pay interest on borrowed funds, and payments are made each week through automatic deductions. A $20 monthly maintenance fee is required but will be waived for 6 months if you draw at least $5,000 within 5 days of opening your account. There are no draw fees for using your line of credit.
To qualify for a line of credit, you must meet these requirements:
Time in business of at least 1 year
At least $100,000 in annual revenue
Personal credit score of 600 or above
Breakout Capital
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Must be in business at least 12 months with a revenue of $10,000 per month.
Must have a personal credit score of 600 or above.
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Breakout Capital provides qualified small business owners with up to $250,000 with its small business loans. Daily, weekly, and monthly repayment terms up to 2 years are available. Breakout Capital loans have a fee of 1.25% to 3.5% of the borrowing amount each month.
To qualify for a small business loan, you must have:
A time in business of at least 1 year
A personal credit score of 600 or above
At least $10,000 in monthly revenue
If you need more capital, you may want to consider FactorAdvantage. This service combines invoice factoring and a business loan to provide qualified borrowers with up to $500,000. Fees start at 1.25% of the borrowing amount per month, and repayment terms are available up to 2 years.
If neither of these options seem right for you, Breakout Capitalâs lending experts can connect you with other financing options including:
SBA 7(a) Loans
Equipment Leases
Merchant Cash Advances
Lines Of Credit
Fundbox
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No time in business requirements, but must have used a compatible accounting or invoicing software for at least 2 months, or a compatible business bank account for at least 3 months.
Business revenue: $50,000 per year
No specific personal credit score requirement
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If you want a fast, flexible line of credit that you can access in just minutes, take a look at what Fundbox has to offer. You can qualify for a line of credit up to $100,000 when you apply with Fundbox. Repayments are made over a 12- or 24-month period, and payments are automatically withdrawn from your business bank account each week.
Fees for using your Fundbox line of credit start at just 4.66% of the draw amount and are based on the performance of your business. If you donât use your line of credit, you never pay any fees. As you repay your line of credit, funds are replenished and become available to use again.
Fundbox has a fast and easy application process with minimum borrower requirements. To qualify, you must have:
Business checking account
At least $50,000 in annual revenue
At least 3 months of transactions from your business bank account OR at least 2 months of activity in accounting software
Amex Merchant Financing
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Time in business: 24 months
Business revenue: $50,000 per year
Personal credit score: Good to excellent
Other: Must accept Amex cards or have an Amex business credit card (depends on the type of financing you are applying for)
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If your small business accepts American Express, you may qualify for a business loan up to $2 million with American Express Merchant Financing.
One of the best things about Amex Merchant Financing is you donât have to worry about confusing interest rates or fees. Instead, you pay one fixed fee for your loan. Fees are based on the terms you select and range from 1.75% to 20% of the borrowing amount. If you repay your loan early, you could receive a rebate of up to 25% of your fee.
Repayment terms of 6, 12, and 24 months are available. A fixed amount will be automatically deducted from your bank account each business day to repay your loan.
Borrowers must meet the following requirements to qualify:
Accept American Express Cards
Have at least $12,000 in annual credit & debit receivables
Have at least $50,000 in annual business revenue
Have a time in business of at least 2 years
Credibly
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Must be in business at least 6 months with a revenue of $15,000 per month.
Must have a personal credit score of 500 or above.
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Credibly is a lender that doesnât have a one-size-fits-all solution for small businesses. Instead, this lender offers three products to give small business owners the capital they need: working capital loans, business expansion loans, and merchant cash advances.
A working capital loan is ideal for covering operational expenses and fueling business growth. Under this program, you may qualify for up to $400,000 that can be repaid over terms of 6 to 18 months. Automatic payments are withdrawn from your account daily or weekly.
Instead of a traditional interest rate, these loans come with factor rates that start at 1.15. Learn more about how factor rates affect the cost of your loan.
The requirements for a Credibly working capital loan are:
Personal credit score of 500 or above
Time in business of at least 6 months
At least $15,000 in average monthly bank deposits
If youâre ready to expand your business, consider applying for Crediblyâs business expansion loan. You can receive up to $250,000 with terms of 18 or 24 months. Repayments are automatically deducted each week. Interest rates for these loans start at 9.99%.
For Crediblyâs business expansion loans, you must have:
A personal credit score of 600 or above
Time in business of at least 3 years
At least $15,000 in average monthly bank deposits
At least $3,000 in average daily balances
The final option that may work best for you is a merchant cash advance, or MCA. Credibly purchases a percentage of your future receivables. Daily remittances are made until your loan plus any applicable fees are repaid. The estimated duration of this type of financing is 3 to 18 months.
With this type of financing, you can qualify for up to $400,000. Factor rates start at 1.15.
Requirements for a Credibly MCA are:
Personal credit score of 500 or above
Time in business of at least 6 months
At least $15,000 in average monthly bank deposits
Upstart
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Time in business: N/A
Personal credit score: Minimum 620
Business revenue: N/A
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Having trouble finding a low-interest loan option? Consider using your own personal credit score and income to qualify for a personal loan for business. Whether youâre operating a brand new business or you canât meet the requirements of small business lenders, getting a personal loan could be the hassle-free, affordable option youâre looking for.
Upstart is an online lender that offers personal loans that you can use for your business expenses. You can borrow between $1,000 and $50,000 with APRs starting at 8.09% for the most qualified borrowers. Donât have perfect credit? Itâs no problem. You can still qualify for a loan with APRs up to 35.99%.
One of the unique things about Upstart is that the lender considers more than just your credit score when approving your loan. Upstart looks at overall credit history, area of study, job history, and education to determine if you qualify for a loan.
To qualify for an Upstart personal loan, you must meet the following minimum requirements:
A source of income
Personal credit score of 620 or above
No bankruptcies or public records
Less than 6 inquiries within the last 6 months on your credit report
A solid debt-to-income ratio
Banks, Credit Unions, & Nonprofit Lenders In Colorado
If youâd rather work with a traditional lender, thereâs no shortage of them in Colorado. Work with your own bank or credit union, or consider one of these options for your business financing.
Bank Of Colorado
The Bank of Colorado has branches located all throughout the state, including cities like Akron, Colorado Springs, Fort Collins, and Denver. The Bank of Colorado offers multiple financial products for small business owners. In addition to business checking and savings accounts, you can apply for:
Business Credit Cards
Business Loans
Lines Of Credit
Agriculture Loans & Lines Of Credit
Equipment Loans
Real Estate Loans
Livestock Loans
Bank of Colorado also offers merchant card processing, employee benefits, and other small business services. Visit your local branch to apply for Bank of Coloradoâs small business banking services.
Ent Credit Union
Ent Credit Union was founded in 1957 and has grown to over 30 branches throughout the state with more than 330,000 members. Service centers can be found in cities including Aurora, Denver, Colorado Springs, and Parker.
You can apply for small business checking, savings, and money market accounts. If you need extra capital for your business, you may also qualify for one of Entâs financial products including:
Business Auto Loans
Business Credit Cards
Lines Of Credit
Commercial Real Estate Loans
Business Term Loans
Equipment Loans
SBA 504 Loans
To apply for any type of financing, you must be an Ent Credit Union member. To qualify for membership, you must meet one of the following requirements:
Live, work, attend school, or worship in one of the counties served by Ent
Be civilian or military personnel of the Colorado Air National Guard or Colorado Army National Guard
Be associated with Buckley Air Force Base
Have a family member that is a member of Ent
You can sign up for membership online, by phone, or through a service center.
Colorado Enterprise Fund
Colorado Enterprise Fund is a nonprofit lender that specializes in lending to small businesses that may not qualify for traditional financing. Since 1976, this lender has closed over 2,000 loans for small business owners in Colorado.
There are multiple financing options available through the Colorado Enterprise Fund, including:
Dream Big Microloans: Up to $50,000 with terms up to 7 years
Step Up Loans: Up to $500,000 with terms up to 10 years
Healthy Food Loans: Up to $500,000
Valor Loans For Veterans: Up to $500,000 with terms up to 10 years
SBA Community Advantage Loans: Up to $250,000 with terms up to 25 years
Just In Time Lines Of Credit: Up to $100,000 with terms up to 2 years
GAP Loans: Up to $500,000 with terms up to 25 years
Commercial Real Estate Loans: Up to $500,000 with terms up to 7 years
Startups and existing businesses may be eligible to receive funding. Colorado Enterprise Fund will evaluate several factors when determining whether to approve an application, including:
Personal Credit Score
Equity
Industry Experience
Payment History
Cash Flow & Profitability
Collateral
The online application and all requirements can be found on the Colorado Enterprise Fund website.
Small Business Grants In Colorado
Nothing in life is free ⦠or is it? If you qualify for a small business grant, you could get the financing your business needs without having to repay the funds. No interest rates, no debt, no problem, right?
Unfortunately, many small business owners find that the process of finding, qualifying for, and receiving a small business grant is extremely difficult. Even if you meet the stringent criteria, youâll have to compete with many other small business owners.
This doesnât mean that you should just forget about small business grants. If you qualify, you certainly should take the time to apply. However, just understand that you also need to consider other sources of capital for your business. In the state of Colorado, there are several grant opportunities available to small business owners. Get started with these options.
LEADING EDGE For International Opportunities
Leading Edge for International Opportunities is a grant program administered by the Colorado Office of Economic Development and International Trade. The proceeds from these grants are used for covering the costs of export projects. Minority, veteran, and women-owned businesses are eligible to apply.
Through this program, grant recipients can receive up to $10,000 to pay for costs associated with international business development and marketing projects, including foreign trade show exhibition and conference costs, advertising in overseas industry trade publications, and foreign business-to-business matchmaking services.
To qualify, businesses must meet the following requirements:
Employ fewer than 100 employees globally
Headquarters in Colorado OR at least 50% of employees based in Colorado
Registered with the Colorado Secretary of State
At least 51% ownership by minorities, veterans, or women
Time in business of at least 1 year
All information and the online application are available through the Colorado Minority Business Office.
Colorado First & Existing Industry Customized Job Training Grant Program
The Colorado First & Existing Industry Customized Job Training Grant Program is open to new or existing Colorado businesses. Through this program, grant funds can be used for training permanent, full-time employees. Businesses can receive up to $1,400 per eligible employee.
There are several requirements a business must meet to receive this grant, including:
Contributions of at least 40% to the total costs of grant-funded training
Must pay at least $13 per hour in urban counties and at least minimum wage in rural counties
Must offer health insurance to employees
To learn more about this grant and to apply, you must contact a CFEI college representative through the Colorado Community College System website.
Colorado Creative Industries Grants
Colorado Creative Industries offers multiple grant opportunities for small businesses and entrepreneurs. One of the most notable grant programs is the Career Advancement Grant. Through this program, you can receive matching funds up to $2,500 to stimulate a commercial creative business.
To qualify for this grant, you must meet these requirements:
A resident of Colorado
At least 18 years old
Have a creative sector business
Received no funding from CCI within 12 months of the application deadline
An online application for this grant and information on additional funding programs is available on the Colorado Creative Industries website.
Loans & Resources For Startups In Colorado
You have your business plan in place, youâre motivated and focused, and youâre ready to launch your new business. Thereâs just one thing missing from the entrepreneurial equation: capital.
Getting a loan through your bank or even alternative lenders can be a challenge for startup businesses. But donât let that get you down because there ARE options available to you if you know where to look.
Start your search for funding with these organizations. In addition to funding, youâll also have access to loads of resources including business training, one-on-one consultations, and educational materials to help you start and operate a successful small business.
Colorado Small Business Development Center Network
If you need business consulting, look no further than the Colorado Small Business Development Center Network. There are more than 80 centers located throughout Colorado that offer free one-on-one consulting on topics including:
Marketing
Financial Assistance
QuickBooks
Business Plan Writing
Certifications
Social Media Strategies
Workshops, scholarships, strategic planning courses, eLearning videos, and special events are also offered through the Colorado SBDC Network. Visit the official website or your local center for more information on the resources available to small business owners.
SCORE
Whether you need help starting your own business or advice for your existing business, check out SCORE to connect with a business mentor. Youâll receive free advice online, over the phone, or at a SCORE office near you.
Mentorships arenât all that SCORE has to offer. You can also sign up for workshops, classes, and webinars. SCORE also has a large library of business resources to access. All services are available for free or for a low fee.
In Colorado, there are several offices throughout the state in cities including Denver, Colorado Springs, and Pueblo. You can call or visit your local office or go online to request a mentor.
What To Consider When Choosing A Lender
As you can see, there are plenty of small business financing options and resources for Coloradans. However, narrowing down your choice to just one is still a daunting task. Whittle down your choices by considering the following:
Does The Lenderâs Products Fit My Needs?
One of the first steps you should take before seeking financing is to determine what product works best for you. If you want capital thatâs available when you need it, work with a lender that offers business credit cards or lines of credit. If you need a large amount of capital, find lenders that offer long-term, low-interest loan options. By determining what type of financing works for your business beforehand, you can eliminate lenders that donât offer the financial products you need.
Do The Rates & Terms Work For Me?
Shop around to compare rates and terms of lenders that are at the top of your list. Would you rather make one monthly payment? Cross off the lenders that require weekly, daily, or bi-weekly payments. Have a good credit score? Avoid lenders that specialize in financing to less creditworthy borrowers, since interest rates will often be much higher.
Always take the full cost of financing into consideration, including additional fees charged by the lender. Then, analyze your other business debts. You should ensure that your business can comfortably afford to take on additional debt before signing on the dotted line.
Will The Funding Be Enough For My Business?
How much capital do you need for your business? Once youâve determined the amount youâre seeking, you can narrow down your list of lenders. If you need $100,000 to purchase new equipment, a lender with loans that max out at $50,000 wonât cut it. Calculate how much you need to borrow, then select a lender that can meet your financial needs.
Do I Meet The Lenderâs Requirements?
Before you apply for financing, check your credit score, understand any negative items on your credit report, and have a grasp of the financials of your business. Most lenders look at factors including personal and business credit scores, personal and business credit history, time in business, and annual revenue. If you fall short with one lender, find a lender with requirements you can meet.
One last thing to note is that if youâre unable to meet the criteria of multiple lenders, it may be time to evaluate if now is the right time for financing. Break down your finances, work to build up your credit score, and explore all financial options before signing on to a high-interest loan with unfavorable terms.
Final Thoughts
Building a business is never easy. However, with the many resources available to Coloradans, you can increase your chances for success whether youâre just getting started or youâre ready to expand your business. Always do your research, consider all options available to you, and take the time to determine what steps to take next to best benefit your business.
The post The Best Business Loan And Financing Resources For Colorado Small Businesses appeared first on Merchant Maverick.
Finding financing and other business resources can be a challenge for any small business. Maybe you donât know where to look, or maybe there are just too many options and you have no idea where to begin. If youâre a small business owner in Ohio that needs help finding the right resources for your business, youâre in the right place.
In this post, weâll explore the different financing resources available to your small business. Weâll review our picks for online business lenders that make the loan process faster and easier than ever. Weâll take a look at local banks, credit unions, and nonprofit lenders that offer financing to Ohio businesses. Weâll even explore small business grants that can put free money into your business. Whether youâre just starting a business in Ohio or your established business is ready to grow, thereâs an option out there for you. And after reading this post, youâll know exactly where to find it!
Online Business Lenders For Ohio Businesses
Small business owners are often strapped for time. From managing day-to-day operations to planning an expansion or gearing up for an upcoming busy season, it’s difficult to find enough hours to tackle your daily tasks, much less pile anything else on your plate. You need capital, but you just donât have the time to sit on a phone with a lender or head into a bank to pitch your business.
Or maybe you have the time to get a loan, but you fall short in another area. Your credit score is low. Your time in business is too short. Your annual revenues arenât where they need to be to qualify for a bank loan.
Whether itâs time, borrowing requirements, or some other issue thatâs keeping you from applying for a small business loan, thereâs an alternative: an online business loan.
You probably already use the internet to perform tasks for your business: bookkeeping, communicating with clients and suppliers, or ordering inventory, just to name a few. Why not leverage the internet to find the capital you need to start your business, grow your brand, or overcome a financial hurdle?
With online lenders, you can apply for your loan without ever stepping foot into a bank or office. You can shop your options, learn about requirements, and compare lenders from your computer or smartphone. Some lenders can even give immediate approvals and send over your funds in as little as one business day.
In addition to ease and speed, online lenders are opening up more opportunities than ever for small business owners. Bad credit? No business credit? Low revenues? Startup? No problem — thereâs an option out there for you.
Ready to find an online lender? Instead of weeding through thousands of search engine results to find legitimate options, start your search with these lenders.
Lendio
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Time in business: 6 months
Business revenue: $10,000 per month
Personal credit score: 550
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Lendio makes shopping for the best financial product easier than ever. This loan aggregator has over 75 financial partners that you can reach through one simple application. You can compare multiple lender offers to find the most affordable option for your Ohio small business. From long-term, low-interest Small Business Administration loans to merchant cash advances, Lendio has it all.
Some of the financial products offered to small businesses through Lendioâs network include:
SBA Loans: Up to $5 million with terms up to 25 years
Term Loans: Up to $2 million with terms up to 5 years
Commercial Mortgages: Up to $5 million with terms up to 25 years
Startup Loans: Up to $750,000 with terms up to 25 years
Lines Of Credit: Up to $150,000 with terms up to 2 years
Short-Term Loans: Up to $500,000 with terms up to 3 years
Equipment Financing: Up to $5 million with terms up to 5 years
Merchant Cash Advances: Up to $200,000 with terms up to 2 years
Accounts Receivable Financing: Up to 80% of receivables with terms up to 2 years
Business Acquisition Loans: Up to $5 million with terms up to 25 years
Business Credit Cards: Up to $500,000
Filling out the application is quick and easy, and thereâs no impact to your credit until you accept an offer. Depending on the type of financing you select, you could have the capital you need in as little as 24 hours. Borrower requirements and required documentation vary based on the product selected. Rates and terms vary by lender.
SmartBiz
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Must be in business at least 2 years.
Must have a personal credit score of 650 or above.
Must have a business credit score of 150 or above.
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If youâve been in business for some time, youâre probably at least aware of the Small Business Administration. If not, youâre missing out on a very important resource. The SBA is not just an advocate for small businesses but also provides competitive, long-term loan options.
The SBA is not a direct lender. Instead, this organization guarantees small business loans distributed through its programs. Nonprofit organizations, banks, credit unions, and other lenders can feel more secure in taking on the risk of small business lending. Meanwhile, this opens the door for low-cost loan options for small business owners in Ohio, just like you.
Navigating the SBA loan process can be tricky, but smart business owners lean on SmartBiz to do the heavy lifting. SmartBiz simplifies SBA loans, removing the stress of the application process while putting money in your bank account faster than ever.
SmartBiz offers two SBA loan options for you. If you need to refinance high-interest debt or need extra money for working capital, marketing campaigns, inventory, equipment purchases, or operating expenses, you can apply for $30,000 to $350,000. Youâll have up to 10 years to repay your loan, and youâll receive competitive interest rates of 8.25% to 9.25%.
To qualify, you must meet the requirements below:
Time in business of at least 2 years
U.S. citizen or permanent resident
Credit score of 640 or above
Sufficient cash flow
No bankruptcies or foreclosures within the last 3 years
No prior defaults on government-backed loans
No outstanding tax liens
If you need to purchase commercial real estate or refinance a commercial real estate loan, apply for the SBA 7(a) commercial real estate loan. You can receive between $500,000 to $5 million with repayment terms up to 25 years and interest rates of 7% to 8.25%.
The borrower requirements for SBA 7(a) commercial real estate loans are as follows:
Property must be at least 51% owner occupied
Purchase price must be more than $500,000
Time in business of at least 3 years
U.S. citizen or permanent resident
Credit score of 675 or above
Sufficient cash flow
Funds canât be used to purchase investment properties or fund construction
No bankruptcies or foreclosures within the last 3 years
No prior defaults on government-backed loans
No outstanding tax liens
Credibly
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Must be in business at least 6 months with a revenue of $15,000 per month.
Must have a personal credit score of 500 or above.
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Credibly is an online lender that offers multiple financing options for small business owners. Credibly can preapprove you for up to $400,000 with final approvals in as little as 24 hours.
One of the financial products offered through Credibly is a working capital loan. You can qualify for up to $400,000 with repayment terms up to 18 months. These loans do not have traditional interest rates. Instead, Crediblyâs working capital loans have factor rates that start at 1.15. Repayments on your loan are made daily or weekly.
To qualify for a working capital loan, you must have:
Time in business of at least 6 months
Personal credit score of 500 or above
At least $15,000 in monthly bank deposits
Need longer terms for your loan? Crediblyâs business expansion loans have terms of up to 2 years. These loans are available in amounts up to $250,000 with interest rates starting at 9.99%. This loan is repaid through weekly payments.
To qualify for a business expansion loan, you must meet these requirements:
At least 3 years in business
Personal credit score of 600 or above
At least $3,000 in daily balances
At least $15,000 in monthly bank deposits
Another option to consider through Credibly is a merchant cash advance. With this financing, youâll receive up to $400,000. The anticipated duration of Crediblyâs MCAs are 3 to 18 months, and repayment is based upon your receivables. Factor rates for MCAs start at 1.15.
To qualify for this type of funding, you must:
Have a personal credit score of 500 or above
Be in business for at least 6 months
Have at least $15,000 in monthly bank deposits
Fundbox
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No time in business requirements, but must have used a compatible accounting or invoicing software for at least 2 months, or a compatible business bank account for at least 3 months.
Business revenue: $50,000 per year
No specific personal credit score requirement
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Wouldnât it be a relief to have a source of funding available to you on-demand? If an emergency pops up, youâd have the funds to cover it. If you needed extra inventory or money to pay for operating expenses, you wouldnât have to wait days (or weeks) for loan approval. If your Buckeye business would benefit from this type of funding, a line of credit from Fundbox may be just what you need.
Fundbox offers revolving lines of credit up to $100,000 for qualified businesses. You can make one or multiple draws on your line of credit up to your set limit. As you repay borrowed funds, they become available to draw again. You can select from 12- or 24-week terms, and fees start at just 4.66% of the draw amount. Weekly payments are automatically deducted from your business bank account.
Qualifying is simple, as Fundbox considers your business performance when approving lines of credit. To receive yours, you must have:
A business checking account
At least $50,000 in annual revenue
A U.S.-based business
At least 2 months of activity in accounting software OR at least 3 months of transactions in a business bank account
Prosper
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Time in business: N/A
Business revenue: N/A
Personal credit score: 640
Credit history: 2 years
Personal debt-to-income ratio: Below 50%
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If youâre a new business with no (or very low) revenue, how are you going to qualify for a small business loan? Unfortunately, there will be many small business financing options unavailable to you if your business is brand new or hasnât yet opened its doors. If this sounds familiar, you may have to get a little creative with your financing. One of the best options? A personal loan for business.
With a personal loan for business, your personal credit score and income can help you qualify for the funding you need. This is a great way to pay for startup costs or to cover any business expense when you donât qualify for small business financing.
One lender to consider for personal loans is Prosper. You may qualify for up to $40,000 with APRs of 6.95% to 35.99%. You can select from terms of 3 years or 5 years.
To qualify for a Prosper personal loan, you must meet the following minimum eligibility requirements:
Source of income
Debt-to-income ratio below 50%
No bankruptcies within the last 12 months
Less than 5 credit inquiries within the last 6 months
At least 3 open trade accounts on your credit report
Amex Merchant Financing
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Time in business: 24 months
Business revenue: $50,000 per year, at least $12,000 per year from debit and credit card sales
Personal credit score: Good to excellent
Other: Must accept Amex cards
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If your business accepts American Express, you may qualify for Amex Merchant Financing. You can receive a loan of $5,000 up to $2 million for one fixed fee of 1.75% to 20%. A fixed amount is deducted daily, or you can opt to have a percentage of your daily receivables deducted.
Repayment terms are spread over 6, 12, or 24 months and automatic payments are deducted daily from your account. If you repay your loan early, you could get up to 25% of your fixed fee back, helping you save on the cost of your loan.
To qualify, you must:
Accept American Express cards
Have at least $50,000 in annual revenue
Have at least $12,000 in annual debit and credit receivables
Have been in business for at least 2 years
Banks, Credit Unions, & Nonprofit Lenders In Ohio
Online lenders are convenient, but maybe you prefer working with more traditional lenders. Banks, credit unions, and nonprofit lenders throughout Ohio provide loans and other financial products at competitive rates. You can also sign up for other business services, such as checking and savings accounts, payroll services, or employee benefits.
Huntington Bank
Huntington Bank has branches located in hundreds of cities in Ohio, including Akron, Canton, Cincinnati, Cleveland, and Columbus. Small business owners can open a checking and savings account through this bank. If you need extra capital to start or grow your business, Huntington Bank offers multiple financial products tailored to small businesses including:
Term Loans
Commercial Real Estate Loans
Lines Of Credit
Business Credit Cards
SBA Loans
Huntington Bank is a particularly good choice for SBA loans, as it has been ranked the top SBA lender in the region for the last 10 years.
Rates, terms, and borrower requirements vary by product. If youâre interested in getting financing through Huntington Bank, call their toll-free number or visit a branch near you to learn more.
Wright-Patt Credit Union
If you prefer more personalized service when seeking your small business financing, consider joining a credit union. In Ohio, Wright-Patt Credit Union is one of the largest with over 30 locations throughout the state.
As a member of Wright-Patt Credit Union, youâll be able to handle all of your finances in one place. In addition to traditional financial products including business checking, savings, and money market accounts, members can also apply to receive financing through:
Commercial Real Estate Loans: Terms up to 25 years
SBA Loans: 7(a), Express, and 504
Commercial Auto Loans: Terms up to 84 months
Term Loans: Terms up to 10 years
Business Credit Cards
Lines Of Credit
Rates, terms, and borrower requirements vary by financial product. Some financing options, including auto loans and business credit cards, have online applications available to Wright-Patt members.
To become a member, you must meet one of the following requirements:
Live, work, attend school, or worship in one of the Ohio counties serviced by the credit union
Be a military or civilian employee of Wright-Patterson Air Force Base
Live in the Fairborn area with no access to other credit unions
Be a student, faculty member, staff member, or alumnus of Wright State University
Have a family member that is a Wright-Patt member
Be in a group affiliated with Wright-Patt Credit Union
Finance Fund Capital Corporation
Finance Fund Capital Corporation (FCAP) is a nonprofit community development financial institution. Through FCAP, eligible Ohioans can apply for funding through the Small Business Loan Fund. Loans are available in amounts from $100,000 to $1 million. Funds can be used for the following business purposes:
Working Capital
Real Estate Acquisitions
Construction
Leasehold Improvements
Equipment
Loans come with terms up to 7 years. However, there are longer options for commercial real estate and fixed asset purchases. Rates are based on the creditworthiness of the borrower and the risk of the project being funded.
To qualify, a business must:
Be a for-profit sole proprietorship, partnership, or corporation
Provide vital services to the area
Operate in an underserved market
Have a viable business idea
Loans are also given through the SBA Community Advantage program. To learn more and to apply for the Small Business Loan Fund, call or email Finance Fund Capital Corporation.
Small Business Grants In Ohio
If your business needs capital, turning to a lender isnât your only financing option. Your business may qualify for a small business grant. The best thing about small business grants is that funds donât have to be repaid, so thereâs no worrying about monthly payments, high interest rates, or fees.
On the flip side, scoring a small business grant isnât just as simple as filling out an application, having a credit check performed, and getting the funds you requested. Small business grants are extremely competitive. You must also meet very specific requirements — such as operating in a certain industry, having a veteran-owned business, or being a woman business owner — for most grants.
In the state of Ohio, there are several grant programs to consider. Start with these options.
JobsOhio
JobsOhio is a nonprofit corporation that aims to create jobs and promote economic development in Ohio by attracting, retaining, and expanding businesses. Through JobsOhio, small business owners have access to grant and loan programs including:
Economic Development Grant: Focuses on fixed asset and infrastructure investment of companies, including site development, machinery and equipment, land, and buildings.
Revitalization Program: Provides funds for businesses, nonprofits, and governments for costs related to redevelopment projects, including demolition, building renovation, and site preparation.
Workforce Grant: Provides funding for company training costs including information technology, leadership skills, technical training, and on-the-job training.
Growth Loan Fund: While not a grant, the Growth Loan Fund provides low-cost loans for established businesses that have limited access to traditional funding sources. Loan funds can be used to purchase fixed assets including land, buildings, machinery, and equipment.
Ohio Development Services Agency
The Ohio Development Services Agency has multiple programs that are designed to help Ohio businesses grow and create jobs. These programs include small business grants, low-cost loans, tax credits, and bonds.
Programs available through the Ohio Development Services Agency include:
Alternative Fuel Transportation Program: Provides financial assistance to businesses that purchase and install alternative fuel facilities and terminals.
Energy Loan Fund: Provides low-cost financing to businesses and manufacturers for improvements that reduce fossil fuel emissions and energy usage.
Ohio Minority Business Direct Loan Program: Provides low-interest loans to minority-owned businesses
City Of Cleveland Green Technology Business Grant Program
New green technology businesses located or relocating to Cleveland, Ohio, may qualify for the Green Technology Business Grant Program. To qualify, a business must create at least five new jobs within its first year.
The grant provides up to 1% of new payroll for up to 3 years. An additional $5,000 is also available as a Moving Assistance Grant. Interested small business owners can apply online through the City of Cleveland Economic Development.
Loans & Resources For Startups In Ohio
Startup businesses may find it a challenge to get the capital and resources they need to grow. Fortunately, the state of Ohio offers multiple resources to help new businesses and startups succeed.
Minority Business Assistance Centers
The Ohio Development Services Agency offers assistance to minority-owned businesses through its Minority Business Assistance Centers. Through these centers, minority-owned and disadvantaged small businesses can receive services including accounting assistance, business management counseling, marketing plan development, and help identifying local resources.
SCORE
SCORE is one of the nationâs best resources for startup and small business owners. Through SCORE, you can receive free business counseling with an expert mentor. You can meet face-to-face with your mentor or you can receive counseling online.
SCORE also offers free and low-cost business training, workshops, and other resources such as business templates and guides.
SCORE chapters are located throughout the state of Ohio in cities including Mansfield, Columbus, Toledo, and Newark.
Ohio Small Business Development Centers
Whether youâre launching your business or taking your existing business to the next level, the Ohio Small Business Development Centers have resources for you. You can work with a Certified Business Advisor to get your business on the right track.
Services available through SBDC include business planning, one-on-one counseling, finding sources of capital, workshops, and training programs.
Offices are located throughout Ohio in cities including Akron, Cincinnati, Cleveland, and Columbus.
What To Consider When Choosing A Lender
Now that you know just a few of the options available to you, narrowing down your choices to just one lender can be tricky. However, there are a few factors to keep in mind to help you choose the right lender for your business.
Type Of Financing
What type of financing are you seeking? If you want a flexible line of credit, you can cross off any lenders that offer long-term loan options. Interested in SBA loans? Then donât give short-term lenders a second glance. Determine what type of financing works best for your business, then select a lender that provides this type of funding.
Borrowing Amount
If you need $500,000 to purchase commercial real estate, a $10,000 loan isnât going to get you very far. Consider the borrowing limits of each lender, then choose the lender that is able to provide the capital your business needs.
Affordability
When you receiving financing, you have to consider the overall cost of borrowing. Calculate the fees, interest, and other costs associated with each lender youâre considering. Working with one lender may be faster and easier, but the costs may be much higher ⦠and could be too much of a burden for your business. Consider your options, donât feel obligated to take the first offer, and know how much your business can afford. Remember, you want to grow your business, not slide into a cycle of debt.
Borrower Requirements
Do you meet all of the requirements of the lender? Lenders consider factors such as personal credit score, business credit score, past credit history, time in business, and annual revenue. If you donât meet these requirements, you wonât get approved, so why waste your time? Grab your free credit score, read up on borrower requirements, and submit your application only when you know you meet all requirements. Also, please remember that meeting the minimum requirements of a lender is not a guarantee of approval.
Final Thoughts
Starting and operating a business is tough for even the most experienced entrepreneur. Luckily, you donât have to go it alone. As a business owner in Ohio, there are multiple lending options and other resources available to you to keep your business on the path to success.
The post The Best Business Loan And Financing Resources For Ohio Small Businesses appeared first on Merchant Maverick.
Somewhere in that endless list of things-to-do and boxes to check, a small business owner needs to think about business insurance.
It might be easier to convince yourself that you’ll figure out insurance later or that maybe you won’t need it, but all businesses have risks and make mistakes. Business insurance should be a priority.
A quick search for business insurance on the internet might, however, create more questions than answers. What kind of insurance do you need, anyway? What is a reasonable amount to pay for coverage, and what is the average business similar to yours paying? Can you save money by buying different kinds of coverage from the same company?
Itâs normal to feel overwhelmed about how much things will cost, but since business insurance is a must (and possibly even a legal requirement) for your small business, we will breakdown how much you can expect to spend to protect the business you love.
How Much Does Business Insurance Cost?
âSo, how much will all this cost me?â
There is no pat answer that tells business owners how much they might spend to fully cover their business. The factors and choices can seem endless. Are you buying a business owner’s policy or opting only for worker’s compensation? Do you have a risky endeavor that might need a high ceiling on your general liability and professional liability? Would adding umbrella insurance help you sleep at night? What do you actually need and what is simply a scare-tactic up-sale from an industry that peddles you worst-case-scenarios?
In general, a larger business with more options for risk will end up paying more than a sole proprietor, but that doesn’t mean that insuring your business has to break your budget, either.
Average Cost of Business Insurance
According to Insureon, an insurance provider that specializes in commercial businesses, the average cost for business insurance among their customers in 2017 was $1,281 per year and the median cost was $584. (In this case, nearly 60% of the businesses inventoried only had one employee: the owner!)
However, with a plethora of individual factors involved, the pricing scale differs widely between businesses, their needs, their risks, and how much they will cost to insure. An automotive insurance adjuster takes everything about a driver and his/her car into account before calculating the cost to the insurance company, and business insurance operates the same way. If you’re a reckless driver with some tickets under your belt, that price tag for insurance is going to increase. If you’re running a risky business (resisting…Tom….Cruise…joke), expect the same.
A sole proprietor looking for a single general liability policy with a million dollars in coverage might only pay as little as $30 a month.
How Business Insurance Costs Are Calculated
If we take the time to peek behind the curtain and examine how costs are calculated, it can demystify the process and give business owners an idea of what to expect before they get a quote from their insurance company.
First, think about your small business and your industry’s potential risks and liabilities. How much risk is involved with all the facets of your business? Riskier, larger, and more profitable companies will require more comprehensive protection and will therefore pay more.
Your own insurance calculations will be completed by an actuary from an insurance company who will explore your space, your product, your financial numbers, and assess your own particular risk and loss. (Are you a paper company located within a high forest fire hazard zone? A glass company on an earthquake fault line? A pool builder in the middle of a drought? Okay, okay, you get the idea.)
After the actuary looks at the risk and loss, the size and revenue from your company will factor into the ultimate decision. When you ask for a quote, you will need to provide the actuary an ample amount of data with all your business numbers (square footage of space, payroll details, etc.), so arrive prepared.
Business Insurance Cost Factors
When the actuary (someone whose sole job is to manage risk and assess risk) arrives from the insurance company to sit down and plug all your risks, losses, and opportunities for income into the calculator, many factors can ultimately impact that final number. Knowing which factors might affect cost could help you plan ahead.
Your Business Size: What is the physical square footage of your business? What kind of space does it require? The larger the space, the larger the quote.
Location, Location, Location: Location is a key factor for multiple reasons. First, where you are located will affect your premiums because some states are more accommodating than others. Are you located in a state that is considered small business friendly or lawsuit friendly? Location also factors into other business risks like flooding, crime, and foot traffic. (More water, more thieves, more people in your storefront? More money.)
Business Sales Reports: How much money do you make? It’s pretty simple. The more money you make, the more insurance you’ll need. An actuary will look at your numbers and see how much you — or they — might stand to lose.
Your Business Industry: Offices require less capital to insure than, say, a traveling circus. Some industries are built with inherently more risk than others, and the insurance company will examine all the ins and outs of how your business operates to know the best ways to protect you.
Number Of Employees: More employees, more insurance. (Are we sensing a theme?)
Claim History: As with any insurer, the actuary will also look at your past business history and see if you have made any claims in the past.
Types Of Policies: The bigger your business, the bigger the policy. If you don’t have any employees and can stick with general liability, you will pay pennies next to a business that is working to protect employee incomes.
Ways To Save On Business Insurance
So, you want to protect your business but you don’t want to spend more than you need to? Maybe you can’t change where your business is located or your claim history, but here some tips on how to save on business insurance:
1. Bundle Policies
Bundling your insurance policies will often save you money. Consider a business owner’s policy which combines both general liability and commercial property insurance.
2. Shop Around
Insurance companies are in the business of sales and that lowest quote may not always be the best deal in the long run if the company can’t follow-through when you submit a claim. Your business is important enough to do the research. Five independent agencies (including Standard, Poor, and AM Best) rate the financial strength of an insurance company and you can use their services for free if you sign up for an account.
3. Choose A Higher Deductible
A deductible is the amount of money you will pay before your insurance kicks in. Choose a higher deductible and your premiums will go down.
4. Group Rates
Group rates might be available for your industry! If so, this route could save you the big bucks and possibly get you better coverage
5. Work With An Agent Who Specializes In Business
Go out and find an expert on small business insurance instead of settling for an agent who might not know the specifics of your industry.
6. Pay Your Premium In Full
It may be cheaper to pay your premiums for the year in one lump sum rather than spread them out in 12 monthly installments.
Where to Buy Business Insurance
According to Insureon, only 1 in 4 small businesses has adequate insurance and 80% of small businesses never recover after a disaster. Clearly, you need to protect your business, but where should you start?
All the major insurance companies carry commercial business insurance packages. So, places like Allstate, Farmers, Nationwide, and Chubb all offer competitive rates. Some companies, like Hartford and Hiscox, which specialize in small business insurance, have online quotes that walk a business owner through the process of optimizing their rate.
Again, it’s smart to check with the Better Business Bureau or your state’s department of insurance to examine the viability and strength of your insurer. Use the rating agencies and talk with business owners in your area. Ask around and shop around: this is your business baby and should the worst-case-scenario befall your company, you don’t want to end up in the 80% of businesses who have to close their doors after a disaster.
Comparing Business Insurance Quotes
Pre-internet days, a business owner might need to make an appointment with several insurance retailers and sit through long sales pitches before receiving a quote. Now, it’s easy to get an online quote from an insurance company in minutes over the internet. That isn’t to say that scheduling a face-to-face meeting with your top three insurers is a bad idea. Once you’ve narrowed down choices, talking to a real human being could help you make a final decision on what insurance company you trust the most.
Not all business insurance plans are created equally, so here are some things to consider as you compare:
Don’t just fixate on the premium number, but also look at the rate. As your company grows, the rate may increase as well and price you out of your own policy.
Cheaper isn’t always better. Carefully weigh the cost with the level of coverage you need and don’t skimp on the coverage you need just to pay less.
No insurance plan covers everything, so discuss and address exclusions to the policy to make sure there are no surprises.
Several websites also can do the initial aggregate work for you and compare all the major retail policies in one place. Check Bizinsure, Coverhound, and Insureon and have your company numbers ready to go (number of employees, sales data, business address, and square footage). You can grab comparison quotes from these websites in a matter of minutes.
After you’ve carefully researched and compared all of your options, pick the best one suited for your business. Consult an insurance professional for advice. Once you’ve found the right business insurance you can rest easy knowing that you got your business the coverage it needs — and without breaking the bank.
The post How Much Does Business Insurance Cost? appeared first on Merchant Maverick.
