FAQs
How do I know if my business is eligible for financing?
There are 4 main factors that lenders consider when reviewing a business loan application – credit, time in business, revenue, business plans.
Credit
Traditional Lenders: have strict business financing requirements such as excellent personal (720+ FICO) and business credit.
Us: The lenders in our network are flexible when it comes to credit. Your credit won’t decline you, it only determines the pricing of the loan product.
Time in Business
Traditional Lenders: require that businesses must have been in operation for at least 3-5 years before they will consider them for business financing.
Us: With our expansive lender network, you can get funding as early as 6 months in business.
Revenue Requirements
Traditional Lenders: require that your business has a minimum of $300,000 annual revenues.
Us: Our lending partners require a minimum of $50,000 annual revenues to be considered for business financing.
Business Plans
Traditional Lenders: require business plans to accompany your business financing request.
Us: Our lenders aren’t interested in a business plan, they’re more focused on the strength of cash flow that’s verified through bank statements and other financial documents.
What types of business loans are available and which one is best for my business?
There are a variety of business loans available.
First, you need to determine if you have short-term or long-term needs.
If you have short-term needs, such as quick access to funds for day-to-day expenses, such as inventory purchases, travel or unforeseen emergencies, business credit cards and merchant cash advances may be a good option.
However, if you have long-term needs, for sustained growth and stability, business term loans, business lines of credit, asset-based loans or equipment financing may be what you need.
It also depends on if you’re providing collateral to secure the loan or not. You can obtain business loans and lines of credit without collateral. Whereas, to qualify for equipment financing and asset-based loans, collateral is required.
What’s the difference between secured and unsecured business financing?
Secured financing is a type of business financing that requires collateral to complete the loan. Examples of collateral are equipment, real estate, stock portfolios, patents.
Adding collateral to your business financing request provides security to the lender. It decreases the risk to the lender.
Secured financing types are equipment financing (where the equipment serves as the collateral) and asset-based loans (where the asset serves as the collateral).
Unsecured financing is a type of business financing that does not require collateral to complete the loan.
Examples of unsecured financing are business credit cards, merchant cash advances, business term loans and business lines of credit.
How much financing can my business qualify for and how is this determined?
There are several factors that must be considered when applying for business financing – financial health, collateral, creditworthiness.
Financial Health
Before applying for a business loan, ask yourself:
Is my business stable, growing or stagnant?
Do I have a positive monthly cash flow?
Do I experience seasonal/slow cycles?
Will taking on debt help me to bridge a gap in my business that will allow me to maintain or grow?
Answers to these questions are specific to your business. It’s important to ask these questions before applying for business financing.
We offer a complete Loan Readiness Self-Assessment.
Collateral
Do you have collateral that can be used to secure the loan (secured financing) or do you want to obtain business financing without putting up any collateral (unsecured financing)?
Adding collateral to your business financing request will increase your chances of getting approved and getting a better rate because it lessens the risk for the lender. However, you can still obtain business financing without collateral.
In most cases, you’re capped at $400,000 for unsecured business loans. No financials are required.
If your business requires more than $400,000, you will need to include a full financial package that includes tax returns, Profit & Loss Statements and a Balance Sheet.
Creditworthiness
What’s the credit history and credit score of the business and the personal guarantor?
Most business loans require a personal guarantor (PG). This is someone who will guarantee the loan should the business default on repaying the loan.
The stronger the credit profile of both the business and the personal guarantor, the better rates you’ll receive. Credit won’t decline you. It simply determines the pricing.
What documentation do I need to apply for a business loan?
Most lenders will require the following documents when applying for a business loan:
- 12 months of business bank statements
- last filed business tax return
- Balance Sheet
- Profit & Loss Statement
How can I improve my credit score to qualify for better financing options?
One of the best practices for credit optimization is to review your credit reports quarterly to check for accuracy. If something is reporting inaccurately, you want to make sure you address it as quickly as possible. You don’t want to find out that you have errors on your report before you apply for credit because it will delay the application process.
Our network of lenders isn’t making lending decisions based solely on credit, you can still apply with damaged credit.
However, if you’re looking to improve your personal credit before applying for a business loan, here are a few things you can do:
- Pay down your personal credit cards so the overall credit card utilization is 30% or less
- If you have late pays reflecting on your credit report, send a goodwill letter to those creditors to see if they will delete the late pays
- If you have charge-offs or collections, reach out to the original creditors, not the collection agencies, and agree to pay them a discounted amount in exchange for deleting the negative information on your credit report. Be sure to get this in writing.
Here are a few ways to improve your business credit:
- Update your credit information with the commercial credit bureaus (Dunn & Bradstreet, Experian and Equifax). Errors in your file can lower your credit score. To ensure accuracy, visit each bureau’s website and review your business’s file. If you notice any errors in your payment history or outstanding balances, immediately report them to the corresponding bureau.
- Add trade references to your business credit profile. This will improve your business profile and credit score. If you have positive experiences with your vendors and suppliers—and always pay them on time—ask them to give you a trade reference on one or all of the credit bureaus’ websites. If they don’t want to or don’t have time, you can still list your vendor as a trade reference on your credit file. The credit bureau will follow up with them for more information if necessary.
Can I still get a business loan if my business has had financial challenges in the past?
Yes. You can get business financing even if you’ve had financial challenges in the past.
Our lenders understand there are times when you need to use your personal credit to keep your business going and as a result, your personal credit may be negatively impacted. They also understand the cyclical nature businesses experience. There may be some months that yield positive cashflow, whereas other months may be slower because of the industry you’re in.
Our lenders aren’t looking only at your credit, they look at the totality of your business profile. Their main concern is that your business produces positive cashflow consistently.
What is the typical interest rate for business loans and how can I secure the best rates?
The terms of your business financing depends upon a number of factors:
- Your personal credit
- The business credit
- Your business cash flow
- The type of loan product
- If the loan is secured versus unsecured
In order to secure the most favorable terms, it’s important to have strong positive cash flow, good personal and business credit and a solid financial package (tax returns, Profit & Loss Statements and Balance Sheet).
What are the potential risks and pitfalls associated with business financing and how can I mitigate them?
When applying for business financing, you will need to personally guarantee the loan. This means that should your business default on the loan, you will be personally liable to take responsibility for the loan.
Most lenders require a personal guarantee for business funding; however, there are a handful of lenders who will approve business financing without a personal guarantee. We work directly with those rare lenders.
If you’d prefer to not personally guarantee a business loan, we can make that happen. However, the money may be more expensive because the risk is greater.
If you select secured financing, where you pledge collateral to secure the loan such as an equipment or asset-based loan, and you default on the loan, your collateral may be repossessed. However, if you experience trouble making timely payments, it’s important to reach out to the lenders and let them know. They are amenable in making arrangements so you can stay in good standing. Remember, the lender is in the business of lending money, not owning equipment or a real estate portfolio. They’ll work with you to get you back on financial track.
Are there any alternative financing methods available that my business should consider?
Yes. We specialize in alternative financing options. Our vast lender network concentrates on offering business financing solutions that most traditional lenders reject.
We work with clients who are in unique situations where:
- they don’t qualify for traditional loans
- they need money fast to take advantage of an opportunity
- their credit is challenged but have good business cash flow
- their business is in a nontraditional industry