Want to get a business credit card, but are worried that doing so may hurt your personal credit score? Then this guide is for you!
Business credit cards are often a great idea — they help separate business expenses from personal purchases and rewards are usually built with business spending in mind. Plus, they often incorporate extra benefits targeted towards business users.
However, in some cases card issuers report activity on a business credit card to one of the three major personal credit bureaus — Equifax, Experian, and TransUnion (these bureaus collect and sell data regarding the credit history of individuals, and problematic usage can impact your ability to get loans and apply for credit cards). This means that negative actions like missing payments or high credit utilization may indeed affect you personal credit.
It isn’t all gloomy, of course. By staying on top of payments and using your business credit card wisely, you should only save money in the long term. Plus, depending on the issuer, you may actually help your personal credit score.
To get the full picture on just how a business credit might be able to harm your personal credit score, read on below!
How Business Credit Cards Can Affect Personal Credit
Unfortunately for those that want to keep business credit entirely separate from personal credit, you’ll often be required to back up your business credit card with a personal guarantee. Should your credit card require this, you’ll be on the hook if your business’s account defaults. Note that in some cases, issuers won’t report your activity to personal credit bureaus while other may only report when your account is seriously delinquent.
As always, it’s helpful to monitor your credit score. That way you can track any changes and potentially stop harmful practices before things get out of hand. Don’t know your credit score? Find out with one of these free tools.
Here are a few key reasons why your personal credit score may be affected by business credit card usage:
Credit Inquiry For Your Application
When you apply for a business credit card, the issuer may look at both your business credit and your personal credit history. If this is the case, you’ll receive a hard pull on your credit.
Hard pulls will drop your credit score by a few points. However, they shouldn’t be damaging to your credit in the long term (unless you apply for numerous cards in rapid succession).
If you are using a high amount of your available credit, and your card’s issuer reports all your activity to personal credit bureaus, you may see a negative impact on your credit score. Credit utilization is based off the amount of credit you’re using and the amount of available credit you have.
In general, it’s best to only utilize up to 30% of your available credit. It’s even better if you can keep the amount below 10%. Luckily, business credit cards usually include higher credit limits than those that fall under the personal variety.
Failure To Make Payments On Time
This is the big one. Late payments make up a big part of your credit score and can stay on your history for up to seven years. Plus, some issuers will only report info to personal credit bureaus if your business credit is seriously late on payments. This means that while you may be safe utilizing a lot of credit, you will still be dinged for operating a delinquent account.
Besides potentially affecting your personal credit, a delinquent account costs you more money, too. For starters, you’ll likely need to pay a penalty APR (generally around 29.99%) and may be further subject to other late fees.
Issuers That Report Spending To Personal Credit Bureaus
Some issuers will send information to credit bureaus and others won’t. We’ve outlined how some of the major issuers handle credit report below.
These issuers will report your activity to personal credit bureaus:
American Express (but only negative activity)
Barclays (depends on the situation)
These issuers won’t report your activity to personal credit bureaus unless your account becomes delinquent:
Bank of America
These issuers generally won’t report your activity to personal credit bureaus:
Note that all the above issuers do report activity to commercial credit bureaus, with the exception of BBVA (which does no reporting at all).
Can Employee Spending Affect Personal Credit?
Employee spending won’t directly affect your personal credit. However, if your employees spend more than you can pay off in a payment period, or their spending constantly utilizes too much of your available credit, you could see dings on your credit report. To avoid these potential problems, be sure to frequently monitor charges to your account and set up the spending tools that come with your card. For all the ins and outs of employee cards, read up on our guide.
It’s also worth mentioning that employees who are authorized users may see an effect on their own personal credit scores. If you are on top of payments and manage spending efficiently, you could help boost their credit scores. On the flip side, if you’re struggling with payments, it may be worth double-checking that employees are okay with being authorized users — otherwise, they could have their credit unknowingly damaged.
Should I Get A Business Credit Card That Wonât Affect Personal Credit?
When it comes time to choose, you should look for cards that offer rewards that best fit your business’s spending profile. However, if you anticipate that you’ll constantly be behind on payments, then you may want a card that doesn’t report to personal credit bureaus. Of course, that’s not a very savvy way to plan to get a credit card; instead, you should try to follow some of these best practices for credit cards.
One way you can ensure your personal credit won’t be affected is by applying for a corporate credit card. Because corporate card liability is placed on the business level, you’ll be able to avoid any personal guarantees. However, corporate cards are only available for larger companies; for instance, you’ll likely need to make at least $4 million in annual revenue.
Get a complete breakdown of the differences between corporate and business cards.
Maintaining Good Credit: Best Practices
The number one best thing you can do to maintain (or even build) good credit is pay off your card in full every month. By doing so, issuers won’t have a reason to report negative activity to credit bureaus. Plus, you’ll save money by not paying extra for interest or on late fees.
On top of this, you’ll want to keep your credit utilization low. This means that you should only use up to 30% of your allotted credit line — and, ideally, between 1% and 10%.
Get more tips on how you can boost your credit score with a credit card.
While business credit cards can affect your personal credit history, your score should be fine as long as you stay on top of payments and don’t utilize too much credit.
Ultimately, smart use of a business credit card can only be a good thing. By boosting your business’ credit score, you’ll be able to apply for better credit cards and lower interest loans, helping your business grow faster.
The post Can Business Credit Cards Affect Your Personal Credit Score? appeared first on Merchant Maverick.
It should come as no surprise that, as the stratospheric rise in the cost of housing, health care, and education exceeds wage growth, interest in managing one’s credit health would soar as well. After all, our credit scores play a huge role in determining our access to the credit we need just to keep ourselves afloat. Of course, we’d prefer not to have to pay money just to keep track of our own credit score.
This is where services like Credit Sesame come in.
Describing itself as “a fast-growing credit and loan management platform,” Credit Sesame offers four primary credit management services. When you sign up for a free Credit Sesame account, you’ll get access to the following:
Your credit score
Your credit report
Identity theft protection
How does Credit Sesame work? Is it safe? And is it genuinely free? Read on to discover the answer to these questions and more!
What Is Credit Sesame?
Credit Sesame was founded by Adrian Nazari in 2010. Since then, the company has grown to the point where it now employs 119 people. Millions of users now subscribe to Credit Sesame, though the company doesn’t give an exact number. Some sources claim the site has six million members, others say eight million, while others say 12 million.
A free Credit Sesame account offers the following:
Access to your TransUnion (one of the big three credit bureaus) credit score once per month
Daily credit monitoring with an alerting system that alerts you when your TransUnion credit score changes
Up to $50,000 in identity theft insurance
Is Credit Sesame Always Free?
If you’re satisfied with the services you get access to with a free Credit Sesame membership, you can use Credit Sesame forever without having to pay a cent. However, Credit Sesame does offer paid services in addition to the free services. These services are offered in the form of three different subscription plans: Advanced Credit, Pro Credit, and Platinum Protection. Here’s what you’ll get with each of these plans:
Daily credit score updates from TransUnion
Monthly credit score updates from all three major credit bureaus
Full credit reports each month from all three credit bureaus
All of the above, plus:
Full identity protection
Credit monitoring with alerts for all three credit bureaus
24/7 access to live experts to help solve credit report inaccuracies
All of the above, plus:
24/7 access to live experts for stolen/lost wallet protection
Black market website monitoring
Public records monitoring
Social Security Number monitoring
Is Credit Sesame Safe?
I have seen nothing to indicate that Credit Sesame is unsafe at all. You don’t need to give them any credit card information, and you only have to enter the last four digits of your SSN to establish an account.
No data breaches or any other loss of private user information associated with Credit Sesame have ever been reported. If you sign up with Credit Sesame, I wouldn’t worry about the safety of your personal information.
Credit Scores & Reports Offered By Credit Sesame
Credit Sesame shows you your credit score from TransUnion, one of the three major consumer credit bureaus. This score is calculated using the VantageScore formula, which means that the score you’ll see is not your FICO credit score. VantageScore is a different, newer credit-scoring model than FICO, and while your creditors may be assessing you based on your FICO score, your VantageScore shouldn’t be that far removed from your FICO score (learn about the differences in our complete guide to VantageScore VS FICO scores). Additionally, as VantageScore is the newer scoring model, it has become increasingly utilized by potential creditors with time. Your score will be updated by Credit Sesame once a month.
Your VantageScore credit score from TransUnion takes your credit information and history into account, giving you a picture of your overall credit health. It’s a nice feature to have for free, though I will note that competitor Credit Karma gives you free access to your VantageScore from both TransUnion and Equifax (another one of the big three credit bureaus).
Along with your credit score, Credit Sesame will show you five data points from your TransUnion credit report to show you how these factors affect your score: Payment history, credit usage, credit age, account mix (this refers to how many different types of open accounts you have — credit cards, auto loans, etc.), and the number of recent credit inquiries you’ve had.
You’ll also get access to information about any debts you have (including what percentage of your monthly income goes toward debt payments), along with credit monitoring, which means you’ll be alerted to any new activity that appears on your TransUnion credit report.
Note that while you’ll see selected data pulled from your credit report, you won’t have access to your full credit report with just a free site membership. You’ll need an Advanced Credit subscription ($9.95/month) for that. With an Advanced Credit subscription, you can get your full credit report each month from all three credit bureaus, not just TransUnion. Alternately, you can make a single standalone purchase of your TransUnion credit report for a one-time payment of $9.95.
With an Advanced Credit subscription, your TransUnion credit score will be updated daily, not just monthly. You’ll get monthly credit score updates from the other two major credit bureaus (Experian and Equifax) as well — something you can’t see for free.
Other Services Offered By Credit Sesame
I’ve touched on Credit Sesame’s other services, but let’s now delve into what the site has to offer beyond credit scores and reports.
A free Credit Sesame account will get you credit monitoring for your TransUnion credit report. You’ll get alerts whenever new activity appears on your TransUnion report. However, to get credit monitoring/alerts for all three of your credit reports — TransUnion, Experian, and Equifax — you’ll need a Pro subscription ($15.95/month)
Identity Theft Insurance
Most credit score sites don’t give you free access to identity theft insurance, so Credit Sesame stands out in this regard. You’ll get $50K in insurance coverage for identity theft, fraud, and other financial crimes. Hey, it’s free insurance! And if you want more coverage, sign up for a Pro Credit subscription and get $1 million in identity insurance.
Along with identity theft insurance, you’ll get some identity restoration tools. These come in the form of documents showing you how to report fraud to government agencies, sample letters to credit bureaus, and the like.
Credit Card Recommendations
Credit Sesame will recommend credit cards to you according to your likelihood of approval (based on your credit score). These offers also show you how much credit you’re likely to gain access to in the event that you’re approved. You can also check to see if you pre-qualify for any personal loans. You can even search for mortgage lenders.
Credit Sesame’s free tools let you check and monitor your credit score as well as determine just what aspects of your credit profile are dragging down your score (or boosting it, as the case may be). What’s more, $50K of free identity theft insurance is nothing to scoff at!
However, if you want full access to your credit reports, full identity protection, and such bonuses as full Social Security Number monitoring, you’ll need a paid subscription. What you get for free is of considerable value, though.
Should you use Credit Sesameâs credit score services?
This service might be a good option ifâ¦
You want to know your TransUnion credit score for free
You want free identity theft insurance
You want free credit monitoring
You’re willing to pay for a higher degree of credit management help
You might want to use a different service ifâ¦
You specifically want to know your FICO score
You want free access to both your TransUnion and Equifax credit scores (Credit Karma has this)
You want to use debt/loan calculators to help you formulate your credit building strategy (some competitors have this)
Want more tools to help you boost your credit score? Check out these articles!
Guide to credit bureaus
Guide to credit scoring models
How to improve personal credit score
How to dispute errors on your report
The post Credit Sesame Review: Free VantageScores From TransUnion appeared first on Merchant Maverick.
If you have a Visa or Mastercard, then you already have an intuitive understanding of what an issuing bank is. It is the bank whose name is on the card, alongside the Visa or Mastercard brand. It is the bank where you applied for the card, the bank that sends you a bill each month, and the bank that you (hopefully) pay each month. As a cardholder, the issuing bank is the only entity you work with, and you probably donât care how the money you charged eventually ends up with the merchant.
If you are also a business owner, however, you do indeed care about how the money gets to you, and the issuing bank plays an important role in the process. Read on to find out what an issuing bank is, and why it is important to a merchant.
Defining An Issuing Bank
The credit card business can be complicated. Its technical terms can make a personâs head spin, and one of these terms is issuing bank or, sometimes, issuer.
The issuing bank is the entity that owns the relationship with the cardholder. The issuing bank finds the consumer it wants to do business with, investigates the creditworthiness of the consumer, issues the consumer a revolving line of credit in the form of a credit card, fronts the money for the consumerâs purchases, and then collects all or some of the money in one invoice to the consumer every month. They assume some of the risk if the consumer is unable to pay back the credit card debt.
There are four major credit cards brands in the US: Visa, Mastercard, American Express, and Discover. Each card has a slightly different relationship with its issuing banks.
Visa and Mastercard
With Visa and Mastercard, it is easy to identify the issuing bank of each cardâthe bankâs name is always on the card. The reason this is so has a lot to do with how the modern-day credit card got started.
Visa was formerly called BankAmericard. It was the first successful consumer credit card, and it was started by Bank of America in 1958. Mastercard came along soon after. It was formed by a consortium of banks who wanted to compete with Bank of America in the credit card business.
In the beginning, BankAmericard was only available in California because that was where Bank of America did business. As the card became more successful, Bank of America wanted to expand the card into other states. However, at that time, a bank from one state could not operate in another state, so Bank of America had to license the cardâs name to individual banks authorized to operate in specific states.
BankAmericard became a franchising business and the licensee banks found their own consumers and issued their own cards, but all under the BankAmericard name. They used the payment infrastructure from Bank of America to move money from the cardholders to the merchants to pay for the goods and services.
Mastercard grew in a similar way with a similar business structure. It started out as a consortium, so it had always been a licensing business.
The BankAmericard continued to belong to Bank of America until 1970, when it became an independent company. In 1976, it changed the cardâs name to Visa, and became the company we know today.
Because of this history, with Visa and Mastercard, the name of the issuing bank always appears on every card along with the cardâs brand. Because each individual bank had the responsibility of finding new cardholders, the cardholders worked with the issuing banks whenever a payment or purchase issue arises.
The American Express card originally started as a charge card instead of a credit card, and only the American Express company issued the card.
Charge cards are slightly different than credit cards. There is no stated limit on a charge chard–it changes as the creditworthiness of the cardholder changes, so it can change on a month-to-month basis. Charge cards must be repaid in full at the end of every month. In contrast, a credit card is a line of credit with a stated limit that can be paid back over a longer period of time.
American Express still issues charge cards, and the issuing bank for these charge cards is American Express itself (it became a bank holding company in 2008). However, American Express also offers a line of credit cards, and the credit cards can be issued by third-party banks such as Bank of Hawaii (actually owned by Bank of America), MBNA, Citibank, Wells Fargo, and quite a few others.
So American Express is sometimes its own issuing bank, but it also works with other banks to issue credit cards. When an American Express credit card is issued through a third-party bank, the issuing bankâs name is on the card, along with the American Express logo.
Discover works a little bit like American Express because it functions as the issuing bank. That bank is called the Discover Bank, but its name does not appear on the card. It is the only issuing bank of Discover cards in the US. (There are international arrangements, so a few banks outside the US do issue Discover cards in their respective countries.)
Discover began its life in 1985 at Sears, when Sears wanted a general-purpose credit card in addition to its own store card. When the card started, it was issued by The Greenwood Trust Company located in Delaware, which Discover bought in the same year. Even to this date, the trust has one physical location, in Delaware. Discover changed the trustâs name to Discover Bank and the bank continues to issue Discover cards as well as offer a suite of traditional financial products like checking accounts. You can explore its traditional banking services online on Discoverâs website.
Now that we understand how to identify an issuing bank for each card, letâs look at the issuing bankâs role in payment processing.
The Issuing Bank’s Role In Payment Processing
As mentioned above, the issuing bank owns the relationship with the cardholder. The issuing bank is the entity that investigates the creditworthiness of the cardholder, grants the line of credit to the cardholder, and fronts the money for purchases made with the card to send to the merchant.
A highly simplified flow of the process is as follows:
Cardholder presents the card to pay.
Merchant takes the information and contacts its own credit card processing entity, which, for the sake of simplification here, is a bank (called the acquiring bank).
Acquiring bank contacts the issuing bank.
Issuing bank verifies the cardholder’s funds and sends the purchase amount to the acquiring bank.
Acquiring bank pays the merchant.
Issuing bank recoups the money from the cardholder based on a regular billing cycle.
As can be seen above, as a merchant, you do not have to deal with the issuing bank in this normal process flow. However, sometimes the cardholder disputes the charges, maybe because of buyerâs regret, maybe because they never got the goods/services, or maybe because the charge is fraudulent in some way.
The cardholderâs relationship is with the issuing bank, so they file a complaint with the issuing bank. The issuing bank then works with the acquiring bank and the acquiring bank might come back to you and ask you about the disputed charge. Note that the issuing bank has a direct business relationship with the cardholder while you have no direct business relationship with the issuing bank–your relationship is with the acquiring bank.
Unfortunately, it is the issuing bank who has the final say on disputed charges, and it often decides in the cardholderâs favor. This results in a chargeback and you end up not only having to pay the money back, but also pay a fee for the investigation. Even if you do win the dispute, you may still not get the investigation fee back.
Issuing Bank VS Acquiring Bank
There are a few things to note about the acquiring bank or acquirer. First, this is the bank that owns the relationship with the merchant. It fronts the credit card payment to the merchant and then shares some risk with the issuing bank on not being able to eventually recoup the money from the cardholder. Some acquiring banks work directly with a merchant, others farm out the work to another specialized entity called the payment processor (who then owns the direct working relationship with the merchant), yet other acquiring banks do both.
In the above simplified flow, the acquiring bank is a bank different from the issuing bank. Real life, however, is never this simple. As discussed above, the first widely accepted credit card was started by Bank of America. They had to build an entire backend infrastructure to pay the merchants, so they were their own issuing bank as well as the acquiring bank. Even to this date, Bank of America continues to be both an issuing bank and an acquiring bank. Many other big banks work the same way.
As a merchant, the most important bank for taking credit card payments is the acquiring bank, so it is worth your time to get a deeper understanding of what they are and how they work. We have a terrific in-depth article on acquiring banks, so be sure to check the article out.
How Important Is The Issuing Bank To Merchants?
If you have a business credit card, then, of course, the issuing bank is important to you because you work with the issuing bank on your businessâs purchases. As a merchant who accepts credit card payments, however, the issuing bank is only important when a chargeback occurs.
If your business experiences very few chargebacks, then you would have to deal with the issuing bank only occasionally. If you have a lot of chargebacks, you would have to deal with issuing banks often, but only indirectly. Because you do not have direct contact with issuing banks on chargebacks, it could handicap your ability to dispute a chargeback. It is, therefore, not the actual issuing bank that is important to a merchant, but the role of the issuing bank in the credit card processing that is important to the merchant.
How often do you have to deal with issuing banks? Is there an issuing bank you found particularly difficult or easy to work with? Leave us a comment below.
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When small business owners need a flexible option for funding business expenses, a line of credit fits the bill. Unlike traditional loans that provide a lump sum of capital, lines of credit allow borrowers to draw money as needed up to the credit limit set by the lender. If the line of credit is revolving, funds are replenished as the borrower pays down the balance, giving the borrower consistent access to the capital they need to grow their business.
While banks offer lines of credit, these are typically difficult to qualify for, and the application processes can be lengthy and confusing. More small business owners are bypassing traditional lenders in favor of alternative lenders that offer quick approvals and easy applications — lenders like Fundbox.
What Is Fundbox?
Over 100,000 small businesses have used Fundbox to boost their business capital. Unlike banks, Fundbox has an easy application process. Fundbox provides credit decisions in just minutes, and if approved, you can immediately initiate your first draw and have cash in your bank account in as little as one business day.Â Fundbox has a transparent fee structure, and you only pay when you make a draw. Pay your balance back early and Fundbox waives all remaining fees, helping you lower your cost of borrowing.
One of the best things about Fundbox is the lender’s relaxed borrower qualifications. Approval is based on the performance of your business, so businesses that have trouble qualifying elsewhere may have success in obtaining a Fundbox line of credit. During the application process, you’ll sync your business bank account so Fundbox can analyze the performance of your business. If you have outstanding invoices, you can qualify for a line of credit through Fundbox’s invoice financing service by syncing your supported accounting software. Learn more by checking out our full review of Fundbox.
Although there are many benefits to using Fundbox, this lender isn’t the right choice for every business. With a maximum borrowing amount of $100,000, Fundbox may not offer enough capital for larger businesses. Maybe Fundbox’s weekly payment schedule doesn’t work for your business, or you want longer than the maximum repayment terms of 24 weeks. If you have an established business and a high personal credit score, you may qualify for other options with more affordable terms than what is offered through Fundbox.
Whether Fundbox doesn’t quite fit your needs or you’re just shopping around, there are similar lenders that may work better for your financial situation. In this post, we’ll explore alternatives to Fundbox to help you make the wisest financial choice for your business.
Time in business: 12 months
Business revenue: $100,000 per year
Business industry: Must not be in aÂ restricted industry
OnDeck is similar to Fundbox in many ways. This alternative lender offers a quick and simple online application that doesn’t require piles of paperwork. In fact, all you need in most cases is some basic business and personal information, your business tax ID and social security number, and business bank account statements. After submitting your application, you can receive a decision in just a few minutes.
OnDeck offers lines of credit up to $100,000. If you need more money, you may qualify for OnDeck’s term loans with maximum borrowing limits of $500,000 and terms up to 36 months. OnDeck has just one financing application and will determine which product best fits the needs of your business. Repayments are made on a daily or weekly schedule.
One thing that stands apart about OnDeck’s lines of credit is Instant Advance. With Instant Advance, approved borrowers with eligible debit cards can receive their funds in just minutes. Automated Clearinghouse (ACH) transfers are also available, and borrowers will receive funds typically in 1 to 2 business days.
OnDeck has low borrower requirements, but personal credit score is a factor for approval. All applicants must have a score of at least 600 to qualify for OnDeck’s term loans or lines of credit. Borrowers must also be in business for at least a year and have at least $100,000 in annual revenue.
StreetShares is a veteran-founded small business lender that once focused on other veteran-owned business. Today, any business owner can apply to receive funds through one of StreetShares’ three financial products: lines of credit, term loans, and contract financing.
If you need a line of credit larger than the maximum $100,000 offered through Fundbox, StreetShares might be a good option for you. This lender provides lines of credit with limits up to $250,000 for qualified borrowers. This option allows you to draw funds as needed and only pay interest on what you’ve borrowed. If you want your money as one lump sum, you may qualify for up to $250,000 with a term loan. StreetShares’ loans and lines of credit each have terms up to 36 months for businesses that want longer repayment terms.
StreetShares also offers contract financing — a product that’s similar to invoice financing. You can receive up to 90% of your invoices upfront with no limitations on the contract amount. This could be an ideal solution for borrowers that want to borrow money now against their unpaid contracts.
Like Fundbox and other lenders on this list, StreetShares has a simple online application process. You can be pre-approved in just minutes with minimal information. However, you may be required to provide additional documentation during the underwriting process, including financial statements and tax returns. All borrowers must have a time in business of at least one year, annual revenue of at least $100,000, and a credit score of at least 600. One last thing to note is that StreetShares only allows you to borrow up to 20% of your annual revenue.
Time in business: 12 months
Business revenue: $50,000 annually (or $4,500 for the last 3 months)
No specific personal credit score requirement, but Kabbage will run a credit check when you apply
Kabbage is very similar to Fundbox, offering lines of credit with very lenient borrowing requirements. Like Fundbox, Kabbage bases its approvals on the performance of a business, so Kabbage may be a good option for credit-challenged borrowers.
Despite its similarities, though, there are some key differences that could make Kabbage the more appealing option for your business. For starters, Kabbage offers higher maximum limits for its lines of credit — up to $250,000 compared to just $100,000 with Fundbox. Kabbage also offers monthly payments, which may work better for your needs than Fundbox’s weekly repayments.
Kabbage’s lines of credit can be repaid over 6, 12, or 18 months. Kabbage offers simple, transparent monthly fees only for the amount you’ve borrowed, and you can save on the cost of borrowing by repaying early. Borrowers may receive better rates and terms with Kabbage than Fundbox, but Fundbox may be the less expensive option for other borrowers. If you qualify for Kabbage, you can also receive the Kabbage Card, which allows you to instantly access your line of credit without waiting for transfers.
The application process for Kabbage is fast, and you can be approved and access your funds just minutes after applying. Minimal information is required to apply, and there are no minimum credit score requirements. You must, however, have a time in business of at least one year and at least $50,000 in annual revenue.
Shopping your options? Give Lendio a try. With just one application, you can receive offers from over 75 lenders, making it easy to find the best loan for your situation. Lendio’s network of lenders offer many different types of funding, including lines of credit.
You can receive up to $500,000 through Lendio’s network as a line of credit, which is significantly more than the limits of Fundbox’s financial product. Interest rates start at 8%, although some borrowers may receive interest rates as high as 24% based on a number of factors including, but not limited to, credit profile. Typical loan maturity for a line of credit obtained through Lendio is one to two years.
Qualifying for a line of credit through Lendio’s network is simple. Minimum borrower requirements include at least $50,000 in annual revenue, a time in business of at least six months, and a personal credit score of at least 560. However, to get the highest borrowing amount and lowest interest rates, you must have a higher credit score and a solid business performance.
Applying through Lendio is free and doesn’t have an impact on your credit, so it’s ideal for comparing your options. You may also decide that a line of credit isn’t right for your business, and you can get offers from lenders for other types of funding including Small Business Administration loans, accounts receivable loans, and business credit cards.
Like Fundbox, BlueVine offers a business line of credit. One of the main differences, however, is that you can borrow up to $250,000 through BlueVine. BlueVine also offers longer repayment terms of six or 12 months. Repayments are made on a weekly or monthly schedule.
However, it is more difficult to qualify for a BlueVine line of credit. The minimum requirements include a personal credit score of at least 600, minimum annual revenue of at least $100,000, and a time in business of at least six months.
In addition to its lines of credit, BlueVine also offers an invoice factoring service. This is ideal if you have outstanding invoices and need more money than is offered through a line of credit. You can receive up to 90% of your outstanding invoices, with lines up to $5 million. Once the invoice is paid, you’ll receive the remaining balance, minus BlueVine’s fees, which start at 0.25% per week. To qualify, you must have a B2B business that has been in business for at least three months. You must also have annual revenue of at least $100,000 and a personal credit score of at least 530.
Finally, you can also receive a term loan through BlueVine. You can borrow up to $250,000 as one lump sum that is repaid weekly over a period of up to 12 months. There are no origination fees, and you can receive your funds in as little as a few hours.
While there are some benefits to using Fundbox — think low borrower requirements and fast funding — this lender may not be the best choice for your business. Before you put your name on any agreement, make sure to compare your options to find the best rates and terms based on the needs of your business. Take the time to do your research, shop around, and make sure you understand the full cost of borrowing no matter what lender you select.
The post The Best Alternatives To Fundbox appeared first on Merchant Maverick.
If your company is growing and you find that reimbursing employees for their business purchases is becoming a hassle, it may be time to look into getting your employees business credit cards.
These bits of plastic can help streamline your employees’ workflows when it comes to making business purchases. Plus, you may find it’s easier to track your business’s spending habits via a card issuer’s money-tracking tools.
Of course, it’s not going to be all smooth sailing if you do end up adding employee cards to your spending arsenal. There are plenty of nitty-gritty details to go over when it comes to this type of credit card.
Are you ready to get an in-depth look at what employee cards are and how they work? Let’s delve on in!
How Employee Credit Cards Work
Employee credit cards are often offered in conjunction with business credit cards. Many issuers include employee cards as a free benefit. However, some may limit the number of employee cards you can request, or you may incur charges when requesting employee cards.
Once youâve been approved for a credit card with employee cards as a benefit, youâll be able to contact your issuer to receive additional cards.
When an employee uses their employee credit card to make a purchase, their purchase will go on a primary account. This primary account will then need to be paid off every month. Additionally, if your card has a rewards program, youâll earn rewards whenever your employees make purchases.
In many cases, employees can take advantage of the additional benefits a credit card provides. These benefits could include features such as car rental insurance, roadside assistance, Global Entry/TSA PreCheck waivers, and extended warranty on purchases. Some more premium cards even include benefits such as hotel credits, complimentary access to airport lounges, and free hotel or flight upgrades.
If you run a larger company, corporate cards may be a better option than a basic business card. These cards are designed to work with a large number of users and are often customized to best fit a company’s needs. To learn the differences between corporate cards and business cards, take a deep dive with the Merchant Maverick comparison.
The Benefits (& Pitfalls) Of Giving Credit Cards To Your Employees
There are plenty of reasons to hand out employee cards. Here are a few of the top benefits to doling out plastic to your employees:
Management Tools: With a business credit card that offers employee cards, you can often manage spending through your issuer’s website or app. These tools usually include spending limits, ability to control which categories are available for purchases, and quarterly/year-end spending summaries.
Simplified Spending: Because employees can just put purchases on their credit cards, they wonât need to waste time filling out expense reports or requesting reimbursement.
Rewards Programs: Many business credit cards have excellent reward schemes. By matching your businessâs spending profile with the right card, youâll be able to save money every time an employee buys something.
Extra Benefits: The numerous benefits that come with business credit cards could help your employees with purchases, travel, and more. From car rental coverage to purchase protection to travel waivers, credit card benefits can make many points of an employee’s work life easier.
Of course, there are a couple of cons to watch out for. Here are a few things to consider before giving employees credit cards:
Increased Fraud: If you donât properly keep tabs on what employees are buying, itâs possible they may use their cards for personal purchases. Additionally, the more cards you hand out, the greater the chance someone outside the company will steal a card or data associated with a card.
Extra Fees: When using credit cards, itâs important to stay on top of your monthly payments. If you donât, you may be hit with late payment fees and interest.
How To Get Credit Cards For Your Employees
To hand out employee credit cards, you’ll need to find a business credit card that offers employee cards as an option. Plenty of issuers deliver cards that include free employee credit cards. If employee cards are a primary concern for your business, it may be in your best interest to look for a card with complimentary employee cards.
Issuers that offer free employee credit cards include:
Bank of America
Note that in some cases, issuers will charge extra fees for each employee card you request. Additionally, there may be instances where you can only request a limited number of employee cards. Amex, for example, only allows 99 employee cards to be issued, while Wells Fargo places their limit at 100 for the Business Platinum Card and 200 for the Business Elite Card.
How To Manage Employee Use Of Credit Cards
Creating clear outlines is an important step to giving your employees credit cards operated by the business. This means they should understand that the cards are only to be used on business-related purchases (and not on that 65-inch 4k TV they’ve been eyeing). On top of this, make sure guidelines on what is and isn’t a business expense are clearly articulated.
For your part, as an owner, plan to review charges employees place on their cards on a frequent basis. Every time you give an employee a credit card, the chance of fraud increases. By regularly monitoring where those within your business are placing charges, you may be able to catch fraud before it gets out of hand.
Many cards also offer spending limits. This means you can limit employees to a set allowance every month. This is helpful in cases where employees make consistent monthly purchases. It will also help prevent potential fraud because employees won’t be able to go on crazy spending sprees.
Some cards additionally will notify you when a purchase is made outside of certain set categories. If your card has this tool, you may be able to spot a spend-happy employee more easily.
Finally, recommend that employees save their receipts. This way they (and you) can have a written record in case anything goes amiss.
Employee cards can help your company function more smoothly when it comes to making purchases. By adding them to your business’s purchasing arsenal, you’ll be able to streamline spending, track employee purchases, and take advantage of credit card benefits.
To get started finding your business’s next credit card, visit our complete rundown of the best business cards out there. Or, you can check out the dos and don’ts of business credit cards to kick-start your credit card journey.
The post What You Should Know About Giving Credit Cards To Your Employees appeared first on Merchant Maverick.
In the age of precarious living, we’re all swimming upstream. Dealing with the ever-escalating expenses of life — housing, education, health care, etc. — can put a serious strain on your credit. Because our credit score so heavily influences what we are able to do with our lives, interest in free credit score services has never been higher.
One of the most prominent websites offering free credit scores and reports is Credit Karma. While over 85 million people are already Credit Karma members (as of January 2019), others may (justifiably) be concerned about the privacy of their data, the accuracy of the credit scores given, and whether or not Credit Karma is genuinely free to use.
Let’s tackle these questions and find out whether or not Credit Karma is a good choice when it comes to keeping an eye on your credit score. I’ll assume the role of the Karma Police!
Sorry — for a minute there, I lost myself. (Do people still get Radiohead references in 2019?)
Note: While Credit Karma also offers tax services, this review will be focused on Credit Karma’s credit management services.
What Is Credit Karma?
Credit Karma was founded on March 8th, 2007 by Kenneth Lin, Ryan Graciano, and Nichole Mustard. While the platform was founded in order to provide users with free information about their credit, the company has steadily expanded its offerings over the years, offering full credit reports, personalized offers for credit cards and personal loans, and a tax planning service. The company now employs over 800 people.
Is Credit Karma Really Free?
The short answer: Yes. The credit scores and reports given by Credit Karma are completely free. All you need is a free Credit Karma account. This begs the question: How does Credit Karma make money?
Credit Karma uses your personal credit data to send you targeted ads based on your individual financial situation. If you ultimately take an offer from one of Credit Karma’s advertising partners, the company makes money off the sale. This way, Credit Karma doesn’t have to charge users a fee to use the company’s services.
Is Credit Karma Safe?
Naturally, when people hear that a company is using customers’ financial information to send them targeted ads, they may be concerned with what else Credit Karma could be doing with that information. Additionally, Credit Karma requires you to give your social security number in order to verify your identity when pulling your credit. Having to enter my SSN online, for any reason, makes me feel a bit uneasy, and it probably does for you as well.
Despite all this, Credit Karma is as safe as a site like this can be and has a strong track record in this regard. The site uses 128-bit encryption to protect the information you type in, and your social security number is not stored with Credit Karma. Additionally, the site has a DigiCert EV SSL certificate (the highest degree of authentication). And while Credit Karma uses your financial information to match you with ads, the company has a policy of not sharing that information with third parties. I’ve yet to see any evidence that the company has breached this policy.
Credit Scores & Reports Offered By Credit Karma
Credit Karma provides free credit scores from TransUnion and Equifax, two of the three major credit bureaus (the third is Experian). These scores are calculated using the VantageScore formula and are updated on a weekly basis. Note that your VantageScore credit score is different than your FICO score, as FICO is an entirely different (and older) credit-scoring model.
Learn all about the differences between VantageScore and FICO in our complete guide, but suffice to say, the two models weigh various aspects of your credit data differently than one another, therefore your VantageScore credit scores may differ from your FICO scores. If your creditor is looking at your FICO score, it won’t be the same TransUnion or Equifax score you get from Credit Karma. However, VantageScore — the newer scoring model — has been gaining acceptance with time.
In addition to your TransUnion and Equifax credit scores, you’ll also have access to your full TransUnion and Equifax credit reports. Credit Karma will highlight the most important items in the reports for you to help you make sense of what your reports mean, as they can be hard to decipher in their raw form. These reports are updated each week and you can check them as often as you like with no penalty.
Other Services Offered By Credit Karma
Free credit scores and reports aren’t the only services offered by Credit Karma. Let’s go through the company’s other offerings.
Credit Karma provides free credit monitoring along with free credit scores and reports. According to Credit Karma, “If we notice important changes on your TransUnion or Equifax credit reports, we’ll send you an alert so you can check for suspicious activity.”
A related service provided by Credit Karma is Direct Dispute. If you notice an error on your TransUnion credit report, you can submit a dispute without leaving Credit Karma. Unfortunately, this does not apply to errors on your Equifax credit report — for those, you’ll have to submit a dispute directly to Equifax.
As you can see, Credit Karma gives you some free tools to help you manage your finances. Let’s go through them.
Credit Score Simulator: This handy tool lets you calculate how actions you might take can affect your credit score. For example, you can see what effect opening a new credit card account or closing an existing account would have on your credit score. It’s certainly better than taking a financial action without knowing how it will impact your score and hoping for the best!
Debt Repayment Calculator: With this tool, you can see how long it will take to pay off your credit card debt. First, you enter your balance owed and your interest rate. You then either a) enter your expected monthly payment and have the calculator tell you when your debt will be repaid given the information you put in, or b) enter the time frame by which you want to have your balance paid off and have the calculator give you the amount you’ll have to pay per month in order to pay off your debt in your desired time frame.
Simple Loan Calculator: This tool determines your estimated payments for different loan amounts, interest rates, and terms. Just enter the loan amount, interest rate, and term length (in years) and the calculator will estimate your monthly payments.
Amortization Calculator: This tool shows how your debt will go down over time with your payments. It shows your payment breakdown of interest paid, principal paid, and loan balance over the life of the loan. Essentially, this is a tool that shows you how much of your payments will go towards paying down interest and how much will go towards paying down the actual principal, and it will show you how this balance changes over time.
Home & Auto Insurance Scores
Credit Karma will estimate your home insurance score and your auto insurance score for you by taking into account your active accounts, payment history, credit card utilization, and age of credit history. These scores exist to estimate the likelihood that you will file a claim. Many states use these scores to determine your monthly premiums, though this practice is banned in other states.
Offers For Credit Cards, Personal Loans, And Automobile Loans
Credit Karma uses your personal financial data to send you offers for the credit cards, personal loans, and automobile loans you are most likely to qualify for based on your credit profile. When you choose one of these options, you can see reviews of the credit card or loan by Credit Karma members who have experience with using the card or lender in question.
Search For Unclaimed Money
Credit Karma recently introduced this new feature. It identifies any unclaimed money that may be owed to you by your state. This money may have originally been owed to you by a business, but when a business can’t figure out how to send you the money it owes you, it may turn the money over to the state.
This feature lets you search by state to show you if the state in question owes you any money. If it does, you’ll be directed to state-specific resources that can help you claim what you are owed.
Along with Credit Karma’s other services, the company also offers Credit Karma Tax, offering free filing for federal and state tax returns.
For better or worse, your credit score is vitally important in determining the opportunities you’ll be able to access throughout your life. Credit Karma’s services help you understand what goes into determining your credit score, identify what you can do to improve it, monitor your credit, and more — all without charging you a penny. It’s not a scam. It’s free information — information that would be extremely difficult and time-consuming (and in some cases downright impossible) to gather by yourself. Information is one of the few means by which you can empower yourself to make good financial decisions, so it’s hard to find fault with Credit Karma making money by selling financial products on its website, as the alternative would be to charge users a subscription fee.
Should you use Credit Karmaâs credit score services?
This service might be a good option ifâ¦
You want to know your credit score without paying a fee
You want free credit monitoring
You want to get offers for financial products that you would be likely to qualify for
You want to simulate how various actions you might take (opening a new credit card account etc.) would impact your credit score
You might want to use a different service ifâ¦
You specifically want to know your FICO score
You want to see your credit report from Experian, not just from TransUnion and Equifax
The post Credit Karma Review: Free VantageScores From TransUnion And Equifax appeared first on Merchant Maverick.
If your business takes credit cards, then you know that you are charged a fee for each payment made with a card. You would not have to pay these fees if the customer paid in cash or by check, but given that we are moving towards a cashless society, you might feel forced to take credit card payments.
There a few ways for merchants can recoup credit card charges…by passing the cost down to their customers. One way is through surcharges and another is through convenience fees. We already have an article explaining surcharges, so this article focuses on convenience fees.
What Is A Convenience Fee?
A convenience fee is an amount you add to the purchase price; the customer pays this fee in return for being able to use a more convenient way to pay. The customer will always have the choice to use another standard method of payment that does not require the added convenience fee. The fee isnât technically related to taking credit cards. It is meant to help the merchant recoup the added cost for setting up a new payment channel.
As an example, movie theaters usually sell tickets at the box office. Customers can pay by credit card and that cost is absorbed as a cost of doing business. But the movie theater owner can offer an alternate way to buy tickets — via online sales — and require customers to pay with a credit card. The theater can then charge a convenience fee for online purchases because those who do not wish to pay the convenience fee can always buy in person at the box office.
As a practical matter, convenience fees seem to be most commonly applied to payments such as utilities, rent, tuition, government fees (e.g., motor vehicle registration fees), and even taxes. All these fees tend to be traditionally payable by check or in person, so payment online by a credit card is very obviously an added convenience.
There are rules on how you can charge a convenience fee, and they differ with every card. Visa has the most thorough policy on the subject, while Discover and American Express are rather vague and rely on broader rules that apply to how merchants accept card payments, period. We will explain these rules below and show you how to properly charge a convenience fee.
First, though, let’s clarify the difference between convenience fees and surcharges.
Convenience Fee VS Surcharges
As mentioned in the introduction, adding a credit card surcharge is another way to offset credit card fees. A surcharge is not the same as a convenience fee, though they are often confused with each other.
Generally, a surcharge is added to a product or serviceâs regular price when a customer pays with a credit card. It can be applied to all credit card payments for a specific card or to specific categories of products. You do not need primary or secondary payment channels to institute surcharges, which makes it a bit simpler. However, not every state allows surcharges. The rules related to surcharges are complex, so be sure to speak to your credit card acquirer to make sure you follow all the rules before you start charging this fee.
We have a good article on surcharges–what they are and how to implement them–so be sure to check the article out as you consider your options.
How To (Correctly) Charge Convenience Fees
If you wish to charge a convenience fee, make sure you do it the correct way. Each credit card company has its own rules, and they all encourage merchants to speak to their card acquirer when considering adding a convenience fee. In fact, it seems you canât find out the precise amount you can charge without working with your processor. Below, we will go through the rules implemented by Visa, Mastercard, Discover, and American Express so you can have a better idea of what you might have to do to charge a convenience fee.
According to Visaâs website:
In certain countries, for example Russia, the U.S., and some countries in Asia, a merchant is permitted to charge a convenience fee to the customer. The fee must be a flat fee (not a percentage of the transaction amount), clearly disclosed, and represent payment for the convenience of paying through an alternate payment channel (such as online) that is different than the merchantâs normal payment channel (for example sending a check through the mail or paying in person).
The details of Visaâs convenience fee rules can be found in the Visa Core Rules and Visa Product and Service Rules on Visaâs website. Section 5.6.2 addresses convenience fees, and it was last modified in 2016.
If your business is in the US, here are some major items of note when implementing a convenience fee for Visa cards:
Can only be charged online.
Cannot be charged if you are solely an online merchant (if you are, then consider a surcharge).
Must disclose clearly and give the cardholder a chance to cancel the payment before paying.
Fee must be included in the total amount of the transaction and not charged separately.
Cannot charge for recurring transactions or installment transactions.
Cannot charge both a convenience fee and a surcharge.
If you wish to implement a convenience fee for Visa cards, we encourage you to read Section 5.6.2 of the Visa rules and work with your processor.
Mastercardâs rules for convenience fees are a little difficult to find. It seems that Mastercard does allow convenience fees, but only for government and education entities. Specifically, convenience fees are allowed only in connection with these types of payments:
Tuition and school-sponsored room and board for elementary schools, secondary schools, colleges, universities, and professional schools.
Government and court fees, costs, and fines, including alimony and child support payments.
Local, state, and federal taxes.
There are some additional rules under the Mastercard Convenience Fee Program. They include:
If you charge a convenience fee for American Express, Discover, and Visa, then you must treat Mastercard in the same way you treat these other cards.
There are additional electronic data security standards that you may have to adhere to.
The cardholder must be notified of the additional convenience fee and be given a chance to back out of paying this way.
Finally, Mastercard recommends that the convenience fee be charged separately from the actual payment. This is the opposite of the Visa requirement. Fortunately, it is not a mandatory rule.
If you are a government or education entity and wish to charge a convenience fee for Mastercard payments, contact your acquirer and work with them on the details.
American Express does not seem to have a policy on convenience fees, but it does not prohibit its merchants from charging them either (see Section 3.3 of the American Express Merchant Reference Guide–U.S., last updated in April 2019). It seems that you can charge a convenience fee as long as:
The fee fits the definition of convenience fee (as opposed to a surcharge),
You do not discriminate against the use of the American Express card (Section 2.3, fifth bullet point), and
You disclose the fee to the cardholder and give the cardholder a chance to back out.
The safest approach for adding American Express to your convenience fee program is to speak to your credit card acquirer. But as long as you meet Visa’s requirements, you should also satisfy American Express’s.
Like American Express, Discover does not seem to have a rule on convenience fees. There is an undated article on Discoverâs website about paying taxes with a credit card, and it touches on convenience fees. The article suggests that you can pay your taxes with a Discover card but you typically will have to pay a convenience fee in a percentage form or a flat rate form.
Because there are no clear, stated rules on convenience fees, the only other consideration is Section 2.4 of Discover’s Merchant Operating Regulations R11.1. This rule requires the merchant to not discriminate against the use of the Discover card, similar to American Express’s policy. If you don’t charge a convenience fee for Visa but assess one for Discover, you would be in violation of this rule. From a practical standpoint, if you use the Visa rules and just add Discover card as a payment option, you should be satisfying Discover’s requirements for convenience fees.
Are Convenience Fees The Right Choice For Your Business?
Let’s review: Accepting credit card payments means more costs for merchants. However, you can sometimes pass credit card fees to a customer instead of having to absorb them as a cost of doing business. One such way is to use a convenience fee, but this method can only be used when there is another âstandardâ way for the customer to pay. If you wish to impose a convenience fee, contact your credit card acquirer. They can help you follow all the rules from the credit card companies as well as tell you how much you can charge for the fee.
Will customers pay extra just to have a non-standard way to pay for goods and services? It depends! Many people might be willing to pay extra to skip the line to renew a driverâs license but might not care about the time savings when they can just drop a check in the mail for their electric bill. Before you charge convenience fees, be sure there is a demand for them, or you might end up with an alternate payment method that no one uses.
Do you charge a convenience fee? Have you happily paid a convenience fee before? Let us know about your experiences in the comments section!
The post What Is A Convenience Fee? appeared first on Merchant Maverick.
Startup capital is a necessity for virtually all businesses. However, the cost to start a business varies widely depending on what kind of business you are starting. For example, a home-based endeavor such as a dropshipping company or an Amazon business can cost less than $1,000 to get off the ground; the same goes for a business that doesn’t require an office or much equipment, such as a pet sitting business. On the other hand, opening a business that requires more equipment and office space—such as an autobody shop or a coffee shop—could cost $100,000 or more.
In this post, I’ll go over the main costs associated with starting a business and what you can expect to pay for each of them.
Surprisingly, there aren’t too many official statistics available on how much it costs to start a business, probably because the costs vary so much. There was a study conducted by the Ewing Marion Kauffman Foundation way back in 2009 that found the average cost to start a business at that time was $30,000.
Below, we’ve put together our own startup business cost figures, but keep in mind that the amount you’ll spend will vary greatly depending on various factors, such as your industry and location.
Common Small Business Expenses
Business Licenses & Permits
Equipment & Supplies
Office Space & Utilities
$5,000 initially, then $2,000 monthly
$700 initially, then $200 monthly
Professional Services (e.g., legal services)
Total estimated cost: $28,200
Business Licenses & Permits
As a new business owner, you will need to register your business in your state and apply for a local business license/permit in your city or county. Depending on your industry, you may also need to obtain an industry-specific business permit. These initial business registration costs are usually minimal (less than $500).
There are several types of business insurance for startups and which type(s) you need depends on various factors. Insurance is a significant, ongoing business cost. Most businesses will need general liability insurance and business property insurance, and if you have employees, you will also need to pay for workers compensation insurance and health insurance. Commercial vehicle insurance and product liability insurance are some other business types you may or not need.
Equipment & Supplies
All businesses require some sort of equipment or supplies, but these costs vary significantly depending on what type of business you have. Examples of equipment and supplies include:
Restaurant kitchen equipment
Medical equipment & supplies
Product manufacturing equipment
Point of sale equipment (cash register, credit card reader, etc.)
The type of equipment and other materials you need to run your business really depends on your industry—for example, if you’re starting a wedding planner business, you’ll probably just need a computer and office supplies, whereas a trucking company will need commercial vehicles, etc.
Office Space & Utilities
If you need to rent or buy an office space, this will be a significant ongoing expense, and a big startup cost too, as you will need to pay a security deposit, first and last month’s rent, etc. Internet, gas and electricity, a business phone, and data plans will also factor into the infrastructure costs of your office space. Most businesses start out as home-based or rent a business space initially, instead of purchasing or building property.
If you sell a physical product, you need a certain amount of inventory to start out with (and have on-hand on an ongoing basis). Retail stores need a certain number of finished products on hand, while food-based businesses such as food trucks, for example, need to stock up on raw ingredients before they can open up shop. This, of course, does not apply to information-based businesses, such as consulting businesses or various other service-based businesses.
You may or may not start your business with any employees. If you do have employees, you need to factor in payroll costs, payroll taxes, insurance costs (workers comp. and health insurance), and training costs.
Modern business marketing includes not only business cards, advertisements, signage, etc., but also digital marketing costs such as SEO, social media marketing, and website maintenance costs. As far as your digital marketing, at the very least you will need a website and social media presence. Tip: Be sure you register your domain early on in the process of starting your business, as your website will be the foundation of your online marketing.
Some different types of business software you might need to launch and run your business include:
eCommerce/shopping cart software
Website builder software
Project management software
Email marketing software
Industry-specific business software (for example, specialized software for dentists, auto mechanics, etc.)
Some small business software programs combine multiple functions. For example, a restaurant management software system might include POS functionality as well as accounting, inventory, employee management, and maybe even email marketing functions. An accounting program like QuickBooks combines accounting, payroll, and invoicing functions, with POS functionality as an add-on.
Generally, most business software apps are no longer large programs that you install onto a computer as a one-time expense; rather, today’s business software is usually app/cloud-based, meaning you can sign in from any internet-connected device. And rather than paying for the software as a large, one-time expense, today’s software-as-a-service (SaaS) model is based on monthly payments with no down payment or long-term commitment. So, initial investment for business software will likely be much less than you would have paid for a comparable program 15 or 20 years ago. Some business software is even free to use.
In addition to software, don’t forget to factor in the cost of the associated hardware you’ll need to run the software into your equipment costs. For example, most businesses will need point of sale equipment, a laptop or iPad, a wireless router, etc. For very small businesses requiring only a basic app to take payments, it’s possible that the only hardware you might need is your smartphone.
This category can include legal fees, consultancy fees, accountant fees, and fees for any other professional services you use to help launch your business. While some businesses require minimal professional services, most businesses should at least consult a lawyer and/or professional accountant during the startup phase.
You’ll more than likely find out that there are more startup costs than you initially anticipated. Thus, it’s important to have a certain amount of your budget set aside for miscellaneous expenses that will inevitably come up. Some various costs you’ll need to include in your budget may include:
Credit card processing fees (once you start making sales)
Of course, you’ll also need to make sure you have enough money to support yourself before your business becomes profitable, so make sure this cost is included as well.
How To Calculate Startup Costs
The SBA has a very useful startup cost worksheet that outlines common business startup costs with sample figures that you can personalize to calculate the true cost of starting your business. Simply enter the estimated cost for each category (rent, utilities, inventory, employees, etc.) and you’ll be able to get a rough estimate of how much money you might need for your initial investment.
It’s also a good idea to make a sales forecast, in which you estimate how much you will sell in the first 6â12 months of opening your business. How long will it take for your business to make a profit? How long ’til you can pay off your startup expenses? With your prospective revenue in mind, you’ll have a better idea of how much you can afford to spend on ongoing expenses such as payroll and inventory.
If the total seems unaffordably high, look for areas you might be able to cut costs. For example, could you operate your business out of your home for the first six months? Could you subcontract workers instead of hiring employees? Could you use dropshipping to deliver goods to customers directly from the manufacturer, instead of buying inventory upfront?
Once you have a good idea of how much startup capital you might need for your first 6â12 months in business, you can decide how you will finance your venture.
What To Do If You Donât Have The Money
Startup funding can be difficult to procure from a traditional bank, especially if you don’t have any significant assets or previous experience owning a business. However, that doesn’t mean you don’t have any options. Online technology has actually made it a lot easier to find small business funding. Here are some options you might try to finance your business.
Online Loan: This category includes both online business loans and online personal loans. Generally, online business loans for startups are limited to short-term, high-interest loans; you won’t qualify for better terms unless you’ve been in business at least two years. Still, it’s definitely worth looking into to see what kind of loans and rates you might qualify for. Some online lenders might even offer access to SBA loans for entrepreneurs, such as SBA microloans. Look at our startup business loan comparison chart to find some startup-friendly loan options.
Business Credit Cards: If you just need a few thousand dollars to get started, a business credit card can be a smart choice. You can use a business credit card to charge startup expenses, and/or to get a cash advance (though make sure you check the terms on the advance because they usually charge high interest). You could also use a personal credit card, though business credit cards typically have more business-specific benefits, such as cash-back for common business expenses. Look at our best small business credit cards comparison to see some of the top business cards’ requirements and perks.
Equipment Financing: If your main startup expense is the equipment you’ll need to run your business — for example, restaurant kitchen equipment, manufacturing equipment, office equipment, etc. — then you can simply finance the equipment itself, in the form of an equipment loan or lease. Similar to automotive financing, equipment financing involves monthly payments (either to lease or own), and does not typically require good credit or any collateral other than the equipment itself. Check out our equipment financing comparison chart to see your best options.
Line Of Credit: A business line of credit is similar to a credit card in the sense that you can have it on hand to pay for expenses, but you only have to repay what you use. Like a business loan, you can get a line of credit from an online lender or a traditional bank. However, startups will have better luck finding a line of credit online; there are several online line of credit providers that only require only 6 or fewer months in business, whereas banks typically will not extend a line of credit to startups. Check out our line of credit comparison page to find some startup-friendly LOC options.
Other startup financing ideas:
Loan from friends/family
Personal retirement savings— rollover a retirement account using a ROBS (rollovers as business startups) plan
Our team at Merchant Maverick has also written many informative articles about startup financing that can help you on your journey:
Crowdfunding For Startups: 8 Tips For Launching
Don’t Let Bad Credit Stop You From Getting A Startup Loan
The Best Business Cards For Startups And Entrepreneurs
SBA Loans For Startups
How To Find A Startup Grant
14 Types Of Alternative Financing For Small Businesses
The Best Business Credit Cards For People With Bad Credit
Tax-Deductible Startup Costs
If your total startup costs are $50K or less, you can write off up to $10,000 of startup costs on your taxes in the year that you start the business, including up to $5,000 in business startup costs and another $5,000 in organizational expenses (legal fees, state incorporation fees, etc.). If your startup costs exceed $50,000, the amount of your allowable deduction will be reduced by that dollar amount, and if your startup costs are more than $55,000, you are not eligible for the deduction.
Certain startup expenses are not tax-deductible—for example, the costs to qualify for doing business in your industry, such as real estate licensing costs, are not deductible as a startup expense. Additionally,Â business assets (one-time business expenditures such as vehicles and equipment) are not deductible as startup expenses, but may be deductible in a different category (amortization).
(In case you were wondering, business loan interest is, indeed, tax-deductible.)
It may be a cliche, but it is also true that “it takes money to make money.” Startup business costs can range from under $10K to over $100K, depending on a number of factors. It’s okay if you don’t have all the money right now: the important thing is to put together an accurate estimate of how much you will need, what you will spend the money on, and how/when you’ll be able to repay any borrowed monies with your revenue. You can then incorporate this estimate into your business plan and the loan proposal you will use to demonstrate to lenders that you are a good candidate for financing.
With the numerous financing options available to entrepreneurs these days, there is a great chance that if you have a sound business plan and accurate, reasonable startup cost estimate, you will be able to find a lender that can meet your startup financing needs.
The post How Much Money Do You Need To Start A Business? appeared first on Merchant Maverick.
We at Merchant Maverick like Square. Itâs a great service that opens up the ability to process credit card payments to many small businesses, and weâve written a lot of articles about Square’s point of sale, payment processing, inventory, booking, and invoicing features. These articles can be prohibitively in-depth to the uninitiated, however, so you might want to read this quick overview of Square for a summary before digging into the details.
A Brief History Of Square
Square was founded in 2009 when Jack Dorsey (also of Twitter) tried to help his friend Jim McKelvey take a credit card payment of $2,000.00. Squareâs first product was a magnetic stripe credit card reader that could be inserted into a smartphoneâs headphone jack to take credit card sales.
Square became a public company in November of 2015, and its stock is traded on the New York Stock Exchange under the ticker symbol SQ. While Square does bring in a lot of money ($3.3 billion for the year 2018), it still has not made a profit. For the moment, the company seems to be more focused on growing by adding new services for its customers.
While Square’s main focus continues to be helping small businesses quickly and easily set up taking credit card payments, it has also expanded its services to point of sale, inventory, and employee management — giving small businesses the ability to run more like large ones (more on these services below). To this end, it has bought the food delivery business Caviar, the catering service Zesty, and the website building service Weebly. It also owns a consumer-centric digital wallet called the Cash App, where users can send money to each other and even buy from any store with the money in the app.
In the span of about ten years, Square has grown from a startup focusing on one aspect of helping small businesses grow to a large business providing a suite of services that help small businesses expand. With so many additional services, what exactly does Square do these days?
What Does Square Do?
At its heart, Square is still a credit card processing aggregator (also sometimes called a third party payment processor or a payment service provider (PSP)). We have a great article on the difference between a merchant account provider and an aggregator, but below is a quick explanation.
Square’s Credit Card Processing Services
Traditionally, if you want your business to take credit card sales, you would work with a provider to set up something called a merchant account. To get a merchant account, you typically undergo a long application process and provide a lot of financial information before you are approved. These providers want to make sure that, based on your businessâs existing history, you don’t present a huge financial risk.
Credit card processing aggregators take more of a see-as-we-go approach and assume financial risk for bad accounts. Aggregators merely need to verify the identity of the applicant before authorizing a new account, and generally don’t ask too much more information. They have more freedom on who they sign up and how they do business with those they sign up.
While this means aggregators can quickly set your business up to take credit card payments without needing an established history, they tend to be cautious afterwards. These types of payment processors have advanced systems in place to analyze each transaction for any red flags. Suspicious transactions can cause the processor to hold funds until it has more information. Worse, third-party processors often have a clause in the contract that says they can terminate your account if they see fit. Usually, this happens to businesses that have high numbers of chargebacks or fraudulent transactions.
Square is an aggregator, so essentially the above is its business model. You can sign up for Square within minutes and without providing detailed financial information. In addition, Square gives you a basic set of free hardware and software so you can start taking credit card payments almost right away. The free items include:
Square Point Of Sale Software: Square’s free POS software is incredibly advanced for being free, though it’s certainly not a full-fledged POS. Still, for most small businesses it is more than sufficient. Square also offers premium iPad POS systems for a monthly fee if you need more advanced features.
Credit Card Reader: You can get a basic magnetic strip reader for free, but if you want support for chip cards, you’ll have to upgrade to another reader, which will cost you.
Invoicing: For those businesses that bill a larger amount but less often (e.g. lawn care services), Square offers an electronic invoicing function. The invoices are free to send, but you will pay a transaction fee when your customer pays with their card.
Square’s Value-Added Services
As mentioned earlier, Square has been adding more services to its core credit card processing business. Some of these services are for free, but others are available for a small fee. These services include:
Employee Management: With this service, you can manage your employees from anywhere. You can add new employees to the system, track their hours, track their register/sales (at either single location or multiple locations), edit and close employee timecards, and give selected employees selected access to various parts of this software (e.g. so they can enter their own hours but not see your weekly sales numbers).
Payroll Services: This service imports data from the employee management software so that you can easily pay your employees and contractors. Square will handle tax filings and withholdings, and they can handle the payments to other employee benefits such as health insurance and 401(k). You can even offer direct deposit to your employees.
Inventory Management: Square offers basic inventory management in its Point of Sale app for free, but the premium iPad POS systems offer a more detailed system that can track and analyze your business’s inventory across multiple stores and multiple registers. You are notified when inventory is low, and items are automatically removed from inventory when they’re sold, whether at one of your physical locations or online.
Business Debit Card (Square Card): When you are paid by your customers through Square, the money goes to an account kept by Square. Rather than moving the money to your bank, you can use it immediately with the Square Card. The Square Card is a debit card sponsored by Mastercard, and you can request it from Square for free. Check out How Does Square’s Instant Deposit Work?Â for more information about how to access your funds.
Appointments: Square provides a booking calendar for professional service businesses (like hair salons). The calendar not only tracks and moves appointments, but it can also send appointment reminders to customers. The POS and booking system is free for a single user, but if you have multiple users you’ll need to pay a monthly fee.
Square Online Store: Pretty much every business needs an online presence, and Square can help you build a professional-looking website even if you’ve never done it before. Square provides tools that can help you track your inventory sold through your online store and helps you with shipping (printing labels, discounted rates). Best of all, when you sell out of state, it tracks all the different sales taxes that you might owe. There’s a basic free webstore, but if you need more advanced features, you’ll need to upgrade to one of the other plans.
Other Services: Square offers many more services designed to make a small business owner’s life easier. For instance, Square offers marketing software to help you build email and social media advertising campaigns. It has an installment payment service for certain businesses so that a customer can buy a big-ticket item and pay Square in installments while you get paid right away. Square can help you build a loyalty program where customers can redeem goods or services with points. You can get your own branded gift cards to sell to your customers. Square even provides online store owners with a product photography service so that the items sold through webstores are presented in their best light.
As can be seen above, Square is well on its way to offering an entire suite of software and services that not only help you take credit card sales, but also help you manage your entire business’s operations.
What Are The Advantages of Square?
Every successful business has a few things it does extremely well, and Square is no exception. Square basically provides you with a free, fast, and easy-to-get-out-of way to start taking credit card sales. To elaborate a bit, the following are some advantages for signing up with Square:
Fast Setup: You can sign up for Square within minutes and get a credit card reader shipped to you very quickly.
Easy Termination: If you sign up and find that you don’t like Square, you can stop working with Square any time you want. There are no penalties for leaving, so you can sign up without fear. (There may be loose ends to tie up, but you can still terminate the services at will.)
Easy To Use: Square is focused on small businesses that are just starting out. They provide a simple piece of hardware and intuitive software to help you run your business and help you grow.
Simple Fee Structure: Compared with other pricing models, Square has an easy-to-understand flat fee structure so you can better predict your profits.
Fast Payment: With Square, you can get paid almost right away after a customer makes a charge. You can instantly deposit these funds into your outside account or use the funds directly with the Square Card debit card. In contrast, traditional merchant account providers typically hold the funds for at least 24 hours before releasing it to you. For a small business with tight cash flow, Square’s fast payment can make a difference to the business’s survival.
No Minimums Or Monthly Fees: A small fee here and there might seem insignificant, but they can add up in the long run. Square’s credit card processing service (and a lot of their other services) have no minimum or monthly fees, so a small business doesn’t have to worry about paying for anything other than the transaction processing costs.
These are just some of the advantages for signing up with Square. Of course, no business is perfect, and neither is Square. Under some circumstances and for some types of businesses, Square is not the best option.
What Are The Disadvantages Of Square?
No business can be everything to everyone, so Square is not suitable for every type of business. One of the biggest complaints we see about Square is that Square sometimes withhold funds in a merchant’s account, with or without warning. Sometimes, you never get paid. If you fit into one of the categories below, you might want to think twice before signing up with Square:
Not Suitable For High-Risk Businesses: A “high risk” business is usually defined as a business that deals with guns and ammo, tobacco and vaporizers, pharmaceuticals, gambling and financial services, and similar — anything highly regulated or prone to chargebacks and disputes. If you deal in any of these, Square is likely not the right business partner for you. Specifically, in its Terms of Service, Square reserves the right to terminate service if you violate any export control regulations (for example, sell military-grade items to specific countries) and money laundering laws, sell weapons or devices designed to cause physical harm, or “use the Services except as otherwise allowed” under their agreements.
Not Suitable For Business With Many Chargebacks: If you have a business that causes a high rate of dispute or chargebacks (even if it’s not otherwise a high-risk business), then Square is probably not the right company for you. Going back to Square’s business model, it fronts you the money that you take from your customers so you can collect right away while it waits for the banks to settle the charges. So, if Square can’t eventually get the money from the banks, it might stop fronting you the money (put a hold on your account) or stop working with you altogether.
Not The Best Pricing For High-Volume businesses: Despite its transparent pricing, Square might not be the cheapest service provider for your particular business. If your business is mature, you have an established financial history and are doing a consistently high volume of card payments, and you know how your customers tend to pay for your goods or services, then you might want to shop around a little more to find the merchant account provider that can offer you interchange-plus pricing and volume discounts. (That said, Square does negotiate custom rates for high-volume businesses, but you should absolutely shop around all the same.)
We have an article that gives more details on why Square is not suitable for high risk and high chargeback businesses. If you have an established business and wish to shop around, here’s some information on where you might be able to get a better deal.
What Are Square’s Fees?
Business owners like having predictable operating expenditures every month. Because credit card fees usually have a percentage component and a flat fee component, the cost of allowing credit card sales tend to be less predictable. Compared to traditional credit card processors, however, Squareâs fees are easier to predict.
With Square, you usually only have to worry about just one fee, expressed in a percentage form. Right now, if you use Squareâs free credit card reader and free Point of Sale software, you pay 2.75% of the sale. Thatâs it. If your customers choose to pay online, your rate is 2.9% + $0.30 per transaction.Â Having only to keep two numbers in mind makes it easier for you to figure out your markups so you can make a profit for your entire business.
Note, though, that if you use Squareâs premium hardware or software, the charges can get a little complex. Here’s an article giving a more detailed breakdown of Square’s fees.
How Do You Use Square?
When it comes down to it, it’s fairly easy to start using Square’s services. You can do it in four steps:
Sign Up For A Free Account. This only takes a few minutes, and we even have an article walking you through the process. You wonât have to provide a lot of financial information, and they wonât do a credit check on you at this stage (they will later, after youâre all set up).
Get Your Free Square Reader. Youâll have quite a few hardware choices–some of which you will need to pay for–but thereâs always one thatâs free for either iOS or Android.
Download The Free Square App. The app is called Square Point of Sale, and you will need this app to process payments through a mobile device.
Log In To The Free Square Dashboard And Explore. This is a fairly robust piece of software that manages all your credit card charges. You can customize reporting in a centralized hub, and do much, much more (some of which cost extra). Here’s a Merchant Maverick article on the details of the dashboard.
As mentioned above, Square wants to help you run your business. There are a lot of value-added services they offer, so once you’re all set taking credit card sales, you might wish set aside a little time to explore these additional services to see how they can help you run your business.
What Kinds of Businesses Is Square Best For?
Square isnât right for every business, but if your business is small or new, Square is very likely the best bet for you. With Square, youâll get lots of free software, hardware, and add-ons to get you up and running very quickly. You can use Square on the web, at a brick-and-mortar store, and even at mobile locations such as food festivals.
We’ve compared Square with PayPal and Clover Go and believe Square really does offer the best value for the price for a start-up business. As long as youâre not one of the âhigh riskâ businesses, you should have no problems getting payments from Square or with your account being abruptly suspended or terminated. Best of all, if you use Square and then after a while decide you donât like them, you can stop using them at any time.
Is Square right for you? This more in-depth article can help you decide.
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Arkansas is a great place to start a business, with its low cost of living and even lower cost of doing business—in fact, Arkansas’ cost of doing business is the lowest in the United States. Whether you have an established business in Central Arkansas’ vibrant Little Rock metro area, or are opening up shop in fast-growing Northwest Arkansas, the Natural State provides a lot of opportunities to make your business dreams a reality. However, most business owners struggle with accessing capital at some point, and Arkansas entrepreneurs are no exception. Read on to learn about the best business loans and financing opportunities for Arkansas small businesses.
Online Business Lenders For Arkansas Businesses
Online business loans are an important source of financing for many small businesses, and especially those that can’t qualify for a loan from a bank or credit union. As long as you have decent credit, strong cashflow, and 6â12 months in business, you should be able to find an online loan that meets your needs. However, there are also online loan options for startups and businesses with bad credit.
Generally, online loans have the advantage of being quick and easy to apply for, with a time-to-funding of a few days or less. They also have more relaxed borrower requirements when compared to a bank loan, with the caveat of having higher borrowing fees and rates than what you’d pay with a traditional bank loan. You will also have the repay the loan quickly—usually between 3 months and 3 years, depending on the loan.
While you might assume that you can apply for any online loan whose website you’re able to access, many online lenders only do business in certain states. As follows are some top-rated online loan options that offer loans to Arkansas small businesses.
Lendio is a highly rated online loan marketplace where you can compare and apply to multiple online business loans that Lendio partners with. It’s a good place to start if you’re not sure which of the many types of business financing to apply for, or what financing you’re even eligible for. Luckily, Lendio operates in all 50 states and has options for both startups and established businesses.
Lendio even has offices in Northwest Arkansas (Bentonville) and an Arkansas-based lending consultant who can help you secure financing in this region.
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 is an online lender that specializes in SBA (Small Business Administration) loans, serving all 50 states. If you meet the qualifications for an SBA loan, SmartBiz provides a relatively quick and easy way to apply for SBA-backed funds. The three types of SBA loan programs available for business owners include the 7(a) Loan Program, the CDC/504 Loan Program, and the Microloan Program. SmartBiz also offers non-SBA financing, including lines of credit and term loans.
Overall, SmartBiz is a good choice if you want to try to secure a low-interest SBA loan for an already-established Arkansas business.
Time in business: 12 months
Business revenue: $100,000
Personal credit score: 660
Number of employees: At least 3 full-time employees (yourself included)
Fundation is another nationwide online lender that provides high-quality loans to Arkansas businesses, specifically term loans and lines of credit. Fundation is unsuited for startups and businesses with poor credit, but the borrower criteria aren’t as stringent as a traditional bank’s. Fundation’s rates are not as good as what you’d get with a bank loan or SBA loan, but they’re about as good as you can get from an online/alternative lender.
Established Arkansas businesses that don’t quite qualify for bank loans should see if they can get a good loan offer from Fundation.
Time in business: 12 months
Business revenue: $100,000 per year
Business industry: Must not be in aÂ restricted industry
OnDeck is the largest non-bank small business lender, financing businesses in all 50 states (and Canada). OnDeck’s short-term loans and lines of credit are accessible to businesses with lower credit scores, but not startups. Despite being such a large company, OnDeck actually has very accessible customer service to help you through the application and funding process. This is also one of the easiest lenders to apply to. OnDeck loans can carry high factor rates—a fixed fee charged on short-term loans in lieu of interest—but OnDeck’s rates are comparable to other short-term financing products for businesses that don’t qualify for bank financing.
OnDeck is an option for semi-established Arkansas businesses that need fast capital.
LoanBuilder is PayPal’s business loan arm, which offers short-term loans to businesses in all 50 states. The borrower criteria are fairly relaxed and you do not need to be a PayPal seller to qualify. LoanBuilder also offers a useful online tool which lets you customize your prospective loan offer, adjusting the loan amount and repayment schedule to see how your weekly payments would be affected. Another good thing about LoanBuilder loans is that there is no origination fee (a commonplace upfront fee charged by most short-term lenders). However, like OnDeck, these loans can have high factor rates.
LoanBuilder provides an easy means for newer and bad-credit Arkansas businesses to secure a short-term loan online. Plus, being associated with PayPal, you know they are not some shady fly-by-night short-term lender (which are sadly all too common on the internet).
Time in business: N/A
Business revenue: N/A
Personal credit score: 600 – 680
Personal income: $20,000
LendingPoint does not operate inÂ Colorado, Connecticut, Iowa, Louisiana, Maine, Maryland, Massachusetts, Nevada, New York, North Dakota, Rhode Island, South Carolina, Vermont, West Virginia, Wisconsin, and Wyoming
LendingPoint is a personal loan option for brand-new Arkansas startups with no time in business. LendingPoint does not lend to businesses in all 50 states, but fortunately, Arkansas is one of the states they do business in. Because these are personal loans, you do not need any particular business qualifications and you can use the loan’s proceeds for any purpose; the main consideration is your personal credit score. We think LendingPoint’s favorable online reputation is well-earned, with their excellent customer service and easy application process.
LendingPoint is suitable for Arkansas entrepreneurs who need a small amount of capital to get their startup off the ground, even if their business is still in the idea stage.
Banks & Credit Unions In Arkansas
While they are not as easy to apply for as online loans, bank and credit union loans generally provide the best-quality business loans with the lowest interest rates. Banks that offer SBA-backed loans can offer even better rates and longer terms. The downside is that bank loans are much harder to qualify for than online loans—you generally need very good credit and at least two years in business, and even then you still might not qualify. Nevertheless, established businesses with good credit should still at least see if they qualify for a loan from a bank/credit union.
A nationwide bank can be a viable option to finance your small business, provided that the bank has a strong presence in your region. Arkansas is among the 25 states U.S. Bank operates in, so you shouldn’t have difficulty finding a U.S. Bank branch in your city. U.S. Bank is one of the smaller big national banks, with the reputation of flexibility and personable customer service.
Bank of Arkansas
A local bank is another option for financing your small business. Bank of Arkansas has a good reputation in their state and they are a preferred SBA lender, which can mean a quicker approval time. In addition to SBA loans, Bank Of Arkansas also offers Arkansas small businesses revolving lines of credit and business credit cards—which can be another smart financing option for just about any business.
Arkansas Federal Credit Union
Credit unions don’t often offer small business loans, but when they do, they typically have very good rates. We don’t know their exact rates, but Arkansas Federal Credit Union, the largest credit union in Arkansas, seems to have a mostly favorable reputation online. They offer multiple business financing products, including:
Working capital loans
Revolving lines of credit
Business credit cards
Commercial real estate loans
Loans for equipment, inventory, and accounts receivable
Bank OZK, formerly Bank of the Ozarks, has been providing banking services to the people of Arkansas for over 115 years. They also have strong business loan services. Bank OZK is a preferred SBA lender, which makes the SBA loan process easier to navigate and quicker to close. With loan amounts ranging from $30,000 to $10,000,000, Bank OZK funds everything from small business startups to land acquisition for business expansion.
Nonprofit Lenders In Arkansas
You might be able to secure funding from a nonprofit lender if you do not qualify for a bank loan. Typically, nonprofit lenders only offer microloans of $50,000 or less, but this is not always the case. As follows are some nonprofit lenders that offer loans to Arkansas small businesses.
Accion is a nonprofit lender offering online loans to small businesses in all 50 states. In fact, it is the largest, nationwide, nonprofit-lending network in the United States. In particular, Accion funds women-owned businesses, minority-owned businesses, veteran-owned businesses, people with disabilities, and other underserved communities. They also provide small loans to startup businesses. Arkansas small businesses are served by Accion’s East Coast branch. Loan offerings and borrower qualifications (which are generally quite relaxed compared to most other lenders) vary by location; visit Accionâs site and enter your zip code to learn about the current SMB loan offerings in Arkansas.
Kiva is an online nonprofit small business lender, offering crowdfunded microloans up to $10,000. Kiva loans require a little more work on your part, as you will have to create an online business profile with your business’s story, and also recruit a certain number of backers from your personal networks. If Kiva agrees to underwrite your loan and you can generate enough online interest to get enough backers to fund your loan, you will get a really good deal—all Kiva loans are 0% interest.
LiftFund is a nonprofit SMB lender based in Texas, but they also serve several other southern states, including Arkansas, with offices in Little Rock and Helena, AK. This nonprofit will consider lending even to business owners with very poor credit, and they typically help small businesses that have limited access to traditional forms of credit. LiftFund’s services include small business loans up to $1 million and startup loans up to $50,000, as well as business and financial training.
Small Business Grants In Arkansas
Business grants are, unfortunately, few and far to come by. Free money to start or expand a business, from the government or elsewhere, is more myth than reality. With that said, there may be some government funds earmarked for very specific types of for-profit businesses. Usually, these are related to medical research, agriculture, green technology, or business development in economically struggling or rural areas. There are also some publicly and privately funded business grants available to veterans, women, and minority business owners.
Arkansas Economic Development Commission Grants
Arkansas Economic Development Commission provides some incentives for businesses in Arkansas, including grants and tax incentives. However, the grants awarded by the state are mostly limited to public schools, community buildings, fire stations, and other nonprofit entities. For larger companies looking to invest in Arkansas, such as large manufacturers, motion picture companies, corporate headquarters, or software manufacturers, AEDC has a program in which it shares the cost of project infrastructure needs by committing grants from state and federal infrastructure funds.
The AEDC also offers some tax incentives to job creators in Arkansas, including:
The Tax Back program, which provides sales-and-use tax refunds on the purchase of building materials and taxable machinery and equipment to qualified businesses investing at least $100,000
Advantage Arkansas, a state income tax credit for job creation based on the payroll of new, full-time, permanent employees hired as a result of the project, with wages greater than the lowest county average hourly wage (currently $11.60)
Generally, Arkansas state business grants and incentives are available to larger businesses looking to invest in the state, though some knowledge-based startup businesses in emerging technology sectors might also be eligible. You can find program eligibility guidelines on the AEDC website.
At grants.gov, you can find a database of U.S. federal government grants that might be available to businesses in Arkansas. Again, most grant money is earmarked for nonprofit entities, though some very specific exceptions might exist, depending on the type and scale of your business.
The U.S. Small Business Administration has several SMB grant programs, particularly for innovative tech companies and veterans, executed through partnerships with other entities. Some of these include Boots 2 Business, Federal and State Technology (FAST) grants, and Support of Competitive Research (SCORE) grants. You can find more information on these grant programs at SBA.gov under Funding Programs > Grants.
Amber Grants is a non-government grant program for small businesses owned by women, including women-owned businesses in Arkansas (and nationwide). Each month, an Amber Grant of $2,000 is awarded to the top candidate. Amber Grants also awards a $25,000 grant to one of the 12 monthly recipients each year. You can apply for this grant on the Amber Grants website.
Loans & Resources For Startups In Arkansas
There are several Arkansas-based community entrepreneurship resources you might want to look into when seeking small business financing in the state. Some provide loans and grants to SMB owners, while others primarily offer training and mentorship.
Arkansas Small Business Association
The Arkansas district office of the U.S. Small Business Association is a federal resource that helps entrepreneurs plan, launch, manage, and grow their business through a variety of services. You can find SBA offices in Fayetteville and Little Rock.
Communities Unlimited is an AK-based organization that helps promote entrepreneurship in seven southern states: Arkansas, Mississippi, Tennessee, Texas, Oklahoma, Louisiana, and Alabama. The main goal of this organization is to help entrepreneurs in poor, rural counties move from poverty to prosperity. Communities Unlimited provides SMB loans as well as training.
The Venture Center
The Venture Center is a Little Rock-based organization that provides mentorship, seed investment, and other services to help grow early-stage small businesses in Arkansas. Specifically, Venture Center is a resource for technology startups in Arkansas.
Innovate Arkansas is a state-funded initiative that helps grow commercially-promising technology ventures in Arkansas by providing acceleration, capital, and talent. Innovate Arkansas is funded by the Arkansas Economic Development Commission and administered by Winrock International.
What To Consider When Choosing A Lender
With all the options available to finance a small business, it can be difficult to decide among lenders, especially if you are approved for multiple different loan offers. But if you keep a few simple things in mind, you can weed out predatory lenders and choose the financing option that works best for you.
Can You Afford The Loan Payments?
The total amount you’re borrowing, as well as the interest and fees charged by the lender, determine how much you’ll pay for the loan in total. The repayment schedule (how often you make payments), along with the length of your loan term, will also determine the size of each loan payment. Before accepting a loan offer, it is essential that you know how much your payments will be and if you can reasonably afford them. For example, can you afford to make daily payments in the hundreds of dollars, or weekly payments in the thousands, starting immediately?
Some online lenders, such as LoanBuilder, offer a calculator that lets you tinker around and see how your borrowing amount and term length will affect your repayments. However, even if the lender doesn’t offer this sort of feature, it’s something you can figure out on your own. Using one of our small business loan calculators, you can plug in a few key pieces of information about your loan offer, and see how much your payments will be and how many cents on the dollar you’ll pay for your loan.
Can You Qualify For Something Better?
Faster and easier is not always better. You don’t want to accept the first loan offer you receive just because they say they can get the money to you in one business day. You also need to do your due diligence to make sure there aren’t any other, possibly better, options you might qualify for.
If the answer is no, this still doesn’t mean you should accept a loan offer that has a high interest rate or unfavorable repayment terms. There are also things you can do to make yourself more qualified to receive a better-priced loan, either from that same lender or a different lender. Namely, you can improve your credit score or wait until your business is more established before applying for financing. Before applying for loans, make sure you check your credit score and see if there is anything you can do to improve it, such as paying down existing debt.
In addition to improving your borrower qualifications, it’s also a good idea to apply for not just one but multiple loans using a free service like Lendio, so that you can make sure you’re choosing the best loan that you qualify for.
Arkansas is an awesome place to start a business, especially if you are based there already. The cost of doing business is uncommonly low, and the population is still growing, particularly in the metropolitan areas in Northwest, Northeast, and Central Arkansas. If you have an existing business, now is a good time to invest more capital into it so that you can keep it healthy and growing, just like your amazing home state. A lot of business owners are afraid to take on new debt, but it’s true that you need to have money to make money, especially if you want to take your business to new heights. With the proliferation of online lenders, and even online SBA loans and other low-cost financing options, there are more small business financing options than ever before.
If you are ready to take the plunge and apply for business financing, I strongly encourage you to check out the resources I’ve provided in this post. If have any further questions about any of the Arkansas business loans described, please leave me a comment and I’ll be sure to get back to you.
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