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Small Business Working Capital Loan

Understanding Working Capital Loans For Small Businesses

You can use working capital loans to pay for your small business operational costs, such as rent, payroll and debt payments. They give you the flexibility to invest your company’s growth while covering everyday expenses.

If you have an established business with a steady cash flow, reach out to a bank as they offer the lowest financing rates. However, if you experience problems with cash flow, you can turn to traditional and alternative financial institutions to meet your funding needs. Some of these options include a term loan, a business line of credit or invoice factoring. You may also use business credit cards and earn rewards in the process.

In this guide, we’ll cover exactly how a working capital loan functions, and where to find the best online small business loans.

Small Business Working Capital Loan
Small Business Working Capital Loan

What Is A Working Capital Loan?

The most common type of working capital loan is a short-term working capital loan. It can be only a few thousands of dollars since it depends on your operational costs. Repayment schedule varies in frequency depending on the lender.

If you have substantial credit card sales, you should consider a merchant cash advance. This working capital loan provides a lump sum for a percentage of daily card sales until you pay back the balance. You can calculate the amount based on how much debt and credit transactions you are plan over a certain time. You will deduct payments when you make sales to avoid impacting your cash flow negatively.

You could also consider accounts receivable factoring, especially if you have unpaid receivables or invoices. The lender may purchase outstanding receivables for a discount, and the borrower will receive the money immediately. The lender then collects the payment from the customer. Once you raise the amount, the borrower gets whatever is outstanding from the first payment, minus a percentage.

Why Do I Need A Working Capital Loan?

Short-term working capital loans are great for cash shortages or short-term investments. If you are short on cash, you’ll get a loan if it is temporary and beyond your control. Short-term working capital loans also allow you to handle unplanned projects that require operational funding. It allows smaller businesses to accept profitable and long-term plans since they can wait until the completion of the project to pay their bills and employees.

You may also get a merchant cash advance for medium term projects such as a marketing campaign, a purchase of new equipment, bulk inventory purchase, or seasonal hires. You can use merchant cash advances when business is slow to help out long-term investments and then pay it back when revenue increases.

Accounts receivable factoring stabilizes your cash flow when you have pending payments from clients or customers. Instead of waiting over a month for refund, you get paid immediately after the purchase of the receivables. The borrower may use the money for anything. You may use accounts receivable factoring to sign a deal with a new client that you usually could not afford because of delayed compensation.

5 Reasons to Seek Out Working Capital Loans For A Small Business

Unlike most small business loans, you can use working capital loans for running costs.

Your working capital consists of assets that you can convert into cash within 12 months, minus your due liabilities within 12 months. This is the money you have left over after you’ve worked out how much you’ve made and how much you need to pay out. Payroll, rent, and utilities all of them come out of working capital.

Your company will go well if you have a positive working capital, and working capital loans will be one way to ensure that this is the case.

Here are five general ways that you can put working capital loans to work for your small business:

  1. Handle Downtime
    Every business experiences downtime every now and again, especially seasonal businesses. For example, you may make a significant portion of your sales during the holiday season or warm summer months. It is a must to have enough working capital to get by during the other times of the year.
  2. For Growth and Expansion
    Are you ready to take your company to the next level? Is expansion on your mind? With working capital, you’re in a position to act fast. The same can’t be said if you’re in the place of negative working capital. It can work against you when you’re trying to grow.
  3. Prepare for an Emergency
    Just like with your finances, you need to prepare your company for an emergency. What will happen if you lose your most important clients? What if you face a lawsuit? It can significantly impact your financial situation. When you have working capital, you can handle anything that comes up – without having to scramble to find the necessary funds.
  4. To Pay Short-term Debt Obligations
    Short-term debt is a way of life for many companies. You need enough working capital to handle this as it happens.
  5. Peace of Mind
    With no working capital, you’re always at risk. Even something small could cause severe financial damage. For your peace of mind, do your best to have access to enough working capital at all times.

Working Capital Loan Case Studies

Here are some general examples of how you can put a working capital loan to work for your business:

  • The Big Opportunity
    Imagine you run a custom made guitar business.
    You have $7,000 of assets and $4,000 of liabilities (debt). That gives you $3,000 in working capital.
    So why would you want a working capital loan?
    Let’s say you usually get ten orders per month. Your $3,000 is more than enough to pay suppliers and payroll to make ten guitars.
    However, what happens when an important store contacts you and wants 30 orders for next month? That’s a lot of business for you, but your $3,000 of working capital isn’t enough to cover the cost of materials and increase in payroll to fulfill the order.
    So you take out a working capital loan. It covers the cost of the materials and overtime expenses for your staff. You fulfill the order and even with the fee for the loan, make an excellent profit.
    Without a working capital loan, you wouldn’t be capable of accepting such a large order and your business would suffer.
  • The Seasonal Business
    Another example is if you run a seasonal business and have pre-season costs but no pre-season revenue. If you’re setting up shop during spring, and you have to make some repairs, you’ll have to access some form of working capital that you probably don’t have from the winter.
    A working capital loan will give you the money you need to cover your repairs and set up shop before the business starts pouring in during your summer upswing.

Different Types of Working Capital Loans

In a perfect world, you’ll be able to increase working capital by generating more revenue.
Unfortunately, this isn’t the way things work for every company. Some have to think outside the box, like seek working capital loans for small business through other means.
Your options include:

  • Working Capital Short-term Loans
    Usually, you will seek a short-term loan and you will receive a lump sum loan that you can pay back over a shorter period (3 to 18 months).
  • Working Capital Lines of Credit
    It is a very flexible option for small business owners. You may use it as a backup plan when your cash flow is negative. If approved, you can tap into a pool of funds whenever you need to.
  • Merchant Cash Advances
    A merchant cash advance is a quick and easy option. You can get a sum of cash, which you’ll pay back with a fixed percentage of your daily credit card sales. While this is a smooth working capital solution, it’s the most expensive to get.
    You can access a working capital loan from AMEX through American Express Merchant Financing. You’ll receive a lump sum of cash from AMEX of anywhere from $5,000 to $2 million, and repay it, plus a set fee (rather than interest), through a percentage of your credit and debit card transactions.
    The fees attached to your merchant financing can be as low as 3% of your loan amount and as high as 28% of your loan amount. So how affordable this working capital loan ends up being can vary.
    That said, if you think that merchant cash advance offers an ideal setup for your business, but you want to access a cheaper loan, then American Express Merchant Financing could be the best option.
  • SBA Loan
    An SBA loan is the most popular working capital loan. The 7(a) credit works offers anywhere from $5,000 to $5 million to use for different business reasons.
  • Invoice Financing
    If your working capital is tied up by late customer payments, then invoice financing helps you get paid immediately for your outstanding accounts. This frees up cash to use for your business’s daily operations.

Working capital loans for everyday needs

A working capital loan can help your business cope with seasonal decreases in revenue, cover maintenance costs and salaries or manage your assets.

  • If your credit score is between 500-600:
    Kabbage gives you a fast working-capital line of credit up to $150,000. It’s a good option if you have poor credit and need quick cash; however APRs can reach 99%.
  • If your credit score is above 600:
    StreetShares (peer-to-peer lender) offers lines of credit and term loans to businesses making at least $75,000 a year. It’s a good option if your revenues are low, but you can borrow only up to 20% of your annual income.
  • If you need more than $100,000 for your business:
    Take out a term loan with OnDeck up to $500,000, but you should have a credit score of 660 or higher. However, APRs can reach 99.4%. You can get approval in as soon as 24 hours. The fees will depend on your cash flow and credit rating. It is an excellent option for businesses that are more established and have more revenue than new companies.
  • Credit Cards for everyday needs
    You can finance every day needs with a business credit card which helps you build your credit and earn rewards, such as cash back or travel miles. You will typically require a proper personal credit to qualify. Credit limits generally are lower than a business line or line of credit.

Working capital loans for large purchases

If you need a hefty sum to cover expansions or equipment purchase, look for online lenders that offer low APRs and better reimbursement terms.

  • For lowest rates and most extended repayment period
    SmartBiz gives Small Business Administration loans to established businesses with the lowest APRs on the market and a 10-year repayment term. But the application process is laborious, and funding may take up to several weeks and not just a few days like other options.
  • For purchasing equipment
    Currency Capital can provide loans up to $2 million. Borrowers can find equipment lenders here, and some of them charge a prepayment penalty.
  • For quick funding and competitive rates:
    Credibility Capital provides loans of up to $350,000, and you can get funding in less than a week, but the term length is only three years.

Working capital loans for unpaid customer invoices

Companies in the business-to-business sector will face gaps in cash flow. Invoice financing is a good option in this case, but high APRs make this type of borrowing pricey.

  • If you have customers with a strong-credit score:
    BlueVine can provide up to $5 million even if you have poor credit or if your business is only a year old. It’s an excellent way to benefit from a customer’s strong credit score, but if your customer doesn’t pay you, you’re liable for the loan. The terms will vary based on the loan you choose. It’s a good way to access short-term financing to boost your small business working capital.
  • For businesses with bad credit:
    Fundbox can give you access to cash in less than three business days. You don’t need a minimum revenue or personal credit score to qualify, but you need to use accounting software like QuickBooks.

Working Capital Loans for Bad Credit

If your credit score is bad, you may still get a working capital loan for your business. Here are some of the best lenders and you do not require a minimum credit score to apply.

  • Kabbage
    Kabbage is an excellent option as they don’t have strict rules to qualify. Your business has to be operational for one year and generate $50,000 in revenue yearly to be eligible for up to $100,000. If you’ve been in business for more than three years and have at least $500,000 in annual revenue, you can get lines up to $150,000. Your business’s online information, including your banking, social media, and vendor accounts, will be evaluated, so if you don’t have a good credit score but your business is financially healthy, you may get a substantial loan amount. You may get up to $150,000 with a six- or 12-month term, and you will receive the funds in one to three business days in your bank account and one on the same day to a PayPal account.
  • PayPal Working Capital
    If you use PayPal to process most of your sales, you may seek a PayPal Working Capital loan. One of the requirements is to be using a PayPal business or premier account for at least three months, and be generating between $15,000 to $20,000 in yearly sales through PayPal. You may get up to 18% of your purchases in the past year, up to a maximum of $97,000. Once approved, you can get funds immediately to your PayPal account.
    You will repay a fixed percentage of your daily sales on PayPal with automatic repayment. There is no lump-sum payment every month. When you have slower sales days, you will contribute less to your loan repayment. There are no particular terms; instead, you must pay back your loan within 18 months. APRs are between 15% to 30%, which is not as high as other lenders mentioned in this article.
  • FundBox
    Fundbox provides invoice financing and lines of credit up to $100,000. You don’t need a specific credit score to qualify, but you have to be operational for at least 2 or 3 months and generate some revenue (more than $25,000 for a line of credit and some income if you apply for invoice financing over $30,000). It offers APRs that range from 15% to 59% for a line of credit and 13% to 60% for invoice financing.
    You don’t need a separate account for your customers to pay the factoring company. When you pay an unpaid invoice, you’ll receive a 100% advance on the invoice, and you have to repay this plus fees over 12 or 24 weeks. To use Fundbox, you’ll need to use available accounting software, such as QuickBooks Online and Desktop, Harvest, PayPal, FreshBooks, Xero and Clio.
  • Credibly
    If you need a short-term loan, Credibly provides affordable working capital loans with low APRs and high loan amounts. You don’t require a credit score, personal guarantee or collateral. It is an excellent choice if you need an unsecured loan up to $250,000. To qualify, you need to be operational for six months with $10,000 in monthly revenues and bank deposits. APRs are lower than other lenders and range from 10 to 36%. If approved, you can receive funds in as soon as 48 hours.

Best Working Capital Loans for Good Credit

If you have good to excellent credit scores, you may seek affordable working capital loans and lines of credit from banks and credit unions.

  • SBA CAPLines
    The SBA offers an excellent line of credit program that lets you borrow up to $5 million with low interest rates. SBA CAPLines allows you to borrow money for working capital needs with up to 85% of the loan guaranteed by the SBA with the same interest rates as with a standard 7(a) credit. They have very competitive rates from 6 to 8% and comes with terms up to 10 years. It’s a great long-term option. You may apply through a bank or credit union.

    • Lines up to $5 million
    • Funds in several weeks to months
    • Stricter eligibility requirements
    • Bank Loan or Line of Credit
    • 6.00% – 8.50% interest rates (maybe lower)
    • Terms of up to 10 years
  • Bank Loan or Line of Credit
    If you already have a banking or borrowing relationship in a bank, check out standard term loans and lines of credit for small businesses. You will need a strong personal and business credit scores. You will enjoy some of the lowest APRs and competitive terms. You may borrow up to several million dollars and with terms over five to 25 years. Funding may take a few weeks, but some banks have started offering online loans with approval in a few days.

    • Terms up to 5 to 25 years
    • Funds in several weeks to months
    • Strict eligibility requirements
    • Low APRs
    • Loans up to several million

Best Working Capital Loans for Startups

  • SBA
    The SBA offers the Community Advantage loan for underserved and new businesses. You may borrow up to $250,000 for working capital or other needs with an interest rate capped at 9.75%. You’ll also have assistance and services for your business, including marketing, payroll, accounting, and business plan preparation.
  • Kiva
    Kiva offers working capital startup loans if you don’t have a good credit score, up to $10,000 with no interest. You’ll need to be based in the U.S., be at least 18 years old, have a PayPal account and not a bankrupt. You’ll also need to provide a compelling pitch to convince potential lenders. Typically, your loan will depend on how old your startup is. At the conceptual stage, you can get up to $1,000. If you’ve been operational for less than 90 days, you can get up to $5,000. And if you’re generating revenue, you can get up to $10,000.

    • Terms up to 3 years
    • Funds in 6 weeks
    • 0% interest rates
    • Loans up to $10,000

What You Need to Consider When Getting a Working Capital Loan

If you need to cover unpredictable expenses and gaps in your cash flow, you can consider a working capital loan. If your business has a seasonal business cycle, you may take advantage of this type of loan during months with lower sales to consider your daily expenses. During the busy season, you will be able to purchase more inventory and hire more staff. You may also choose this type of loan when you need extra funds to expand or start new projects.
Choosing a bank or an online lender will depend on a few factors. Borrowers who want an online lender will receive funds within a few days and don’t need to pay back the loan over a few years. Some repayment options will allow you to be debt-free in just a few weeks and you may use the loan for a different reasons. However, the APRs will be higher, and you’ll have less time to generate cash to repay the short-term loan. Banks can provide more top lines of credit with better terms, so they are an excellent option for an established business with higher running costs. However, banks have a more complex process and stricter terms and requirements.

How to Evaluate Small Business Loans

You should compare all of your options using the APR, which is the actual cost of the credit and includes all fees. NerdWallet has a small business loan tool with options such as customer experience, market scope and lender trustworthiness.

What Documents Will I Need To Apply For Working Capital Loans

  • Driver’s License
  • Voided Business Check
  • Bank Statements
  • Credit Score
  • Business Tax Returns
  • Credit Card Processing Statements

Monitoring Your Working Capital Finances

Here are three steps to monitor your working capital:

  1. Keep a running tally of your assets.
    Your assets will change regularly, so you need a system that lets you stay on track.
  2. Keep track of your liabilities too.
    You need to know your liabilities, including the total debt, monthly obligations, and when you can expect your debt to be paid off.
  3. Know the number that will keep your business operating efficiently.
    If you get close to a critically low level for your “cutoff point”, it’s time to reassess your situation and make changes that will work in favor of your organisation. As complicated as this may sound, it all comes down to regular monitoring.

Final Thoughts on Working Capital Loans

There are many uses for working capital loans in a healthy small business. But just like any other types of loans, it’s essential that you look closely at the costs and fees associated with working capital loans.

Because of their fast approval process, and they frequently are unsecured. Working capital loans often come with substantial APRs, so get a couple of different quotations to get the best rate possible.

Short Term Business Loans

5 Reasons Why You Need Short Term Business Loans

For a long time, many small business owners have depended on traditional term loans to inject working capital into their companies.
With the many alternatives to long-term loans, business owners are now taking advantages of short-term business loans that give them access to quick cash that they can pay off quickly and be debt-free to focus on running their business ventures.
In this guide, you’ll learn what these loans are, how they work, why businesses need short-term finance and the different loan types that are ideal for short-term business needs.

Let’s dive in

Short Term Business Loans
Short Term Business Loans

What are short-term business loans?

A short-term loan is a fast business funding option that gives small business owners access to quick cash when they need to handle unexpected emergencies, bridge cash flow gaps, or take advantage of a great business opportunity that would bring additional ROI to their companies.
Think of them as short-term financing that allows you to borrow a loan amount that you can pay off quickly.

How they work

As the name suggests, short-term business loans have a short repayment period, say, between 3-18 months.
You can apply for these loans online by filling out the lender’s loan application forms, wait for notification on approval, and if your request is approved, the cash is credited to your bank account within the same business day.
For your loan request to be approved, your credit scores have to be above 620. Excellent personal credit is an indication that you are a responsible borrower and that your delinquency rate is low.
Lenders prefer borrowers who have been in business for a long time and have consistent annual revenue.
Usually, short-term loans are risky, and to reduce this lending risk, lenders will charge high interest rates. You will also have to make daily or weekly payments since the repayment period is short.
This may affect your cash flows and receivables, and ultimately affect your bottom line. You may also be plunge yourself into a debt spiral since you’ll be forced to borrow more working capital to help meet your needs.
These loans, therefore, should only be used for short-term business needs as they are costly.

Why companies need short term business

When looking for funding for your small business, you need to be sure why you need the money.
Some business needs will require long term loans while others are more short-term and will need fast business loans.

Some of the top reasons why small business owners require short-term business loans are:

  • Handle emergencies and unexpected business expenses
    The business environment is quite dynamic and sometimes surprising situations arise when you least expect or are prepared to handle them.
    Say for example a piece of equipment that’s critical to your business operations stalls. By postponing its repair, your business loses money.
    You’ll need fast business loans to help fund the repair and get back to work.
  • Build business credit
    You can use them as a bridge to better funding
    Short-term loans are a good way of building your business credit to be eligible for substantial business loans with better repayment terms.
    If your lender reports your early and consistent loan repayments to credit bureaus, your credit rating increases, and that gives your company access to better credit facilities.
  • Build business credit
    You can use them as a bridge to better funding
    Short-term loans are a good way of building your business credit to be eligible for substantial business loans with better repayment terms.
    If your lender reports your early and consistent loan repayments to credit bureaus, your credit rating increases, and that gives your company access to better credit facilities.
  • Take advantage of a new business opportunity
    Not all surprises in business are bad. Some bring additional returns that would propel your company to greater heights.
    A supplier could be selling fast moving inventory or machinery at a discount.
    You’ll need quick cash to seize the opportunity before your competitors since such opportunities come once.
  • Bridge cash flow gaps
    If you run a seasonal business, you’ll need cash to support your business operations during the low seasons.
    To be able to make those periodic payments during their downtime, small business owners need access to short term finance to help them bridge the gaps in their cash flows.
  • Growth and expansion
    As your business grows, you’ll need cash to fund it the growth.
    Acquiring new office space, hiring new employees or even marketing your company to reach more customers will need money.
    Fast business loans can help you get the funds you need to support your business expansions.

Types of short-term business loans

Below are some of the most common small business loan options:

  • Lines of credit
    Business lines of credit give you access to a pool of funds that you can draw from when you want to. They are more flexible and allow you to pay back only what you have withdrawn.
    They act like credit cards and are offered by both traditional financial institutions like banks and alternative lenders.
    Once you have paid off the amount borrowed, the money will be revolved for you to withdraw again.
    You can borrow up to $100,000 – $500,000 payable between 1-2 years at an interest rate of 7-12%.
  • Invoice factoring
    It involves selling off your invoices at a discount.
    The lender will give you a lump sum for a percentage of your invoice amount and the rest when the invoices are finally paid.
    The factoring company then takes charge of pursuing payments from your customers. And they do this at a fee.
    This mode of business financing is ideal for businesses that are struggling with their cash flows and cannot wait for their customers to pay up.
  • Invoice financing
    Unlike factoring, invoice financing involves using your receivables as collateral to get business funding.
    Lenders focus more on the value of your invoices than any other aspects of your business.
    It’s also ideal for companies that are struggling with their cash flows, and you can apply for these loans online and get the funding that you need to sort your business needs.
  • Merchant cash advance
    Although they are quite expensive, cash advances have a high approval rate and give you access to cash for a percentage of your future credit sales.
    Usually, lenders charge a factor rate of between 1.10 – 1.50, and you can borrow from $5,000 – $500,000 payable in 3-18 months.
    To fuel growth and expansion, a business needs funding. Depending on the purpose of the loan, you can apply for either short-term business loans or term loans.
    We’ll do our best to connect borrowers with reputable lenders. Fill out our loan application forms today, and let us save you the headache of looking for lenders.

Small Business Loan Rates

Understanding Small Business Loans

Small business loans are normally used to start a business, grow a business, purchase inventory or equipment, and acquire real estate. According to research done by the National Small Business Association, an astounding 69% of small business owners used this option to finance their ventures in 2016. Small loans in terms use of credit cards, venture capital and the very popular option of crowdfunding. The remaining 31% were not able to access enough financing.

The NSBA reports clearly identifies the relationship between small business financing and the capacity to hire and retain employees. The ripple effect results in the economic growth of locals and the national economic growth.

Small Business Loan Rates
Small Business Loan Rates

Alternative lenders market is ever on the rise, according to a data from U.S. Small Business Administration almost $600 billion was made available to borrowers in 2015 by banks while alternative lenders financed approximately $593 billion in the same year.

While small business loans can be a bit difficult to obtain, there are options out there you can easily use to your advantage. As stated, it is important to understand the cost of borrowing. Let’s get you started.

Business Loan Interest Rates and How They Work

There are three commonly known SBA loans: SBA, 7A loans and SBA Express loans. They are ideally used for a broad range of purposes like refinancing and capital growth and CDC/504 loans are commonly used for the purchase of fixed assets such as real estate and machinery.

  • SBA – Small Business Administration sets the limit on interest rates that bank loans can be charged, currently standing at 7.25%-9.75% range for 7A loans, depending on the loan amount and the loan duration. The interest charged is also dependent on the market interest rates, as the market rates change so do rates on these loans
  • SBA 7(A) loan terms
    These loans do not have a minimum loan amount but have an upper limit of $5 million. In 2015, the average SBA loan amount borrowed was $374000. SBA warranties 85% of the loan if the loan is less than $150000 and 75% for loans above that. The cut-off mark is at $3.75 million. For instance, a loan of $25000 or less paid in under 7 years will be charged at a rate of 8.75%. However, interest rate is not the only factor in some of the expenses. The true cost of borrowing is well captured in the APR which includes fees associated with the loan. Furthermore, these loans have a guarantee fee. In simple terms, while SBA guarantees that the loan will be repaid, they do not do that freely – they charge for this service. Guarantee fees are based on the portion of the loan amount guaranteed, and the duration of the loan.
  • CDC/504 loans and loan terms
    As stated earlier these type of loans are normally used for the purchase of fixed assets such as buildings, land, and machinery. They are to a degree funded by approved development companies, and not-for-profit organizations with a focus on community development. These loans require the borrower to base a collateral on the loan, in most instances the collateral is the asset or assets being financed and personal guarantees are needed.These loans are issued in 10 and 20-year terms. As of August 2017, the 10-year term loans had an interest rate of 4.49% while the 20-year duration loans were charged at an interest of 4.53 %. The fee percentages do not change but are reset every 5 years based on the principal amount. This is advantageous to the borrower as the amount repaid decreases.
    The minimum you can access in this category is $50000 and the maximum is $5.5 million. If you consider taking out a 504 loan, you will be required to pay at least 10% of the cost of the asset. Banks put this requirement at 50% of the loan, certified development companies usually ask for 40%. SBA guarantees 100% of the CDC share of the loan. The loan terms include

    • The Treasury bond rate: 10-year duration loans fall under the 5-year treasury bond while the 20 year period loans fall under the 10-year treasury bond
    • A guaranty fee usually paid to SBA.
    • A servicing fee that goes to the CDC.
    • Central servicing agent fee

Upon getting this loan you will be charged all three fees and the Treasury bond rate. You will also be asked to pay a one-time fee of 2.1% to SBA. Thus, your final annual percentage rate will be slightly higher.

SBA loans can be a tad complicated and tedious to apply for, but they provide the best interest rates. If you are in need of financing there are many lenders online willing to help. Do your research, find a financial institution that will serve your needs best.

What Determines Loan Rates?

Lenders look at a few factors such as:

  • Market Prime Rate – The rate commercial banks are charging their most credible clients.
  • Personal Credit Score – your credit score will greatly impact the loan interest rate you will be charged. Borrowers with a score of 700 and above usually enjoy lower rates. Those with a score lower are charged more as lenders are looking to protect themselves against risky investments.
  • How Long You’ve Been in Business – businesses that have been running for two years or less are usually considered risky investments, there is no record to prove the credibility of the business. Thus, borrowers of businesses in this bracket are charged a higher rate than those that have been in business for a longer time.
  • Your Business’s Financials – how are your annual revenues, how is the business doing financially, what is the current business debt. Lenders highly consider business profitability, debt on the business and revenue. Some lenders put a cap on the minimum the business has to be earning before issuing their loans. More profitable businesses with approved minimum revenues are charged lower interest rates.
  • Loan Repayment Term Length – Short-term loans have high APRs, you will, however, pay fewer interest rates in the long run. Long-term loans, on the other hand, have low APRs but are charged higher interest rates.
  • Accessibility of the Loan – Quick business loans that are easily available and easy to apply for come at a significantly higher interest rate as lenders secure themselves from losses as these loans do not require the borrower to base a collateral on the loan. Bank loans, on the other hand, are not easy to fund, tedious to apply for, have strict guidelines and require collateral.
  • Business Credit Score – Your business commercial credit score based on trade lines and debt repayment trends on credit cards and any other debt that has been accrued greatly influence the business loan rate fronted.
  • Your Business’s Industry – How risky or volatile is the industry the business is operating in? This factors when lenders determine what rates to charge. For example, the hotel and restaurant owners find a tough time getting favorable loans due to the high turnover and failure rate in the restaurant industry. The same applies to apparel businesses, law firms and healthcare businesses. The more volatile the industry, the higher the interest rate charged.


You now have some idea what determines business loan and their interest rates, where you can get them, and how they work. Do not stress over funding anymore. Get online and do your research find a lender who best suits your needs. Fill an application form today!

Quick Business Loans

6 Quick Business Loans For Small Business Owners

While it’s pretty common for business expenses to pop up when you least expect them, getting quick business loans in as soon as 24 hours from traditional financial institutions can be a major challenge for small businesses.

Most of these institutions will require tons of paperwork and insist that you to meet their stringent eligibility requirements before your loan request is approved.

Since time is a luxury for any small business owner, they are forced to seek out alternative lenders who can give them access to funds within the same business day.

In this article, you will learn everything you need to know about the different types of fast business loans that can tide you through a financial shortfall.

Quick Business Loans
Quick Business Loans

6 Quick Business Loans

  • Short-term business loans
    Depending on your company’s financial status and creditworthiness, you can borrow as much as $2,500 to $250,000 payable within 3 to 18 months.
    This form of business funding is only good for emergencies because they come in double-digit interest rates.
    You can use these loans to boost your cash flow and take advantage of that business opportunity or solve an emergency situation before it affects your business.
    Usually, you’ll either make daily, weekly or monthly repayments depending on your agreement with the lender.
    Your business, therefore, has to have a stable cash inflow to service the loan.
  • Short business capital loans
    With equipment financing, you can purchase state-of-the-art cooking equipment for your business.
    These loans are ideal for restaurant owners looking to upgrade their kitchen so that they can become more efficient in service delivery or budding chefs starting out their career in the hospitality industry.
    The beauty with this mode of financing is that you don’t need collateral because the piece of equipment acts as security until you repay the loan in full.
  • Inventory financing
    You don’t have to wait for your customers to clear their invoices for you to pay your employees, order inventory, pay taxes or fix that machine that suddenly stalled.
    It’s possible to get access to quick cash that’ll help your business meet its short-term obligations without draining your personal finances.
    A short-term business capital loan can inject into your business the working capital it requires during a financial shortfall.
    These loans have flexible repayment structures and don’t require any collateral. They are also easy to access, and interest rates vary from 7% to 99% annually.
    Since these loans are meant to boost your short-term working capital needs, you can borrow amounts ranging from $2,500 to $250,000 with a repayment term of 3 to 18 months.
    You can apply for working capital loans by filling an online application form from a trusted lender and have the funds credited to your bank account on the same business day.
  • A business line of credit
    If you have fluctuating business needs, a business line of credit is your best bet.
    With this mode of business funding, a lender allows you access to a pool of funds that you draw from any time you need cash as long as you don’t exceed the limit. You then pay interest on the amount drawn, and the funds are revolved almost immediately. It acts like a credit card.
    A business line of credit allows you access to small business loans worth $10,000 to $1 million payable within 6 months or 5 years. The interest rates range from 7% to 25%.
    The only downfall with this mode of funding is that your lender may close the line of credit unexpectedly, ask of constant financial updates from your business or may require you to offer collateral before approving your request.
  • Merchant cash advance
    You can get a lump sum to help with your immediate business needs in exchange for your future projected revenue. The merchant will lend you money for a percentage of your credit sales.
    This mode of funding is ideal for businesses that are struggling with cash flows and have bad credit.
    You can borrow from $2,500 to $250,000 and make daily, weekly or monthly repayments depending on your agreement with the lender.
    Lenders usually charge a factor rate instead of the usual interest rate. This makes cash advances an expensive option to fund your business needs.
    You, therefore, need a stable cash flow to make repayments easily without affecting your bottom line.
  • Invoice financing
    Allows you to use your account receivables to access funds.
    Instead of waiting for customers to pay their invoices, you can use them as security to get funds and meet your immediate businesses finance needs.
    The lender will give you a lump sum in exchange for a percentage of your invoice value and a fee.
    Interest rates vary significantly with lenders, but the approval rate is pretty fast, and you can get funds within the same business day.
    Most lenders will focus on the value of your invoice than any other aspect of your business before approving your loan request.
  • Invoice factoring
    Instead of using your invoice as collateral to get funding, factoring involves selling the invoices to the lending company who’ll then give you a percentage of the amount you need, and pay the rest when the customer pays up the amount owed.
    Usually, the lenders focus on the value of the invoices, your credit and that of your customers.
    The factoring company will, therefore, take charge of tracking payment from your customers and will charge you a fee for that.
    You can apply for these quick business loans online and get immediate approval.
    They, however, come with a steep APR and should only be used for short-term financial needs.

To get fast business loans really quick, you’ll have to follow the following steps:

  • Apply online – you can apply for quick business loans by filling out the lenders’ loan application forms available on their websites. Most lenders have simplified their application process, and it’s pretty easy to navigate through in less than 5 minutes.
  • Wait for approval – you’ll need to wait for the lender to go through your application and check if you are eligible for funding. The approval rate, however, is fast and you’ll get notified if your request was approved or not within minutes after your application.
  • Funds get credited to your bank account – if your request is approved, your lender will send you their terms and conditions, and once you append your signature on the loan agreement form, the funds you requested will be credited to your account on the same business day and the deal closed

In business, unexpected expenses can pop up when you least expect or are prepared to handle them. It is, therefore, important to have some funds set aside to handle contingencies or have access to guaranteed business loans from trusted lenders to help tide you through such financial shortfalls.

We can connect you with our trusted lenders who will approve your loan request in less than 24 hours and have the funds that you request credited to your bank account on the same business day. Fill out our online loan application forms and let us help you get the funding that you need.

Quick Business Loans
Quick Business Loans

Restaurant Business Loans

8 simple ways to get restaurant business loans

Are you a top-notch chef with a desire to start a restaurant business and showcase your culinary skills?

Or are you a veteran looking for funds to grow and expand your business?

The truth is that hotel owners have always had a hard time getting financing for their businesses because the restaurant industry is considered risky.

Unfortunately, lack of funding is the number one reason why restaurant businesses fail after a few years of operation.
So how can a restaurant owner access funds for their ventures?

In this article, you’ll get an overview of the different kinds of restaurant business loans and why you may need them. You’ll also learn how to fund your business.

Restaurant Business Loans
Restaurant Business Loans

Different types of restaurant business loans and why you need them

There are several small business loans for restaurants. Whichever financing option you choose will largely depend on your potential lender and why you need the funds.

Below are some of the most basic restaurant loans available to restaurant owners:

  • A business line of credit
    A line of credit gives you access to a pool of funds that you can draw from whenever you want.
    You’ll then pay back the amount withdrawn plus interest, and the funds will be revolved for you to withdraw again.
    Due to its flexibility, this kind of restaurant financing is ideal for hotel owners because of the nature of their businesses.
    During busy periods, you can use it as a backup plan to boost your working capital.
    It also comes in handy during low seasons to cover the day-to-day expenses of the business.
  • Equipment loans
    With equipment financing, you can purchase state-of-the-art cooking equipment for your business.
    These loans are ideal for restaurant owners looking to upgrade their kitchen so that they can become more efficient in service delivery or budding chefs starting out their career in the hospitality industry.
    The beauty with this mode of financing is that you don’t need collateral because the piece of equipment acts as security until you repay the loan in full.
  • Inventory financing
    According to the 2015 restaurant industry forecast, the number one challenge for many restaurant owners is ensuring that there is enough food in their kitchen.
    You can stock up your kitchen with enough foodstuff and other necessities to help run your business smoothly with inventory financing.
    It’s not wise to lose your customers to competitors because they cannot find what they are looking for in your restaurant.
    It is, therefore, important to make sure that you have everything your clients need to maintain the traffic and increase profitability.
    Just like equipment financing, you can use the inventory you purchase as security for the loan.
  • Working capital loans
    With a maximum credit of $250,000, you can run your restaurant business smoothly.
    Working capital loans give you access to funds that’ll help you cover the day-to-day expenses of the business.
    These loans are usually short-term in nature and keeps you afloat when you need a boost in your cash flows or when you need to take care of an immediate need.

How to finance your restaurant business

Most traditional financing institutions find the restaurant industry so risky due to their high rate of failures.

They, therefore, shy away from lending to such business owners.

Fortunately, some alternative lenders are willing to finance restaurant owners.

Below are some business loans options for restaurants:

  • SBA loans
    To reduce lending risks and provide resources for small business owners, the USA Small Business Administration guarantees different kinds of loans for entrepreneurs.
    It, therefore, means that lenders like credit unions, banks and others can risk funding your restaurant.
    There are several SBA loan options available for restaurant owners. You, therefore, need to choose what suits you most.
    To qualify for an SBA loan, you need to have good credit scores. You’ll also have to pay a guarantee fee upfront.
  • Credit cards
    You can use your credit card to finance the operations of your restaurant.
    It’s, however, vital that you are amenable to the interest rates and you can repay the amount borrowed on time.
    You need to be cautious when using this mode of financing and be sure that you have a stable cash flow to make repayments to avoid accumulating your debt.
  • Bank loans
    Banks are wary of the restaurant industry due to the lending risk involved.
    This makes it more frustrating for restaurant owners looking for credit from banks.
    If you have good credit scores and collateral, you can discuss the options available for you with your local banker.
    The beauty with bank loans is that the interest rates are quite low and depending on how risky you are, you can qualify for a long-term loan that allows you to pay in manageable installments.
  • Merchant cash advance
    Although cash advances are an expensive way of restaurant financing, you can use them to sort out short-term business needs.
    A merchant cash advance gives you access to funds in exchange for a percentage of your future revenue.
    Usually, the advancing company charges an interest rate of 20% and this may affect your bottom line.
  • Loans from credit unions
    You can easily qualify for a loan from credit unions if you present a convincing business plan and solid market research.
    Credit unions charge interest on the loan balance so the earlier you repay the loan, the less interest you will be charged.
    Their terms are also quite flexible, making it ideal for entrepreneurs who want to start a restaurant business.
  • Family and friends
    You can also get restaurant business loans from friends and family.
    Discuss your business ideas with them and ask them to help you kick-start your dream.
    Just ensure that you keep your end of the bargain because failure to pay them back as agreed may break trust and end your friendship.
  • Savings
    Using your savings is by far the best way to finance your restaurant business.
    If you desire to own a thriving hotel business, you can plan and set aside some money to fund your dream.
    That way, you’ll get into business without any debt obligation.
    Treat it as a loan to the business and pay yourself interest.
    Just make sure you don’t use all your savings. Having some left for contingencies is important.
  • Angel investors
    Getting investors to invest in your restaurant can also help you access funds to start your restaurant business.
    With a solid business plan, you should be able to convince your potential investors that the business can repay the loan on time.
    You could also make them permanent partners in your business by giving them some control over the company. Sharing control means that they’ll be able to make decisions regarding the business.
    If you don’t want to share your business equity, it’s important to repay the debt on time so that you cut all the links with the investors.

Essential tips to entrepreneurs seeking restaurant business loans

  • When looking for restaurant loans, you need to compare different lenders and make sure that the one you choose is the most affordable and has flexible repayments terms.
  • Work on improving your credit scores to access loans with better terms and the lowest interest rates.
  • Have a plan in place on how you intend to repay your loan because failure to pay your monthly repayments means you’ll incur more expenses that will affect your bottom line.

To get in touch with our reputable lenders, fill out our online loan application form and let us help you realize your dream. Our application process is simple, and it’ll take less than five minutes to navigate through.

What is Factoring

What is Factoring and Why Do Businesses Use This as a Financing Option

Having a good cash flow is very important for any business to run smoothly. When there are expenses, not to mention accounts receivables that may take time, sometimes it can be a big challenge for a business to search for the funds it needs to fund its growth and continue business operations. This explains why there are many business owners relying on factor. For many who have not yet tried this method, just what is factoring?

What is Factoring
What is Factoring

Know More About Factoring

Factoring is a kind of financing that enables companies who are experiencing some problems in their cash flow to be able to get additional capital. If you happen to have clients who take 30 to 60 days before they pay up, this may create gaps in your cash flow, especially since you won’t stop acquiring new clients and providing products or services.

To fill in the gap, businesses turn to invoice factoring. Over the years, this type of financing method has become a widely popular choice among business owners. But if you are not so familiar as to how it works. This articles gives you a simplified explanation of the process and how you can get one.

How Does It Work?

Instead of applying for a traditional loan where you have to prove to the lender that you have good credit standing, invoice factoring works differently. You work with a factoring company that will buy your invoices. Once you decide to factor your invoices, it means that you are selling your invoices in lieu of the quick cash that the factoring company will give to you.
Factors will get your invoices and they will pay you installments. The first one is you get to have the cash advance. Once your client pays the amount stipulated in the invoice, the factor will give you the remaining amount deducting their fees.

Recourse and Non-Recourse Factoring

Factoring companies offer different kinds of factoring. These are recourse and non-recourse factoring. With recourse factoring, the factoring company takes responsibility as payment for the invoice. With non-recourse factoring, companies sell invoices to the factor and the factoring company will then assume the credit risks in these invoices. Depending on the company, there are factoring companies that actually offer both non-recourse and recourse factoring.

Fees and Contract Terms

There are various fee structures. The overall fee will depend on different factors which include the volume of your receivables, creditworthiness of your customers, etc. There are factoring companies that may have additional fees for money transferring, collateral, and shipping among many others.

How to Qualify

Compared to other option, it is relatively easier for you to qualify for factoring. There are just two main requirements required for your invoices. First is that the invoices must be due from reputable and established commercial businesses or government clients. Another requirement is that there should be no encumbrances. Your company should also be in clean slate which means that it does not have any legal issues.

What Are the Benefits of Factoring?

One of the main reasons why business firms factor is they want to boost their cash flow. Are you considering this option? Here are some of the benefits of factoring:

  • Factoring allows you to get the funds that you need without having to hassle yourself with the strict documentation usually required by the banks.
  • The release of funds is quite fast. It just takes days.
  • Factoring companies give back-office support. In fact, depending on the type of factoring and the services offered by the factor, they may also provide managing collection services for your clients. This allows you to have time to focus on other aspects of your business.
  • Factoring is flexible in the sense that you can customize it in such a way that it will give you the capital that you need.
  • Contrary to what most people think, factoring is really not a loan. When you factor business,you don’t incur any debt. Your factor will just deduct the fees.
  • Another benefit is that it is scalable. It can grow if your receivables grow.

Should You Factor Your Invoices?

Given the numerous benefits of factoring, there is no reason why you should not. However, it still depends on what your business really needs. At the end of the day, it always helps that you are familiar with your options so you can easily compare and identify which financing option is the most suitable to your funding requirements. Once you have decided that you want to factor your business, the next step is for you to find a reputable factoring company that you can work with.

Factoring Financing

Factoring Financing Companies: How Do They Work?

Small-scale business owners, despite having stellar credit scores, may still have a hard time securing a business loan from traditional lenders. The good news is that businesses now get to have various financing options. Nowadays, many would turn to factoring financing companies.

Factoring Financing
Factoring Financing

Is It a Form of Financing?

Factoring is not a loan. This is what you often hear from people. But basically, it works just the same. It is a kind of financial service where a business sells its receivables to factoring firms at a discounted rate to have quick access to funds. It is important to differentiate between factoring and invoice discounting. The former sells the accounts receivables to a third party.

The factoring company will then pay the seller after doing the deductions. The rate ranges from 2 to 6%. The factor will pay only from 75 to 80% after the discount deduction.

What Are the Functions of Factor?

Before even deciding to go for this kind of financing option, it helps that you know the different functions of factor, which include the following:

  • Financing: The factoring firm provides financing to the client by getting all of the account receivables. For many businesses, this is a good financing option.
  • Maintaining a Sales Ledger: A factor maintains the client’s sales ledger. So once you sell the accounts receivable to the factoring company, they take care of all of the transactions.
  • Money Collection: The factoring firm collects the funds the debtors of the clients. This way, the client can focus on the business.
  • Credit Protection: In the event of non-recourse factoring, the factoring company shoulders the risk of the credit.

Types of Factor Financing

Depending on the financial requirements, there are different types of receivable factoring. These include the following:

  • Recourse factoring: The factor is only a collecting agent. The client handles the credit risk and not by the factor company.
  • Non-recourse factoring: In this case, the factor shoulders the risk of credit.
  • Full factoring: This is considered to be the most popular type of factoring as it gives the client with various features like collection, protection from debt, etc.
  • Suppliers guarantee factoring: In this kind of factoring, the factor takes guarantee of the firm.

What Are the Advantages of Factoring?

There are various advantages of accounts receivable factoring which include the following:

  • When you sell your accounts receivable, it reduces your credit risk.
  • In terms of your working capital, you can expect it to run smoothly as the factoring company can provide immediate funding.
  • Factoring can actually help you improve your business liquidity as well as cash flow.
  • You do not necessarily have to get new business capital.

How About the Disadvantages

As with any financing option, there are also downsides in deciding to go for invoice factoring which includes the following:

  • Since factor firms will collect the money on your behalf, it can lead to stress in the client relationship.
  • If the factoring company exhibits bad behavior, it can affect the company.
  • The factoring cost can be quite high.

What to Look for in a Factoring Company?

After taking the time to weigh your options and you have finally decided to go for factor financing, the next step is to start searching for a factoring company.

So, what are the things you have to consider?

  • The reputation of the Company
    Since you will be dealing with the factoring company and have financial transactions, it is logical that you find a reputable company. It is always best to choose a firm that is already established. For instance, find a factoring company that has more than 10 years of being in the business.
  • Factoring Fees
    As with any type of financing option, you should be able to understand the total fees that you will have to pay. You don’t want to experience being surprised having to pay for hidden fees. Make sure that you know under what conditions these fees apply.
  • Know about the penalties.
    Getting information pertaining to penalties is very crucial. You should know when these penalties are imposed. Knowing these details allow you to be careful in order to avoid incurring these penalties.

Factoring has its share of advantages and disadvantages. It will just depend on your business needs and other requirements. There are several reasons why a lot of business owners prefer to turn to factoring financing companies. If your business needs quick funding, this is one of the best ways to go. But just before you do, it is very important to select the right company in order for you to have a good experience. Keep in mind that selecting the wrong one can be really frustrating and may even lead to more problems.

Accounts Receivable Factoring

What You Need to Know About Accounts Receivable Factoring

Account receivables factoring is a financing method where you use your invoices and turn them into cash right away. These invoices are categorized in your ledger as account receivables where your clients promise to pay the certain amount stated. For business owners who need immediate cash, this is one method of financing that they can use. They can just find an invoice factoring company that offers this type of business loan and they are the one who will get paid by the customer.

Accounts Receivable Factoring
Accounts Receivable Factoring

How Factoring Invoices Help a Business

Getting a bank loan might be the best option for most business owners. But if you need the funds really quick like for instance in 24 hours, the best way is to turn to receivables factoring companies. There are so many ways that factoring invoices can help a business. For instance, Sandy owns a repair company that does repair works and services. When there is a new client, Sandy has to buy the necessary supplies and pay the workers to finish the job.

Once the work is done, the company of Sandy will then send an invoice to the customer and payment is made usually within 60 days. When there is a new customer, Sandy has to buy materials and pay for the wages of the workers while still waiting for the invoice to get paid.

If you’re a business owner and you are operating on a small scale, your business’ resources may not be enough to cover all of the expenses to ensure there is a continuous flow of business operation. With invoice factoring, you can take on new customers and get hand of your cash flow.

When Do You Need Accounts Receivable Factoring?

If you have a good credit score, your access to credit is not a problem. You can have many financing options. So, when do you get invoice factoring? The answer actually depends on where you intend to use the money for. When you need immediate cash in order to fund your business growth, this is without a doubt a good option. With factoring invoices, you can have funds for the things you need to buy like supplies or for other expenses like payroll, renovation, etc.

Another reason why many business owners turn to invoice factoring is that this financing option offers fast funding. Invoice factoring companies don’t take that long to approve your application. In only takes hours and you can already receive the funding that you need the same day.

For people who do not qualify for a bank loan, this is a viable option. Even if you have a poor credit score, you can still apply for this type of loan. Why is it the case? Unlike traditional lenders like banks, invoice factoring companies consider mainly the quality of your customers/clients’ credit. After all, they are the source of the invoices or receivables.

What to Consider

When choosing a factoring company, there are essential things that you have to take into consideration.

  • Application Process: Before even applying for a loan, it helps that you get to know about the application process. What documents do they need and what are they looking for? There are some factoring companies that actually need lots of paperwork while there are others that operate online. By knowing the application process, you can assess for yourself whether it is convenient to apply for one.
  • Factoring Fee: Most companies that offer fast and convenient loans tend to charge higher fees. Search for a company that is transparent when it comes to pricing. Be wary of invoice factoring companies claiming that they offer the lowest rates and then they have other fees that will increase the total costs. Once you notice that the company is not divulging the necessary information that you need, it should be a warning.

Customer Service

This type of business loan should be able to help you address your cash flow problems. Prior to dealing with any loan companies, it is very important to know the kind of service that they give to their clients. There is no point in getting a loan from a company that will cause you problems. Pay close attention to the kind of service that you receive. It is also very crucial that you read online reviews. The company should be Better Business Bureau accredited and has the license to operate in your state.

To have access to financing options and to avoid incurring penalties, you need to have a good relationship with your invoice factoring company. If you know that a client may not be able to pay, do not even attempt to ruin your business relationship with the loan company. You don’t want to end up paying for the whole amount of the invoice plus additional fees.
Invoice factoring is a good solution for businesses that need instant cash and quick solution to address crash crunches and in order to fund business growth.

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