Every business needs fund to grow. Sometimes, small businesses are unable to get the funds to manage their business. A business may need urgent funds when they encounter a disaster and their equipment are destroyed. They will need funds to buy new equipment in order to work. They may also need to funds to pre-finance a huge project, pay workers, or even to maintain a regular cash flow for the business. There are several loan options for small businesses when they need funds. They all have their benefits and disadvantages. In this article, we will explore small business lending.
Term loans are one form of small business lending. This lending option is great for businesses who have a good credit history, good credit score (both personal and business), and businesses who have operated for at least one year. There are both long term loans and short term loans for such businesses. The APR on this loan option depends on your credit score. A high credit score attracts a low APR. With term loans, the lender will give a lump sum and you will be expected to repay over a period. If you need a large amount, term loans are ideal for such funding because you can repay the loan over a long period. Their APR is also usually lower than other business loans. However, you may need to provide collateral for term loans. Here some of the best lenders known for offering term loans.
a. Lending Club
Lending Club offers business loans for businesses with a minimum credit score of 600. You should also be in business for at least one year, and you are expected to have a minimum annual revenue of $50,000. The loan amounts they offer ranges from $5,000 to $500,000 at an APR that ranges from 16.7% to 99.4%.
b. Funding Circle
Their loan package is ideal for businesses with good credit score. you will need a minimum credit score of 620. You should also be in business for at least two years, and there is no minimum annual revenue required. Funding Circle loans that range from $25,000 to $500,000 at an APR that ranges from 7.4% to 36%.
If you need a loan for your business but you have bad credit, you can apply for OnDeck. OnDeck’s credit score is quite low compared to that of other lenders. You can apply with a credit score as low as 500. You should be in business for at least one year to qualify for their loan, and you will need a minimum annual revenue of $100,000. The loan amount they offer ranges from $5,000 to $500,000. The APR ranges from 16.7% to 99.4%.
Smartbiz is also worth mentioning due to their high loan limit. You can borrow up to $350,000. However, the minimum amount you can borrow is $30,000. You will need a good credit score of at least 600 if you want to borrow up to $150,000. If you need to borrow more than $150,000 the credit score requirement is higher. You will need a minimum credit score of 620 to apply for a loan amount higher than $150,000. You should also be in business for at least two years, and you should have a minimum annual revenue of $50,000. The APR ranges from 8.53% to 9.83%.
e. Credibility Capital
Credibility Capital offers loans for people with good credit score. However, they focus on offering short term loans to businesses. You will need a minimum credit score of 620 and you should also be in business for at least one and a half months. This lender requires that you have a minimum annual revenue of $150,000. You can access between $10,000 and $350,000 at an APR that ranges from 10% to 25%.
Business owners with poor credit scores can apply to Quarterspot. You can apply with a credit score of 550. This lender also requires that you should have a minimum annual revenue of $200,000. Quarterspot offers loans that range from $5,000 to $200,000. The APR on these loans is between 30% and 70%.
Streetshares offers loans to people with good credit scores and veterans. The newer businesses also have a chance of accessing loans from this firm. You will need a minimum credit score of 600 to apply. You also need to be in business for at least one year, and you should have an annual revenue of $75,000. The minimum loan amount they offer is $2,000 and the maximum is $150,000. Streetshares charges an APR that ranges from 9% to 40% on their loan.
Lines of Credit
This is another popular method of funding for business owners. If you are looking for a flexible funding option for your business, you can consider a business line of credit. With this option, the lender will approve a pool of funds for you and you can draw from the pool anytime you need cash for your business. The system is revolving so anytime you pay back the cash you drew, you limit increases once again. The interest rate is always charged on the amount you draw and not the entire line of credit. The best financial institutions that offer a business line of credit include the following.
a. Blue Vine
Blue Vine offers a line of credit up to $250,000 for people with good credit scores. They offer a six-months line of credit and 12-months line of credit. For the six-months line of credit, you will need a minimum personal credit score of 600. You should also be in business for at least 6 months and you should have a minimum annual revenue of $120,000. For the 12-months line of credit, you will need a minimum personal credit score of 620. You should be in business for at least 2 years, and you should also have a minimum annual revenue of $450,000. The APR on their lines of credit ranges from 15% to 78%.
If you have bad personal credit, and you want to apply for a line of credit, you can apply to Kabbage. Even new businesses have a chance to qualify for a business line of credit from this lender. There is no minimum credit score requirement. However, your business needs to be an operation for at least one year. Your business’ annual revenue should not be less than $50,000. You can access a loan between $2,000 and $250,000 for an APR that ranges from 24% to 99%.
Streetshares is another lender that offers lines of credit for businesses with good credit scores, veterans, and new businesses. You should have a minimum credit score of 600, and you should be in business for at least 1 year. You are also required to have a minimum annual revenue of $75,000. Streetshares’ loan amount ranges from $5,000 to $150,000 and the APR ranges from 9% to 40%.
FundBox considers borrowers with poor credit scores. There is no credit score requirement. Another good thing is that even if you have been operating for only 3 months, you can still apply for this loan. However, you should have a minimum annual revenue of $50,000. You can lend between $2,000 to $250,000. The APR ranges from 10.1% to 99%.
With OnDeck, you will need a good credit score of 600 or more. You should have an annual revenue of $100,000 and you should be in business for at least one year. This lender offers a line of credit up to $100,000. The APR ranges from 11% to 60.8%.
Invoice factoring is another method of business funding that allows you to get cash against outstanding customer invoices. The invoice factoring companies will offer you a lump sum using your customer’s invoices as collateral. Although this form of funding is faster, it is expensive. In most cases, businesses without a good credit history or good credit score can also qualify for this option. This is because most invoice factoring companies focus on the creditworthiness of the customer whose invoice they will be factoring. Some lenders even conduct checks on these customers and approve them before they allow the business to add their invoices to the ones they will be factoring.
a. Blue Vine
You can apply for invoice factoring with a credit score of 530 or more. Businesses that have been operating for at least 3 months qualify for this form of funding, however, Blue Vine expects you to have a minimum annual revenue of $100,000. Blue Vine can factor invoices up to $5 million. The minimum amount they will factor is $20,000. The rate for invoice factoring ranges from 15% to 68%.
Streetshares focuses on businesses that are interested in government contracts. They expect you to have a credit score of at least 540 and be in business for at least one year. They factor 80% to 90% of government contracts and 90% of invoices. The rate usually ranges from 1% to 5.5%.
With FundBox, there is no minimum credit score requirement and there is no annual revenue required. However, this lender expects you to have a software that is compatible with their system. They factor up to $100,000 of your invoices. The minimum invoice amount they factor is $1,000. FundBox factors invoices at APRs that range from 16.4% to 76.5%.
There is also invoice financing which is similar to invoice factoring. With invoice financing, the financing company does not purchase the invoice. They only offer you a lump sum that is equivalent to a percentage of the invoice. When the customer pays back their invoice, you will then pay the financing company. Blue Vine is one of the financial institutions that do invoice financing as well.
Other funding options include equipment financing. With this, the lender will offer you cash to purchase the equipment. You do not need a collateral since the equipment you will buy will be used as collateral until you finish paying the loan.
Since there are several options when it comes to small business lending, it is important to analyze the options before choosing one. You should look at the requirements, the costs involved, the speed of funding, and the repayment terms before choosing one particular option.