Tag: Alternative

Is Alternative Lending from Industrial Banks Right for Your Business?

What are industrial banks? What makes them different from commercial banks? More importantly, are they a better source of lending for small businesses? Let’s find out. 

Industrial Banks Are Not New 

These banks are also called Industrial Lending Companies (ILCs). They have roots way back in the early 1900s. That’s when large companies sometimes offered banking services to their employees. Some of these later ventured into the commercial banking realm. In fact, you’ll probably recognize a few. For example all of the following crossed over from industrial bank to commercial. 

  • Goldman Sachs
  • American Express
  • Merrill Lynch Bank USA
  • Morgan Stanley Bank
  • GE Capital Bank
  • And GMAC Bank

Industrial vs. Commercial Banks

The difference between industrial and commercial banks relates to services and structure.

Industrial  Commercial 
Longer repayment periods, often for 15 or 20 years  Financing and repayment periods are typically shorter periods of time 
Do not offer checking accounts. May focus on a single product line, such as auto loans or credit card payment processing Customers can open savings, checking, or money market accounts and certificates of deposit 
Offer limited services, usually installment loans for consumers and small businesses  Earn profits from interest-bearing loans they offer to customers, such as mortgages, personal loans, business loans, and more 
Most are located in Utah Located throughout the U.S. 
Many do not have traditional branches Traditionally offer a number of in-person branches
Limited to states that permit them Exist in all U.S. states 

Currently, only 7 states in the U.S. allow these institutions, and over 90% of these types of banks are in Utah. 

Why Use These Banks for a Business Loan?

It’s simple really. Traditional banks often deny small business loan applications. Due to less regulation, other types of lenders can be less strict. They may be able to offer approval where traditional lenders cannot. 

Are Industrial Banks Safe?

There is no oversight from the Federal Reserve. However, that does not mean these institutions are unregulated. In fact, deposits are FDIC insured. There is also oversight from the chartering state. Currently, only Utah, California, Colorado, Nevada, Hawaii, Indiana, and Minnesota charter these ILCs.  

A Legit Funding Option?

They aren’t a bad option for small business funding. In fact, it may be easier to get approval.  However, terms and rates may be higher. Still, to get the most out of all your business funding options, business credit is a must. Find out more about building business credit now. Schedule a free business finance assessment from one of our specialists. 

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5 Alternative Funding Secrets Traditional Lenders Don’t Want You to Know

Traditional lenders are large banks and small community banks.  They offer term loans based on your personal credit score.  The problem is, if you do not meet their requirements, you can’t get a loan with them.  Many small businesses do not meet the minimum credit score requirements to get terms they can afford, or sometimes any funding at all.  

This is even true of SBA loans. They are typically processed through traditional lenders. If you cannot get one, you need to find SBA loan alternatives. This is where alternative funding options enter the scene. 

Here’s What Traditional Lenders Don’t Want You to Know About Alternative Funding

There are plenty of alternative business financing options available. There are alternative business lenders that offer term loans and lines of credit similar to what traditional banks offer.  However, they determine creditworthiness based factors other than credit score. This can make them a good option for those that do not have good credit. 

Some of them even offer alternative types of financing that many business owners have not heard of.  Due to this, most business owners can find options that will work for them. 

Find out why so many companies use our proven methods to get business loans.

1. Alternative Financing Options May Consider More than Just Credit Score

This is the crux of why many businesses do not qualify for financing at traditional banks. The credit score is the main indicator of creditworthiness. However, with alternative funding, often the lenders understand that a bad credit score does not necessarily mean that a borrower is a bad credit risk. They take other factors into consideration. 

Fundbox 

Fundbox  is one such lender. At Fundbox, they consider business merit as opposed to personal credit.  For application purposes, they will do a soft pull on your personal credit. This will not affect your credit score.  When you make your first draw, they will do a one time hard pull that could affect your score, but the minimum is only 550.

2. Many Alternative Lenders for Small business Use Innovative Technology

There is really no reason for a lender to not use the technology available today to help them make better lending decisions. Some lenders believe they could miss out on some good borrowers if they look only at credit scores.  They use technology to help them do better. 

Upstart

Upstart uses a completely innovative platform for loans.  They choose to use a combination of artificial intelligence (AI) and machine learning to gather alternative data for use in making credit decisions.

This may include such things as mobile phone bills, rent, deposits, withdrawals, and even other information less directly tied to finances.  The software they use learns and improves on its own. You can use their online quote tool to play with different amounts and terms to see the various interest rate possibilities.  

3. Some Alternative Funding Options Can Help You Build Business Credit

A separate business credit profile can help you get more business funding, while at the same time protecting your personal credit from your business debt. However, there are not a lot of creditors that will report payments to you business credit profile. That makes it hard to build a score. Some alternative lenders will report, which is a huge bonus. 

Grameen 

Grameen offers microloans to women business owners.  The loan amounts range from $2,000 to $15,000, and they also offer financial training and support.  In addition, they do report payments are reported to Equifax and Experian, meaning these loans help borrowers build their credit.  

4. Alternative Lenders Often Show Preference to Women, Minorities, Veterans, and Others 

If you fall into a specific category as a business owner, you may have some special options available to you. Like Grameen, there are other lenders that focus on helping specific groups. 

Streetshares 

 Streetshares  offers a variety of financing and investment products with fast application processes and funds deposited almost immediately. Lending products never have a prepay penalty, and the credit check is a soft one.  There is never any impact on your credit score for applying.

They lend to various types of businesses and business owners.  Still, their early mission was to help veteran business owners, and they remain true to that mission today.

Find out why so many companies use our proven methods to get business loans.

Accion 

Accion is a nonprofit lending network dedicated to helping small businesses.  They offer small business loans, some grant opportunities, and other resources designed to help both startups and established small businesses grow and thrive. 

They lend to small business owners in general, from all backgrounds and most industries. However, they specialize in underserved populations like minorities. 

5. Some Alternative Business Financing Options Offer 0% Interest

This is a secret that almost no one knows.  It is actually possible to get 0% financing on alternative funding and it is not a scam. 

Kiva 

Kiva is an online lender that is a little different. The interest rate is 0%.  That means even though you have to pay it back, it is absolutely free money. They do not check credit at all. Here’s the catch. You have to get at least 5 family members or friends to give to the cause.Furthermore, you have to pitch in a $25 loan to another business on the platform. 

Credit Line Hybrid

This is a form of alternative business financing rather than a specific alternative lender.  The Credit Line Hybrid is a flexible product that can serve your business needs in many ways. First, you can fund your business without putting up collateral.  Then, you only pay back what you use.  

Your personal credit score needs to be at least 680.  In addition, you can’t have any liens, judgments, bankruptcies or late payments. Also, in the past 6 months you should have less than 6 credit inquiries, and you should have less than a 45% balance on all business and personal credit cards.  There are some other requirements as well.

However, If you do not meet all of the requirements you can take on a credit partner that does meet each of these requirements.  Many business owners work with a friend or relative to fund their business.  If a relative or a friend meets all of these requirements, they can partner with you to allow you to tap into their credit to access funding. 

Other Types of Alternative Funding for Small Business

In addition to the Credit Line Hybrid program, here are some other alternative funding options that Credit Suite can help you with. 

Retirement Account Financing

This Credit Suite program offers a unique and powerful way for a new or existing business to leverage assets that are in a 401(k) plan or IRA. 

In as little as 3 weeks you can invest a portion of these funds into your own business. Then, you not only have more control over the performance of your retirement plan assets, but you also have the working capital you need.

It has to be a plan that you are no longer contributing to, and you can no longer work for the employer that it was opened with.  Lastly, it has to have at least a $35,000 balance. 

Business Revenue Lending

If a business has revenue of at least $120,000 per year, it may qualify for this type of funding. Lenders verify revenue using bank statements.  There can be no recent bankruptcies, but the minimum credit score to qualify is 500.  

The business must also be in operation for a year or more, and it must do over 5 small transactions each month to get business revenue financing. 

Find out why so many companies use our proven methods to get business loans.

AR Financing

Outstanding account receivables can be a source of funding for your business.You can get as much as 80% of receivables advanced.  Not only that, but you can have the funds in less than 24 hours. You get the rest of the accounts receivable amount once you collect full payment for the invoice. Closing takes 2 weeks or less. 

Receivables should be with the government or another business. 

Merchant Cash Advance

A business that accepts credit card payments and has at least a 500 FICO can get up to $750,000 in a merchant cash advance. There must be $100,000 or more per year in credit card sales, and typical approval equals one month’s credit card financing volume. 

Wait! Don’t Apply With an Alternative Lender Before You Read This

Nothing is perfect. That includes financing alternatives for small businesses. Even top alternative lending companies sometimes get a bad rap because of the prevalence of predatory lenders in the industry. Do your research and make sure you are working with a company that is trustworthy. 

The best way to do this is to work with a business credit expert like the ones at Credit Suite.  This is someone who has a relationship with many reputable lenders and can help not only find the best lender for you, but also the best funding options for your business right now. They specialize in options like the Credit LIne Hybrid, lines of credit, merchant cash advances, accounts receivable Financing and more.

In addition, they can help you analyze your current fundability, and walk you through the process of improving it so that you can qualify for even more funding and better terms in the future.

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3 Reasons You Need a Brex Alternative

Brex is a fee free banking alternative for businesses. They offer many services, but the big draw for startups and small businesses is the option for a business credit card that reports to Experian and Dun & Bradstreet, thus helping them build a strong business credit score. It’s not enough though. You need a Brex alternative.

You Need More Than One Brex Alternative to Get Everything You Need for Your Business

First, I highly recommend Brex for a number of things.  Yet, while Brex does offer a lot of great options for businesses, it really can’t be an all in one solution.  For many reasons, including building business credit, you are going to need a Brex alternative.  Actually, you are going to need a few of them.

Using Brex to Build Business Credit

While Brex is a fabulous option for managing business finances, it doesn’t really work for business funding when it comes to startups.  Here’s why. The corporate credit card that most startups qualify for only has a limit up to the amount of cash you have in your Brex cash account.

Now, that’s not a bad thing for managing financing or building business credit. There are no fees, and there is no personal guarantee required.  Your on-time payments are reported to two of the big three business credit reporting agencies. It’s a pretty sweet deal.

However, you are only able to use up to the amount of money you already have. Payment is taken from your cash account daily, and you cannot carry a balance. This means that, while this card is a great tool for helping you build business credit and managing funds you already have, it doesn’t actually help you get additional funds for your business.

Furthermore, one account reporting is not enough to effectively build business credit.  You need to find a Brex alternative, really a few, to do that.

Check out our best webinar with its trustworthy list of seven vendors to help you build business credit.

Brex Benefits

That’s not to say that you shouldn’t use Brex at all.  It is a useful tool, and actually has many benefits aside from helping you build business credit for your business.  It can definitely help you manage your cash flow. It’s also a great way to help keep your business expenses separate from your personal expenses.

The card also offers a pretty great rewards program. You can earn points at various levels depending on the type of purchase. Points can be redeemed for cash, statement credit, gift cards, and most recently, crypto!

Brex Drawbacks

With the standard Brex corporate card, you only have access to the amount of money you already have in your cash accounts.  What if you need more? There is the possibility of qualifying for a card that works more like a regular credit card.  The limit can be from 10 to 20 times higher than traditional cards.  You have the option to pay it monthly rather than daily, and you can pay from the account of your choice.

The thing is, not everyone qualifies for this card.  Qualification is based on a number of factors, including investors, cash balance, and spending habits.  Brex then sets the limits accordingly.  This isn’t bad in and of itself, as it’s a chance to get a credit card without a credit check, and it reports to Experian and Dun & Bradstreet.

However, you still cannot carry a balance, and again, one card is simply not enough to build strong business credit.

Why You Need a Brex Alternative

If Brex is so great, why would you ever need a Brex alternative?

# 1: You Need Actual Financing

Other than the one step up card where you have the possibility of a higher credit limit, there is no real financing available through Brex. Even if you get the higher limit card, it isn’t revolving credit. It’s more like net 30 credit, as the balance has to be paid at the end of the 30-day billing cycle.

If you need actual financing like a revolving line of credit, you are going to have to find a Brex alternative. Of course, finding financing that is as easy to qualify for as Brex is not easy.

Check out our best webinar with its trustworthy list of seven vendors to help you build business credit.

#2: You Need More than Brex Reporting to Your Business Credit Profile

If building business credit is your goal, and it should be, Brex is not enough.  The business credit building process has many steps.  These steps must be completed in order, and the first one after establishing a business credit profile for accounts to report to, is to get accounts that will report.  Brex is one.  You need a lot more than that to build a strong business credit score.

#3: You Need More Funding Than Brex Offers

Even if you get the higher limit card option from Brex right away, one card will likely not be enough. Besides not being enough on its own to build business credit, you may very well need more funding than that to run your business.  It depends, of course, on the limit they set based on the specific qualifications of your business.  Even if the limit is fairly high, you need more than one business credit card to build a well-rounded business credit portfolio.

Is There a Brex Alternative?

A Brex alternative is not necessarily to be used instead of Brex, but rather as an additional tool for your tool box to be used in conjunction with Brex.  Here are a few other tools for your tool box.

Credit Line Hybrid

This is a unique and powerful business funding tool that, like Brex, can also help you build your business credit because it reports on-time payments to your business credit profile. Unlike Brex however, the Credit Line Hybrid works as an actual, revolving credit line up to $150,000.

You do not have to submit any documents, and you can get an interest rate as low at 0% initially. You can get approved with a personal credit score of 680 or better, or like many other businesses, you can use a credit partner with a high enough score to qualify if you do not. The credit is still in your business name, so you will still be building credit for your business.

401K Financing

This is another powerful funding tool that few business owners know anything about.  It is a way of funding your business that uses funds from a 401K, but it is not the same as a loan from your retirement account.

In fact,with 401K financing, called a ROBS by the IRS, you can fund your business and still keep earning interest on your investments. A qualifying account will have at least $35,000 in it, and you cannot still be contributing. It also needs to be from a previous employer, not your current employer.

Starter Vendors

How about a Brex alternative for building business credit? If one account is not enough, how do you get more? How many more do you need? You need 5 to 8 accounts initially reporting to be able to qualify for most business credit cards. These have to be accounts that will both extend credit without a credit check, and that will report those payments to the business credit reporting agencies, just like Brex does.

The issue with that is, only 7% of companies that extend credit to businesses report payments. They may report missed payments, but that doesn’t help. There are some vendors however, that will do just that. We call them starter vendors.

Check out our best webinar with its trustworthy list of seven vendors to help you build business credit.

They will issue net terms on invoices without a credit check and report payments.  They use other factors to determine creditworthiness, like time in business, balance in business bank accounts, and more. Sometimes, they will require a few initial purchases before approving for net 30 terms.

These types of accounts, combined with Brex, can help you build strong enough business credit that, eventually, you will be able to qualify for any business credit card out there.  Then, you can be sure you always have the funding you need to run your business.

Brex Is Great, But You May Still Need a Brex Alternative

While Brex can work very well as a business money management tool, it’s not really intended to be a funding source.  Furthermore, even though it can be a wonderful addition to your toolbox for building business credit, it is not possible to build business credit with just one account reporting. You would never try to build a house with just a hammer or just a screwdriver. It takes a toolbox full of tools. That’s what Brex is. It is one very useful, multipurpose tool in the toolbox to help you build business credit, which is the foundation for a strong, well-rounded business credit portfolio.

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