Business Financing with Bad Credit is Possible: 5 Business Loans You Can Get Even With Bad Credit

Bad credit business loans are kind of a mystery. You probably aren’t going to find them at a traditional bank. Rather, business financing with bad credit generally comes in the form of alternative types of financing and from alternative lending sources.

Is it Possible to Get Business Financing With Bad Credit?

If you have collateral, you may be able to get a loan, even with bad credit. Still, there has to be something to mitigate the risk to the lender. So, here are 5 options to consider.

#5 Business Financing with Bad Credit: Cash Flow Financing or Merchant Account Financing

To get cash flow financing, your cash flow must be positive and well managed. That means, you must spend it wisely and avoid taking on more debt than you can handle.

In essence, you are borrowing from part of future expected cash flows. Consequently, the payment schedule is based on projected cash flows and an analysis of historical cash flows. There may be a minimum credit score requirement. However, it will usually not be as limiting as with other types of funding.

Merchant Cash Advances

A merchant cash advance is like cash flow financing. Yet, the amount of funding and repayment is based on credit card sales. Therefore, the business needs steady credit card sales to qualify. Similarly, repayment is a percentage of daily credit card sales. Rates may be much higher than other types of funding, but credit score minimums are lower.

#4 Business Financing with Bad Credit: Equipment Financing

Equipment financing is a great option for purchasing hard assets for your business. The time in business should be at least one year, and there is no requirement to provide financial statements.

#3 Business Financing With Bad Credit: Other Collateral Financing

The amount available depends on the value of the asset being used as collateral. For this type of funding, open invoices and accounts receivable are considered assets that can be used to secure a loan.

Inventory Financing

The inventory itself serves as the collateral for the loan. There may be revenue requirements and a minimum FICO score. However, it will probably not be as limiting as with a traditional loan.

Invoice Factoring

This is an advance on open invoices, with lenders buying outstanding invoices for less than they are worth.

Honestly, the difference in what they are worth versus what the lender pays is the price you pay for getting the cash up front. It’s not technically interest, but similar. As a result, you do not get the full amount of the invoices, but you will get the cash faster. The lender will collect the full amount and keep it.

Account Receivable Financing

Accounts receivable financing is lending that uses unpaid invoices as collateral. Thankfully, there is no personal credit check. Instead, credit providers consider the payment history of your customer to determine the likelihood they will pay you.

#2 Business Financing with Bad Credit; Securities Based Financing

This is a type of collateral financing that can take many forms. The security is investments like stocks, bonds, and investment funds.

IRA Financing

In this scenario, the borrower invests part of retirement funds into the business. It allows more control over retirement plan assets as well as working capital for the business.

Stocks Financing

This type of financing uses securities as collateral, providing ready access to capital. The only restrictions are that you cannot use this for other securities-based transactions.

Bonds Financing

This type of funding is usually for a large business acquisition or real estate purchase. The value of the loan is based on the borrower’s investment portfolio. The best part is, if stocks or bonds have value over $25,000, you can get approval even with bad personal credit.

#1 Business Financing with Bad Credit: FinTech Lending

This is lending from alternative lenders. Generally, they operate online and offer less stringent lending requirements. As a result, they also have higher interest rates.

BlueVine

BlueVine offers invoice factoring and lines of credit. For invoice factoring, there are no reserves or minimums. There is a minimum personal credit score requirement of 530.

They also offer a revolving line of credit for up to $150,000. To get this, a business must have revenues of $10k or more per month, and the borrower must have a consumer credit score of 600+.

OnDeck

At OnDeck, you can get short-term loans and lines of credit. To do so, there must be annual revenue of at least $100,000. In addition, the time-in-business has to be at least 12 months, and you need a personal credit score of at least 600.

To get a line of credit the revenue and credit score requirements are the same, but the minimum time-in-business is 9 months.

Fundera

Fundera offers term loans to businesses with at least one year in business and $90k in annual revenue. The minimum credit score is 600.

They also offer business lines of credit if you have at least 6 months in business and $50k in annual revenue. Collateral may be necessary in some cases, and borrowers with lower credit scores will have higher interest rates.

To get invoice financing from Fundera, there must be at least 6 months in business and $50k in annual revenue.

Bonus: 401(k) Financing

This type of financing is not a loan. Rather, it is a 401(k) Rollover for Working Capital program. The IRS calls this type of program a Rollover for Business Startups (ROBS).

To qualify, the plan must have more than $35,000 in it, and it cannot be a plan you are currently contributing to or with a company where you are currently employed. Better yet, there are no credit score requirements.

Business Financing with Bad Credit Is Possible

It is possible to get business funding with bad credit, though it may not be the traditional type loan you are used to. These options can look different, but they all serve the purpose. If you have bad credit and need funding now, these are good options. However, to get the best rates and terms in the future, work on improving your personal credit score and building business credit. Want to know how to get started? Get a free Business Finance Assessment today!

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3 Surprising Ways Personal Financing Affects Business Funding

It makes sense that, if you do not separate your business credit from your personal credit, you could run into issues. Most get that if they fund their business with their personal credit, their personal finances could suffer. But, did you know that even if you have separated everything beautifully, the reverse can still be true? Here are 3 ways personal financing can affect your ability to get funding for your business.

How Does Personal Financing Impact Business Lending?

Some business funding options consider your personal credit score no matter what. For example, all traditional loans, SBA loans, and even the Credit Line Hybrid focus on personal credit score. Generally, they want to see a personal score above 650, though there are exceptions. The issue goes beyond this however.

Factors that Affect Personal Credit

The number one factor that affects personal credit is paying on time. However, some other factors that can affect your personal credit score include:

How many accounts are reporting payments?
How long have you had each account?
What type of accounts are they?
How much credit you are using on each account versus how much is available

This last point is important. It includes everything from credit card debt to personal financing for auto loans and mortgages. If you max out your limits on everything without paying it down significantly, your personal credit score will be negatively impacted. All of this means, you could be making all payments on time and still run into issues.

#1:Your Personal Credit Score Can Affect Your Business Credit Score With the Business Credit Reporting Bureaus

It’s true. Some business credit reporting agencies take your personal credit into account. They use your personal credit in the calculation of the business credit score they release to lenders. This means if your personal credit score is bad, your business credit score could suffer.

Experian Business Credit

Experian is different from the other two main business credit reporting agencies in one very important way. Of course, business credit is credit in a business’s name. It depends on how well a company can pay its bills. Yet, Experian uses both consumer and business credit information to gauge risk. They find a blended score is more accurate and predictive.

FICO SBSS

This score is becoming increasingly common and it’s a lot trickier. FICO SBSS stands for FICO Liquid Credit Small Business Scoring Service. Unlike your personal FICO, the SBSS reports on a scale of 0 to 300. The higher the score the better, and most lenders demand a score of at least 160.

The scoring model for this score is not the same as other business credit scoring models. It uses your business and personal credit scores, but it does so much differently than Experian.

The formula for calculations is proprietary and well-guarded by FICO. They do not make the information public. Unlike the other business credit reporting agencies, you cannot request a copy of your report or see your score. Here’s why. Surprisingly, this score can actually vary from lender to lender. That’s right, two different lenders can get two different scores for your business from FICO SBSS at the same time.

FICO SBSS Calculation

Here’s how that works. Lenders can ask for certain factors in the score to carry more weight than others. Your score can vary depending on how a lender weighs each factor. One lender may put more weight on your personal credit score or your business credit. Meanwhile, another may choose to weigh annual revenue as more important than payment history. It is their choice.

FICO searches business credit information from business credit agencies. This includes D&B, Experian, and Equifax. They use this information in the calculation of your score. So, your score with these bureaus affects your FICO SBSS.

The only way to ensure that your personal credit doesn’t impact your business credit in a negative way is to keep your personal credit in good order. This is because you really can never know which factors the lender is going to weigh more or less for that matter.

#2: You May Have to Use a Guarantor to Get Business Funding

Because some types of funding require a strong personal credit score, you may need to use a guarantor to get access. This includes some funding types that can help you build business credit, like the Credit Suite Credit Line Hybrid.

Credit Line Hybrid

A credit line hybrid is a form of unsecured funding. Our credit line hybrid even works for startups, and you can get a better interest rate than a secured loan. It reports to business CRAs, but you need a FICO score of at least 680 to qualify.

However, if your personal FICO isn’t that great, you can use a guarantor with good credit to get approval. It’s no-doc financing, meaning you do not have to turn in any financial documents. Using a guarantor could be worth it if you need funding quickly.

#3 Personal Financing Can Affect Overall Fundability

Business lending, at its core, is affected by the Fundability of your business. There are 4 core factors that affect business Fundability, and each of these factors is made up of a number of principles. Personal financial statements and other data bureaus are included in these factors.

Financial Statements

Some lenders will ask for personal financial information no matter what. Others may only look at them if the business is not considered creditworthy on its own. When it comes to personal financial statements, lenders are usually looking primarily at tax returns. It’s best to have a tax professional prepare them. Other information lenders may ask for include check stubs and bank statements, among other things.

Bureaus

There are other agencies that hold information related to your personal finances as well. ChexSystems is one example. They track bad check activity, and their report makes a difference when it comes to your bank score. If you have too many bad checks, you will not be able to open a business bank account. That, in turn, will cause serious fundability issues.

LexisNexis and the Small Business Finance Exchange also fall into this “other bureaus” category. They can have all sorts of information on you, like:

Have you ever been convicted of a crime?
Do you have a bankruptcy or short sale on your record?
How about liens or UCC filings?

While these bureaus do not directly generate credit reports, they do share information with certain credit agencies. They then use this information for their reporting.

This means personal finance information they hold can affect the fundability of your business, and thus your business lending options.

Personal Financing Can Affect Your Ability to Get Business Funding

Whether it’s credit card debt, a mortgage, or just how you handle your personal bank account, your personal finance management can affect your ability to fund your business.

You cannot change that entirely. Still, you can limit the extent to which this is true. Separating your business from yourself and building a strong business credit score is the best way. Lenders will be able to depend less on the personal financing aspects of your creditworthiness, and focus more on the fundability of the business itself.

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Overcome The Unique Challenges of Financing New Businesses & Startups with These 5 Financing Options

New businesses and startups face plenty of unique challenges when it comes to financing options. For example, lack of business credit history, no or low business credit score, and not being set up properly can all lead to reliance on personal financial resources.

There are financing options that can work despite these challenges however. We have a list of both general and specific resources to ensure you can get the funds you need to start and grow your business.

5 Financing Options to Overcome the Unique Challenges New Businesses and Startups Face

There are a number of possibilities here. Which one will work best for your business depends on your individual circumstances and situation.

#1 Traditional Loans

Of all the financing options most consider when it comes to new businesses and startups, traditional loans are the most common. They can take many forms.

Choices include:

SBA loans
Collateral loans
And loans that require a personal guarantee

Traditional term business loans require a good personal credit score. This is regardless of whether you have business credit history, or even a business credit score at all.

If you have either collateral, a good personal credit score, or both, term loans may be the first and best option for you when it comes to new business funding. That is, unless you want to avoid using your personal credit or collateral. If that is the case, there is another choice which in some instances may be better.

#2 Retirement Plan Financing

Retirement plan financing is not a loan from your retirement plan. As a result, you will not have to pay an early withdrawal fee. You will not have to pay a tax penalty. There will not even be any interest.

The type of financing we are referring to here is a Rollover for Working Capital program. The IRS calls this type of program a Rollover for Business Startups (ROBS).

According to the IRS, a ROBS qualified plan is a separate entity, with its own set of requirements. The plan, through its stock investments, owns the business, not an individual.

#3 Alternative Lenders

If a traditional loan option is not going to work, and you do not have a qualifying retirement plan, it may be time to consider alternative lenders. They often have less stringent requirements than banks and credit unions.

Here are some options to consider.

BlueVine

BlueVine offers both invoice factoring and lines of credit.

For invoice factoring:

Your business must have been in operation for at least 3+ months
You need to have a personal credit score of 530 or more
Your business must generate at least $10,000 in monthly revenue

For the BlueVine line of credit:

Your business must have been in operation for at least six months
Be a corporation or LLC
Have a personal credit score of 600+ or more
And your business must generate at least $10,000 each month in revenue

Due to regulations, they cannot provide lines of credit to the following states: Nevada, North Dakota, South Dakota, or Vermont.

OnDeck

OnDeck requires a personal credit score of 600 or more to qualify for funding. Also, you must be in business at least one year and have an annual revenue of at least $100,000. They report to the standard business credit bureaus, and they also cannot lend to businesses in Nevada, North Dakota, or South Dakota.

Fundbox

Fundbox requires a minimum time in business of 6 months. In addition, your accounting or invoice software must be compatible and must be in use for at least 3 months. Your credit score must be 600 or above, and you need at least $100,000 in annual revenue.

Other Options

While most alternative lenders, including these, have less stringent credit requirements, many do require a minimum time in business and minimum revenue. If you do not meet these requirements, there are other financing options available.

#4 Credit Line Hybrid

A credit line hybrid is a form of unsecured funding. Our credit line hybrid has an even better interest rate than a secured loan. Not only that, but you can get some of the highest loan amounts and credit lines for businesses, and sometimes with 0% interest!

This is a credit card stacking program, and many of these cards report to business CRAs. That means you can build business credit at the same time. This will get you access to even more cash with no personal guarantee.

You or a guarantor need a FICO of at least 680 to qualify. No financials are required, and you can often get a loan of up to $150,000. Be aware, some cards may report on your personal credit.

#5 Crowdfunding

Crowdfunding sites allow you to tell thousands of micro investors about your business. Anyone who wants to donate, or invest, can do so. They may give $50, they may give $150, or they may give over $500. In contrast, it might just be $5.

Most entrepreneurs offer rewards to investors for their generosity. Usually, this comes in the form of the product the business will be selling. Different levels of giving result in different rewards. For example, a $50 gift may get you product A, and a $150 gift will get you an upgraded version of product A.

Keep in mind that a crowdfunding campaign can easily become another full-time job, and that there are no guarantees of success. We suggest only considering crowdfunding if you realistically believe your chances of succeeding are over 50%.

There are a lot of crowdfunding platforms out there. Here are a few to consider.

Kickstarter

This is the largest crowdfunding platform, and they require a prototype. Projects cannot be for charity, although nonprofits can use Kickstarter. Equity cannot be offered as an incentive.

Taboo projects and perks include anything to do with:

Contests and raffles
Cures and medicines
Credit services
Live animals
Alcohol
Weapons

There is a 5% fee on all funds which creators collect.

Indiegogo

The minimum goal amount for an Indiegogo campaign is $500. There is a 5% platform fee and 3% + 30¢ third-party credit card fee. Fees are deducted from the amount raised, not the goal you set. So, if you raise more than your goal, you will pay more in fees.

A flexible funding option allows campaigns to keep any money they receive even if they do not reach their goal. This is notably different from some other platforms.

RocketHub

RocketHub is specifically for entrepreneurs who want venture capital. The platform is exclusively for business owners working on projects in these categories:

Art
Business
Science
Social

If you reach your fundraising goal, there will be a 4% fee, and there is a separate 4% credit card handling fee. If you do not reach your goal, the fee increases to 8% plus the credit card handling fee.

Financing Options Are Available for New Businesses & Startups

While it is much harder for new businesses and startups to get funding, there are options out there. Remember, the best way to ensure you have access to the financing options you need in the future is to build a fundable business. That starts now. Contact us today for a free consultation on how to do it.

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Surprise! We Found 10 Secret Startup Financing Sources and Tactics

Secret Startup Financing – is There Really Such a Thing?

Are you just getting started? The thrill of chasing a new business dream will always lead you to one rude awakening, you need money! But how are you going to get it? Here’s where secret startup financing comes into play. C’mon in, and we’ll show you.

Well-Known Kinds of Startup Financing

If you know people who’ve started businesses, often their financing came from places like:

Using personal credit cards
Using personal savings (i.e. “bootstrapping”)
Home equity loans
Conventional bank loans (often secured with collateral)

What About Not So Well-Known Kinds of Funding for Startups?

All these can work. But they all risk personal assets. But there are a lot of OTHER ways of getting startup money, where you don’t put your home or savings on the line.

Secret Startup Funding Tactics: the View from 20,000 Feet

You will need to give up something to get these kinds of startup financing. It can be:

Business control
Business ownership (i.e. equity)
Your time and brainpower
Paying higher interest rates than you would tend to see

If these are acceptable to you, then check out these 10 secret ways to get startup financing!

#10 Venture Capital

We start with venture capital funding. But keep in mind it won’t be a workable option for most businesses and industries. Venture capitalists give money to help build new startups. But only if the VCs believe a company has both high-growth and high-risk potential. These tend to be fast-growth companies with an exit strategy already in place. Venture capitalists often look to recover their investment in 3—5 years.

VCs will also, often, want to own a large piece of a company if not a controlling stake. This means in exchange for their money, they could be calling the shots. They want game-changing businesses. So straightforward businesses won’t be on their radar unless they’re shifting the paradigm. Never forget, you are giving up a part of your ownership in your business. VCs often want a larger share of your business than angel investors do. More on angel investors later.

Venture Capital: Terms and Qualifying

Venture capitalists are much more formal investors than angels. So a valuation of your business is often going to be necessary. Specific terms will be spelled out in your agreement with them. The Securities and Exchange Commission will also have requirements. It is best practices to consult with a lawyer well-versed in business law before you sign anything.

#9 Alternative SBA Loans

We continue with a kind of private investor loan, also called private lending. Private lenders tend to be funded by investors, or by banks, or both. Private lenders are in the business of taking funds from private investors. They make private business purpose loans with those funds. This often involves real estate. These can be hard money loans.

Alternative SBA Loans: Terms and Qualifying

Private lenders will be more creative, and investigative in qualifying income. They may be willing to overlook background flaws upon explanation. But hard money loans are often short term. Terms tend to be 6—36 months. They have a higher interest rate than traditional bank loans. So account for the higher interest rate when determining if a private investor loan is right for your business.

#8 Equity Crowdfunding

If you don’t mind giving up some of your business, then consider equity crowdfunding. Equity crowdfunding is a stock offering from a company not listed on stock exchanges. Equity crowdfunding has been around for less than 10 years. It’s not the same as rewards-based (which comes from places like GoFundMe).

Potential investors visit a funding portal website. There, they can explore different equity crowdfunding investment opportunities. Note: there are limits on how much capital an individual can invest based on their income and net worth. Equity crowdfunding gives investors a stake in your business.

Equity Crowdfunding: Terms and Qualifying

Equity crowdfunding tends to be covered by federal laws like the Securities Act of 1933, Regulation Crowdfunding (17 CFR Part 227), Regulation D Rule 506 (17 CFR § 230.506), and Regulation A+ (17 CFR § 227.100). Federal law can be complex. It’s not something you’ll learn just with a little Googling.

It is always best practices to consult with an attorney well-versed in federal law, specifically, securities and corporations when it comes to interpreting terms and qualifications. This includes any changes made to these aspects of the law in the future. Therefore, factor in the cost of a lawyer if you decide to go for equity crowdfunding.

And, it’s entirely possible that more regulation will hit this industry in the future.

#7 Reward-Based Crowdfunding

This is the type of crowdfunding you’re a lot more likely to have heard of. You can get money from the crowd for your business. Start with a service like Kickstarter. But make sure you read the fine print (always a good idea!). Many crowdfunding platforms make you give all the funding back if you do not make your goal by the end of the campaign. But Indiegogo has a flexible funding option.

Reward-Based Crowdfunding Details

Given how much social media we’re all bombarded with these days, it should come as no surprise, donors can become weary of crowdfunding pitches. You will do better if you start off with a substantial (as in, over 1,000 connections) social media following.

Reward-Based Crowdfunding Caveats

Products not quite on the shelves yet, or
Artistic endeavors

Standard widgets or service-based businesses do not tend to attract brand ambassadors. They won’t tend to get donors too fired up. Because crowdfunding campaigns are time-consuming, it doesn’t make sense to try this form of funding unless you realistically feel your chance of success is better than 50%

Reward-Based Crowdfunding: Terms and Qualifying

Terms will differ depending on which platform you use. Check and make sure your platform of choice will allow your industry to work with them. For example, recreational cannabis use is legal in Massachusetts. But Kickstarter (for example) doesn’t allow fundraising for drugs and related paraphernalia.

Any major crowdfunding platform has a rules section, a FAQ, or ‘how it works’. Be sure to read such a section thoroughly so you know exactly what you’re getting yourself into.

#6 Peer to Peer (P2P) Lending

If you don’t mind investing time and potentially effort, then try Peer-to-peer lending. Peer-to-peer lending allows people to borrow and lend money without a financial institution. P2P platforms connect borrowers to investors faster and cheaper than any bank. These platforms check risk carefully and report on them to peer lenders. Hence your business might be listed on a P2P platform, but show a high risk. It would therefore not attract many lenders.

Peer to Peer: Terms and Qualifying

Terms vary, not only from platform to platform, but also among risk levels. The number of P2P platforms has changed in the past few years. Always check the specifics on any P2P platform’s website before committing yourself. Checking the Better Business Bureau or maybe Yelp reviews before getting started is a good idea.

#5 Online Lending

If you’re okay with paying potentially higher interest rates, and an investment of time investigating your options, online lending could work for you. For certain industries, online lending is one of the only ways to get money.

For example, medical cannabis is legal is most of the country, yet more traditional lenders are still less likely to approve a loan. But lenders that specialize in the cannabis industry (and similar hard to fund industries) are out there.

There are online lenders with over a decade in business. OnDeck dates back to 2006. And Quicken Loans goes back to 1985! As with many industries, a longer time in business is more likely to inspire confidence in a lender.

Online Lending: Terms and Qualifying

Terms and qualifications will vary. Read all the fine print with care. Check all companies with the Better Business Bureau or your local Chamber of Commerce. Always treat deals that seem ‘too good to be true’ with a healthy dose of skepticism.

#4 Private Grants

Grants will always require an investment of time. There are businesses which offer grant money. You can also check with your alma mater, or even the alumni division of your fraternity or sorority. That is, if you participated in Greek life during school. Check other organizations where you or a family member is a member of a fraternal organization like the Elks or the Moose. They may have grants IF your business is a nonprofit.

If you are a member of a protected class, like LGBTQ+, Asian, disabled, female, etc., then check Google but be mindful that there are scammers out there. Again, be sure to check the Better Business Bureau or ask your local Chamber of Commerce if you’re unsure. Terms and qualifications will vary from provider to provider and potentially from year to year.

#3 Federal Grants

Federal grants generally do not have to be paid back. For urban projects, try HUD (Housing and Urban Development). For rural projects, try the USDA (Department of Agriculture). Federal funding means paperwork . You often must show experience in what you are proposing.

Federal Grants: Terms and Qualifying

Grants have varying qualifications. They are VERY COMPETITIVE. Be sure to check information thoroughly! This includes due dates and any necessary paperwork. So beyond spending time, often you will also be gathering paperwork.

Some grants may offer preferences to businesses with minority, female, veteran, or disabled ownership. Grants often aren’t for a lot of money. So don’t use them as your sole/principle source of funding. But they can supplement other funding you get.

Make sure to do a rough cost-benefit analysis to see if it’s worth your time to apply to any particular grant.

#2 Local, City, and State Grants

Your local government also provides grants. Also try city and state websites. They’re often less restrictive than federal grants. Show you will help the community. Try to partner with a local business.

Local, City, and State Grants: Terms and Qualifying

Just like with federal grants, check all requirements and other information with care. You may need to be a resident of the state or city or county in question, or your business may need to be headquartered there. It never hurts to ask. Again, they tend to not be for a lot of money. A lot of effort for very little money may not be the best use of your time and attention.

#1 Angel Investing

Our #1 secret startup financing tactic is to use angel investing. In this instance, you’re giving up some of the equity in your business. But it’s often not control over basic decisions. Angel investors invest in small startups or entrepreneurs. Often, angel investors are among an entrepreneur’s family and friends. Yes, that can be Mom and Dad. The capital they provide may be a one-time investment to help the business get started. Or it can be an ongoing injection of money to support and carry the company through its early stages.

Angels are not covered by SEC standards for accredited investors. Angels could be friends or colleagues sitting on home equity. Or local professionals who are looking to invest. Consider people you know well and people you don’t know so well. Keep in mind, like with venture capital, you’re giving up part of your ownership in your business.

Angel Investing: Terms and Qualifying

Angels are informal investors so there aren’t any real terms. So technically, you do nothing to qualify. Although investors may (probably should) insist on a valuation of your business. No matter what, it’s always a good practice to get everything in writing.

Secret Startup Funding: Takeaways

Less conventional and not so well-known startup financing is out there. But you will have to give up something to get it, like time or business equity. No one but you can decide what will work best for you. And contact us today for information on startup financing sources that might not ask quite so much from you and your business.

The post Surprise! We Found 10 Secret Startup Financing Sources and Tactics appeared first on Credit Suite.

How to Use Retirement Plan Financing to Recession Proof Your Business and Beat Inflation

Hard times are on the way. All you have to do is turn on the television to see it. Prices are rising and so are interest rates. The key to surviving inflation and recession is to be prepared. This means anticipating cash needs and having the funds available before things get bad. If you need financing, don’t wait. One great option is retirement plan financing.

Retirement Plan Financing and Other Funding Options

There are a number of options. Loans, lines of credit, and credit cards are all possibilities, but there are other options that may be even better. In fact, one specific option is available to some regardless of credit, and it’s interest-free.

Retirement Plan Financing

First, retirement plan financing is not a loan from your retirement funds. So, you will not have to pay an early withdrawal fee or pay a tax penalty. Even better, there will not be any interest.

Credit Suite offers a powerful and flexible way for new or existing businesses to use retirement funds. In as little as three weeks you can access money for your business. Then, not only will you have more control over the performance of your retirement assets, but you will get the working capital you need for business growth.

This Rollover for Working Capital program is known by the IRS as a Rollover for Business Startups (ROBS). According to the IRS, a ROBS qualified plan is a separate entity with its own set of requirements. The plan owns the business, not an individual.

Some necessary IRS forms for a ROBS plan are Form 5500 or 5500-EZ and/or Form 1120.

Do You Qualify?

There is no need for financials or good credit to get approval. All the lender needs is a copy of your two most recent retirement fund statements. Also, the plan has to have a value of more than $35,000. If it does, you can receive whatever percent of your plan is “rollable” as financing.

In addition, the plan cannot be from a business where you are currently employed. It has to be from previous employment and you cannot be currently contributing to it.

Lenders are not basing approval decisions on creditworthiness. They just need to see that the plan qualifies. As a result, this program is perfect for business owners with credit issues.

How Does Retirement Plan Financing Work?

You’ll set up a plan for your company and invest it in that company. Then, your business becomes cash rich and debt-free. However, you do need to work with a CPA. They can help handle things properly.

Why is This Better than a Distribution or Loan from Retirement Funds?

Unless you’re 59 ½ years old or older, you will pay an early withdrawal penalty for a distribution. This is basically paying to use your own money! Don’t do that.

If your plan allows for loans, the IRS will only let you borrow up to 50%, up to $50,000. After that you have to start paying taxes. Of course with a loan, you’ll also pay interest.

Inflation and Recession Planning

If you have eligible retirement funds, you need to take advantage of this type of program now. We are already seeing the effects of inflation, including an increase in social security checks to account for rising prices. Recession is most definitely on the way.

If you have these funds on hand and available to use, you will be able to absorb increasing costs more easily. You’ll also avoid the difficulty that comes with trying to access financing during a recession. When prices and interest rates rise, you’ll be ready.

Credit Suite Is Here to Help

Not only can Credit Suite help you set up your retirement plan financing, but our business credit specialists can help you find other ways to fund your business. We can help you assess what types of funding you are eligible for, and guide you to the steps you need to take to qualify for more. Set yourself up for success despite what the economy brings.

The post How to Use Retirement Plan Financing to Recession Proof Your Business and Beat Inflation appeared first on Credit Suite.

The Great Resignation, Business Credit and Financing, and You

The Great Resignation: a Definition and an Explanation

Everywhere you look in the news, it seems to be there. It’s on TV and social media, and your friends may be talking about it. It’s the Great Resignation. It has caused people to start businesses and has disrupted our economy.

But…what is it?

The Great Resignation is the confluence of several different events, all happening at the same time. People are leaving their jobs in droves. As in, 20 million US workers between April and August of 2021.

Causes of the Great Resignation

The Pandemic

First is of course the pandemic. The sudden removal of over 700,000 Americans from our society was bound to create problems. A little under 190,000 of these deaths were among people aged 18 – 65. Even if not everyone could work, that leaves at least 150,000 people out of the workforce, due to dying from Covid-19.

This doesn’t account for those with ‘long Covid’. In the UK (US percentages should be similar), the percentage of people of working age to get long Covid runs about 1 – 2%. Over 48.5 million cases in the US translates to about half a million people of working age with long Covid in the US. Some of them may be considered disabled or have taken early retirement.

As a result, there are job openings.

But what about everyone and everything else pertaining to the Great Resignation?

Depressed Wages

Since the 1970s, wages have been depressed in the US, often not keeping up with inflation. This is particularly true in the service industry.

In contrast, during the worst of the lockdowns, the only employees who could not work from home were in the service industry.

There are some employers who have realized they can’t hire enough people back until they raise wages and improve perks (which is likely to be fueling inflation). Others don’t seem to have gotten the memo yet. Hence there are workers who would have taken those jobs not two years ago. But now? With an ever-present concern about Covid-19 and perhaps a feeling that wage hikes are only temporary, those jobs are going unfilled.

Politics, Ill Treatment, and Being Fed Up

As the disease, vaccines, and mask wearing all became more politicized, businesses were forced to police mask usage in their stores. This policing often fell to the lowest paid workers, in jobs like cashiers. With irate, sometimes violent customers, many workers felt they were being asked to put their own personal safety on the line. But with no added compensation.

In the medical field, there has been a nursing shortage for years, and it is projected to continue into 2030. With hospitals overloaded with Covid patients, anti-vax patients denying their symptoms, and again the threat of violence, many nurses have decided to throw in the towel. This has made the nursing shortage worse, and it has also affected Covid care.

Trillions of Dollars in Aid Programs

The prior and current presidents introduced programs like stimulus checks. This was with the best of intentions. They have led to many in the middle class beefing up their savings. Another big use for these checks has been paying down personal debt. This is from credit cards, car loans, and/or mortgages.

People with some discretionary money may end up being more choosy about employment. Not being desperate provides an opportunity to strive for longer term goals and more money.

Gen X and Younger Boomers Lead the Way in the Great Resignation

Surprised? It seems like quitting your job is a very millennial thing to do. Yet the Harvard Business Review said, “Employees between 30 and 45 years old have had the greatest increase in resignation rates, with an average increase of more than 20% between 2020 and 2021.” Employees with some work experience under their belts are more likely to be part of the Great Resignation.

But What Does The Great Resignation Have to do With Business Financing and Business Credit?

Quitting your job or being laid off can sustain you for just so long. For many Americans, time off and the ready availability of accessible technology led them to start a new business. A good 4.4 million new businesses were started in 2020, and half a million new businesses in January 2021 alone.

As these new businesses have aged, stimulus money has dried up, and the boost in savings is gone for their owners. These business owners—and you may be among them—have been looking for new ways to get money.

And if they (or you) have turned to banks, then there’s a good chance that they’ve gotten a denial.

New business owners are less likely to know about business credit, and how it can get them funding. And they may not be aware of the many alternatives to traditional lending that are out there. Because banks aren’t the only places to get business money.

Business Credit and the Great Resignation

Business credit is credit in the name of a business. It attaches to the business’s EIN (Employer Identification Number), not the owner’s Social Security Number. As a result, business credit relies on the ability of the business to pay its bills—period. A business owner can have poor personal credit yet have excellent business credit.

Building business credit is a great way to transition from bootstrapping to getting a company to fund itself.

Fundability

Fundability is the ability of a business to get funding. Building business credit starts with building what’s called a fundable foundation. Your business can look legit to credit providers and lenders—or not so legitimate. There are proactive steps you can take to improve fundability, even if you haven’t done these before.

Start to Build a Fundable Foundation (Your Business Name, NAICS and SIC Codes, and Your Business Entity)

Fundability starts with your business name. If your business name includes the name of a high-risk industry, this could tank any funding application from the start. Frank’s Gas Station can instead be called Frank’s.

NAICS and SIC codes exist to show lenders, credit providers, and the IRS how risky your business is. If your business can fit under more than one NAICS code, then pick the one which is less risky. There’s nothing unusual or underhanded about this.

Your business entity is sole proprietorship, partnership, corporation, and the like. To build business credit right, incorporate your business. This is because incorporating creates an entity separate from you, the owner. It adds a layer of protection over your personal assets when it comes to corporate debts and corporate wrongdoing. Plus, to build credit in the name of your business, it won’t separate from your own credit history if you and your business are still joined at the hip.

Enhance Fundability With an Excellent Online Presence (Your Website and Email Address)

Lenders and credit providers will look for information on your business online. With your own website, you can control a lot of the narrative. Without one, you’re at the mercy of whatever they can Google—which may not be too flattering.

Putting some of your earlier profits into a website is a smart business decision. It does more than improve fundability. It also makes your business more attractive to customers and prospects.

Purchasing your own domain name is the highest standard for fundability. Very often hosting providers will kick in a free email address on the same domain. Keep it professional with a name like info@yourbusinessname.com.

Grow Fundability With a Professional Offline Presence (Your Business Address and Phone Number)

Business lenders and credit providers also pay attention to your offline presence. Your business address needs to be a brick and mortar building where mail can be delivered—so a PO box or a UPS box is out. Technically, it can still be your home. But you may want to get a virtual address for job interviews or meetings. And if you are a retail business, you are going to need a separate address.

Your business phone number needs to be different from your personal phone number. This is because the listing for your personal phone number is you or your family. A separate, dedicated phone number is far more fundable. And it prevents your family from accidentally picking up on sales calls.

Protect Fundability By Following the Rules (Your Business Licenses and Getting a D-U-N-S Number)

Many industries require some form of licensing. Make sure you have all the licenses your business needs by checking with your Secretary of State. Being fully licensed can also be a way to assure customers and prospects.

D-U-N-S numbers are the way your business is identified in the system of the world’s largest business credit bureau, Dun & Bradstreet. D&B will give you a D-U-N-S number for free once you sign up for one on their website. You need a D-U-N-S to start to build business credit.

Go to the Next Level of Fundability (Get a Separate Business Bank Account and Get Set Up With the Business Credit Reporting Agencies)

A separate business bank account helps keep you from commingling funds. This increases the chances that your business is in compliance with all IRS requirements. You also need a separate business bank account to open a merchant account. A merchant account allows your business to take credit cards. Study upon study has shown that people spend more if they can pay by credit card.

You also need to get set up with the business credit reporting agencies. If you have your D-U-N-S already, then you’re set up with Dun & Bradstreet. Check the Experian and Equifax websites for a listing for your business.

Building Business Credit

Business credit building means buying on credit from vendors. Pay your bills on time and have the payments report to the business credit bureaus. Almost no vendors report positive payment experiences. So, it pays to work with a business credit specialist like Credit Suite.

If you are part of the Great Resignation and have a new business, business credit makes your business more attractive to funding sources.

Business Financing and the Great Resignation

Banks are not the only place to get business financing. When you are getting money for your business, you must leverage one or more of the following:

Personal credit
Collateral
Cash flow
Your time and attention
Equity in your business
Or business credit

Personal Credit

Your personal credit scores are dependent upon a few factors. One is credit utilization, which is the amount of credit in use divided by total available credit. Once this percentage gets high (above 30%), it starts to harm your personal credit score.

Business needs tend to be more expensive than personal needs. Business credit limits reflect that. Hence you can exceed that 30% fast by financing your business with personal credit. You might even max out your personal credit cards.

Collateral

Another way to get business financing is by leveraging collateral. For real estate transactions, that can be land. For equipment financing, it can be the equipment. And for other types of lending, it can even be your retirement funds.

Cash Flow

New businesses tend to have erratic cash flow, and so they aren’t likely to be able to leverage theirs. But once your cash flow becomes more predictable, you can use it as a way to get business money.

Your Time and Attention

With crowdfunding and grant proposals, you don’t have to give the money back. But you do have to spend time trying to get it—often with a low success rate.

Equity in Your Business

Business equity is a share in your business. You can sell yours to venture capitalists (if they’re interested), or to angel investors. This gets you business money in the short run. But in the long run, you’ll be sharing decisions and profits with anyone who owns equity.

Business Credit

Only business credit lets you keep all your equity. You don’t have to spend so much of your valuable time. And your cash flow doesn’t have to be stable yet. Plus, you won’t max out your personal credit cards and tank your utilization rate. And finally, it can help you avoid putting collateral on the line, or even enhance what you can get with the collateral you have.

The Great Resignation, Business Credit, and You: Takeaways

If yours is one of the over four million new small businesses that arose during the pandemic, you have options for business financing. Building business credit can help you succeed, and turn your part of the Great Resignation into a great new direction in life.

The post The Great Resignation, Business Credit and Financing, and You appeared first on Credit Suite.

How to Get Merchant Cash Advance Financing for Your Business

Merchant Cash Advance Financing Can Help Your Business

Is merchant cash advance financing on your radar? If you’ve got bad personal credit, or not a lot of time in business, merchant cash advance financing could be your best bet for business financing.

Getting Business Financing

Financing for your business tends to come from one or more of the following types of sources:

Collateral
Cash flow
Leveraging good business and/or personal credit

Two other ways to get financing are:

Selling off a part of your business
‘Freeish’ sources like grants and crowdfunding

With crowdfunding and grants, you’re giving up time and brainpower, rather than collateral or some form of security.

Let’s look at using forms of business collateral. This includes converting your merchant cash advances into business capital.

Using Business Assets as Collateral for Loans

Business collateral can be:

Merchant cash advances
Accounts receivable
Equipment that you own
A book of business (renewable commissions) if you’re buying an insurance agency
Inventory
Commercial real estate

Using Merchant Cash Advances as Collateral for Merchant Cash Advance Financing

Not-yet paid credit card sales authorizations are worth money! MCAs are a response to the fact that you need to wait a bit to get your money. As a result, your wait time is slashed, and you get the benefit of taking credit cards and payments in a fraction of the time.

Net 30 Terms

Net 30 means a company or person you extend credit to will have thirty days to pay the bill in full. Being able to offer your customers a month to pay you back is a real competitive advantage. It could be what sets you apart. But you’ve also set yourself up with a wait of about a month for the money. Merchant cash advance financing can help to fix all that.

How to Get Merchant Cash Advance Financing for Your Business

An MCA technically isn’t a loan (so you can’t truly call it a merchant cash advance loan). Rather, it is a cash advance based on the credit card sales of a business. A small business can apply for an MCA, and have an advance deposited into its account fairly quickly. So you can offer Net 30 terms, but not have to wait a month to get paid.

A merchant financing program is based on your cash flow as verifiable per your business bank statements—and nothing else. Hence merchant cash advance companies in general will not ask for any burdensome document requests.

How do merchant cash advances stack up against other forms of financing?

Business Credit vs. Merchant Cash Advance Financing vs. Cash Flow Financing

With MCAs, merchant cash advance lenders check your credit card sales, and with cash flow financing, they check all of your cash flow. But with business credit, providers will check your business setup, which is why we talk about fundability so much. And once you have a PAYDEX score, they’ll check it as well.

With business credit, starter vendors often won’t have a time in business requirement. But retail and business credit card providers tend to. Contrast this with MCAs, where you often need to be in business at least 6 months, and cash flow financing, where you often need to be in business for at least a year.

With cash flow financing, lenders want to see accounts payable and accounts receivable. Lenders want to see your bank statements if you’re trying to get an MCA. But with business credit, starter vendors want to know you will pay them back. So they will check your fundability. This means they will want to see you have an EIN, a D-U-N-S number, all the licensing you need, etc.

Details

With cash flow financing, paying the loan back depends on future company profits. But business credit doesn’t depend on anything in particular to pay it back. It’s best practices to pay out of your business profits and/or assets. And with merchant cash advances, future payments to the business by customers is the way you’ll pay back the advance.

Get a merchant cash advance, and you won’t have to pay any interest. Your sole fee is to the lender–it’s compensation to them for advancing you the funds. This form of financing can also be interest-free, but only if you pay on time.

If you don’t pay your business credit cards and starter vendor cards on time, then interest rates will vary. In addition, better FICO scores and/or better business credit will garner you better rates. But with cash flow financing, you will be paying interest no matter what.

Your FICO score will matter more for cash flow financing and business credit. With business credit, better FICO scores will help you get better rates, and some providers may require them. Cash flow financing can often require a higher minimum FICO score than for merchant cash advances. And for MCAs, you can usually have a lower minimum FICO score.

Which Form of Business Financing is Best?

You should always be trying to build your business credit. This is so even if you’re going with a different form of business financing. For a newer business, which has been around for at least six months, MCAs can be a way to get fast cash while still offering good terms to your clientele as you build your business.

And for more time in business, if your cash flow is stable, cash flow financing can be another viable option. And there’s no reason you can’t try two of these or even all three. See what works best for your circumstances.

Merchant Cash Advance Financing: Terms and Qualifying

A lender will review 3 months of bank and merchant account statements, to look for consistent deposits. They want to see deposits showing revenue is $50,000 or higher per year. They will also verify time in business of 6 months or more.

Lenders don’t want to see a lot of Non-Sufficient-Funds (NSFs) showing on your bank statements. They don’t want to see a lot of chargebacks on your merchant statements. And they want to see more than 10 deposits in a month going into your bank account. In a nutshell, they want you to manage your bank and merchant accounts responsibly.

Lenders will want to see a decent number of consistent credit card transaction deposits each month. But what a merchant cash advance lender considers to be ‘decent’ is going to vary from lender to lender. And be aware, interest rates for merchant cash advances can be high.

Choosing a Merchant Cash Advance Financing Program

Always look at interest rates. Because MCAs don’t have federal regulation, terms can seem outrageous. Also check if your payment schedule is fixed or if it’s a percentage of credit card sales. A percentage of card sales means your payment goes down if sales falter, but of course they go up if your sales are robust.

And investigate similar programs like not just cash flow financing and business credit, but also invoice factoring, as they might be a better fit. Our Business Finance Suite has MCA providers you can check out, too!

Merchant Cash Advances and Inflation

Inflation causes price increases for goods and services. And it can also affect how you price your own goods and services. Inflation can cut into your profit margin unless you raise your prices.

How can MCAs help?

By getting use of your money faster, an MCA can help you to buy your own goods and services—and even equipment—before it gets pricier. If you’re using the cash from MCAs to pay off loans faster, then speed will help you avoid paying more in interest.

MCAs are also helpful because you get a payment even though you may have charged less. When the customer buys from you again, if you need to raise prices, you aren’t also waiting around for them to pay what they owe you.

Merchant Cash Advance Financing: Takeaways

Merchant cash advances can make it easier and more logical to give net 30 terms to your customers. You can be paid a lot faster, which eliminates the main disadvantage of offering net 30 terms. MCAs are within reach even if you have a lower FICO score. But keep in mind that interest rates can be high.

The post How to Get Merchant Cash Advance Financing for Your Business appeared first on Credit Suite.

Get Cash Flow Financing for Your Business – It Can Be a Great Way to Get Credit and Funding…

Can Cash Flow Financing Help YOUR Business?

For going concerns with some time in business, cash flow financing can be a good way to fund expansion, growth, or everyday needs. But what IS cash flow financing? And where do you get it?

Fundability, Cash Flow, and Your Business

Fundability is the ability of a business to get funding. It covers all the points a lender or credit provider will check when trying to figure out if you’ll pay back a loan or credit extended to you. These include details you may not have thought about or might think aren’t so important. But they are!

The 3 Cs Capital Acquisition Formula

When you think like a lender, you come to understand that all they want is to be sure that you’ll pay them back. Lenders look at one of three things for loan approval: cash flow, collateral, and/or credit. The more of these “Cs” you have, the more funding options are available. Let’s look at how cash flow financing can help your business.

Cash Flow Financing

Cash flow financing is a loan made to a company is backed by a company’s expected cash flows. A company’s cash flow is the amount of cash that flows in and out of a business. This is within a specific period. Cash flow financing or a cash flow loan uses generated cash flow as the way to pay back the loan. It’s one of the smarter financing activities you can do if you’ve got a going concern with predictable income.

Cash Flow Financing: Terms and Qualifying

Much of the time, you must have a few years in business. You may need a certain minimum credit score. You must prove historical cash flow, and present your accounts receivables and accounts payables, so the lender can determine how much to loan to your business.

Account Receivable Financing

You can use outstanding account receivables as your collateral for business financing. Receivables should be with the government or another business. If you also have purchase orders, you can get financing to have those filled. You won’t need to use your cash flow to do so. Get an accounts receivable credit line with rates of less than 1% with no consumer credit requirement.

Account Receivable Financing: Terms and Qualifying

Use your outstanding account receivables for financing. Get as much as 90% of receivables advanced ongoing or more, in less than 24 hours. The rest of the accounts receivable are released once the invoice is paid in full. Factor rates as low as 1.33%.

Terms are for Credit Suite account receivable financing. The only collateral necessary is your account receivables. Loan amounts run from $10,000 to $10 million. Up to 95% of receivables can be advanced within a week. Rates start at prime rate 2%. You must have a FICO score of 500 or better.

Receivables must come from another business or government agency, not an individual. Business must be open for at least one year to qualify. Medical receivables must have $1 million in annual sales or more. For the deal submission, you must provide the application, a breakdown of existing receivables, and a sample invoice.

Purchase Order Financing

Purchase order financing is advanced to a business with a large purchase order or contract, but the business is unable to fulfill it. A lender then loans the funds necessary to complete the order and charges a percentage for the service. Then the company can fulfill its order or contract.

The difference between purchase order and accounts receivable financing is purchase order financing involves a company lending you money to fulfill purchase orders. But accounts receivable financing involves a company buying your outstanding invoices. Still, they are both, at bottom, based on cash flow.

Purchase Order Financing: Terms and Qualifying

Terms are for Credit Suite purchase order financing. For approval, lenders will often review your outstanding purchase orders that need filling. They want to be sure the purchase orders are valid, and the suppliers you are dealing with are credible.

If so, then you can get approval, regardless of personal credit history. Rates tend to range from to 4%. In some instances, you can get 95% of your purchase order financed.

Business Revenue Lending

This is a way to raise capital from investors who get a percentage of the enterprise’s ongoing gross revenues, in exchange for money invested. In a revenue-based financing investment, investors get a regular share of business income until a predetermined amount is paid. Often, this predetermined amount is a multiple of the principal investment. It is often between 3 to 5 times the original amount invested.

Business Revenue Lending: Terms and Qualifying

Since repayment of the loan is comes from revenues, the time it takes to repay the loan will fluctuate. The faster revenue grows, the quicker you’ll repay the loan, and vice versa. The percentage of monthly revenues committed to repayment can be as high as 10%. Monthly payments will fluctuate with revenue highs and lows and will continue until you’ve paid back the loan in full.

All terms are for the Credit Suite business revenue lending program. Necessary collateral is consistent revenue verifiable through bank statements. Loan amounts run from $5,000 to $500,000. Terms are for 3 to 36 months. Pay a factor rate of 1.10 to 1.45%. Credit you must have a 500 credit score or higher, with no recent bankruptcies.

Business must earn annual revenue of $120,000 or more per year. You must be in business for a year or more. The business must do over 5 small transactions each month. Financial services industries are prohibited, damaged credit is acceptable. Or business must bring in at least $15,000 monthly revenue with 6 months’ time in business. To get this deal, you must provide the application and 6 months of business bank statements.

Fundbox

Get a line of credit from Fundbox. Fundbox just wants to know about your cash flow when deciding whether to fund your business. Fundbox will connect straight to your online accounting software. That’s all you need to do. You can get a revolving line of credit for up to $100,000. Fundbox will auto debit your weekly payment from your bank account. You don’t need to show a particular personal credit score. And you don’t need to show a certain time in business.

Fundbox: Terms and Qualifying

Pay in equal installments over the course of a 12 or 24 week plan. Available credit replenishes as you pay. There are no penalty to repay early. Your business must be American. You must have a 600 or better personal FICO score, and $100,000 or more in annual revenue. Also, you must have a business checking account. Ideally you must have 6 months in business or more.

PayPal Working Capital Loan

You can get a loan from PayPal. But you must already have a PayPal business account. There is no personal guarantee. Loan amounts and eligibility depend on your sales via PayPal. So applying won’t result in a credit check.

PayPal Working Capital Loan: Terms and Qualifying

The maximum loan amount depends on your PayPal account history. To be eligible, you must have a PayPal Premier or Business account for 90 days or more. Also, you must process at least $20,000 in annual PayPal sales if you have a Premier account, or at least $15,000 in annual PayPal sales if you have a Business PayPal account. Pay off any existing PayPal Working Capital loan.

Since automatic repayments get deducted as a percentage of each PayPal sale, the amount you repay each day changes with your sales volume. The more you sell, the more repayment progress you’ll make that day. On days without sales, you’ll make no payments, but you must repay something at least every 90 days.

Depending on the loan terms you choose, you must pay at least 5% or 10% of your total loan amount (loan + the fixed fee) every 90 days. The 5% minimum applies to loans estimated to take 12 months or more for repayment. This has a basis in your business’ past PayPal sales and other factors. The 10% option applies to loans estimated to be repaid within 12 months.

Square

You can get loans through Square. Applying will not affect your personal credit score. Loan eligibility comes from several factors related to your business, including its payment processing volume, account history, and payment frequency.

You can get $300 to $250,000. Borrowers get a customized offer with a basis in their card sales through Square. Then they choose their loan size. You will pay no interest, just an ongoing flat fee

Square: Terms and Qualifying

There are no ongoing interest charges. Instead, you will pay one fixed loan fee to borrow the loan. The fixed fee is the difference between the total owed amount and the initial loan amount. The fixed fee will never change, regardless of how fast or slow the loan is repaid. It is automatically deducted until you pay back your loan in full. If sales are up one day, you pay more; if you have a slow day, you pay less. At least 1/18 of the initial balance must be repaid every 60 days.

They don’t want collateral for business loans of $75,000 or less. For loans amounts over $75,000, they take a security interest in your business assets. Then they will file a UCC statement with the Secretary of State where your business is organized. There is no personal guarantee.

Cash Flow Financing: Takeaways

There are several options for business funding that depend on your cash flow. Some are available through Credit Suite. There are also online options, such as through PayPal and Square. Contact us today for help with your options.

The post Get Cash Flow Financing for Your Business – It Can Be a Great Way to Get Credit and Funding… appeared first on Credit Suite.

10 Kinds of Financing for a Small Business – Including Options You’ve Probably Never Heard Of

How Many Kinds of Financing for a Small Business Can YOU Name?

You may be surprised at the many kinds of financing for a small business there are.

Fundability

Any discussion of business financing has to start with fundability. Fundability is the ability of a business to get funding. It covers all the points a lender or credit provider will look at when they’re trying to figure out if you’ll pay back a loan or credit extended to you. These include factors you probably haven’t thought about or might think aren’t so important. Business details like address and entity all matter. But there’s more.

The 3 Cs Capital Acquisition Formula

When you think like a lender, you realize they just want to be sure that you’ll pay them back. Lenders look at one of three things for loan approval: cashflow, collateral and/or credit. The more of these “Cs” you have, the more funding options are available. For the forms of funding we’re showcasing today, we show you exactly what you need to have for approval.

Two More General Ways to Get Funding

If you have absolutely none of the 3 Cs, there are still two other options: selling a part of your business or grants and crowdfunding. Let’s look at types of funding covering all of these options. We’ll start with financing via your business’s cash flow.

#10. Financing for a Small Business with Cash flow: Cash Flow Financing

A loan made to a company is backed by a company’s expected cash flow. A company’s cash flow is the amount of cash that flows in and out of a business, in a specific period. Cash flow financing (or a cash flow loan) uses generated cash flow as a means to pay back the loan.

Cash flow: Cash Flow Financing: Terms and Qualifying

Often you will need to have a few years in business. You may need to meet a certain minimum credit score requirement. You will need to prove historical cash flow and present your accounts receivables and accounts payables. This way, the lender can determine how much to loan to your business.

#9. Financing for a Small Business with Cash flow: Merchant Cash Advances

An MCA technically isn’t a loan. Rather, it is a cash advance based upon the credit card sales of a business. A small business can apply for an MCA and have an advance deposited into its account fairly quickly. So you can offer Net 30 terms but not have to wait a month to get paid.

Merchant Cash Advances

A merchant financing program is ideal for business owners who accept credit cards and are looking for fast and easy business financing. An MCA program is designed to help you get funding based strictly on your cash flow, as verifiable per your business banks statements. Hence lenders in general will not ask for any burdensome document requests.

Terms and Qualifying

A lender will review 3 months of bank and merchant account statements. They are looking for is consistent deposits. And they want to see deposits showing revenue is $50,000 or higher per year. They will also verify time in business of 6 months or more.

Lenders are also looking to see that you don’t have a lot of Non-Sufficient-Funds (NSFs) showing on your bank statements. They want to see you don’t have a lot of chargebacks on your merchant statements. And they want to see that you have more than 10 deposits in a month going into your bank account. They want to see that you manage your bank and merchant accounts responsibly. And they want to see that have a decent number of consistent credit card transaction deposits each month.

Let’s move onto funding based upon collateral – either yours, or a credit partner’s, or from the business itself.

#8. Financing for a Small Business with Collateral: Inventory Financing

Inventory financing is a revolving line of credit or a short-term loan acquired by a company so it can purchase products for sale later. The products serve as the collateral for the loan. There may be restrictions on the type of inventory you can use. This can include not allowing cannabis, alcohol, firearms, etc., or perishable goods. There can be revenue requirements. And there may also be minimum FICO score requirements.

Terms and Qualifying

Get approved for a line of credit for 50% of inventory value, regardless of personal credit quality. Rates are usually 5 – 15% depending on type of inventory. You can get funding within 3 weeks or less. But it can’t be lumped together inventory, like office equipment.

#7. Financing for a Small Business with Collateral: Account Receivables Financing

You can use outstanding account receivables as collateral for financing. If you also have purchase orders, you can get financing to have those filled. You won’t need to use your cash flow to do so. Get an accounts receivable credit line with rates of less than 1% with no consumer credit requirement. Receivables should be with the government or another business.

Terms and Qualifying

Get as much as 80% of receivables advanced ongoing in less than 24 hours. Remainder of the accounts receivable are released once the invoice is paid in full. Factor rates are as low as 1.33%. You can get an accounts receivable credit line with rates of less than 1% with no consumer credit requirement.

Now it’s time to move onto funding with good personal credit (FICO) scores.

#6. Financing for a Small Business with Good Personal Credit: Credit Line Hybrid

A credit line hybrid is a form of unsecured funding. Our credit line hybrid has an even better interest rate than a secured loan. Get some of the highest loan amounts and credit lines for businesses. Get 0% business credit cards with stated income. These report to business CRAs. You can build business credit at the same time. This will get you access to even more cash with no personal guarantee.

Terms and Qualifying

You need a good credit score or a guarantor with good credit to get an approval (a FICO score of at least 680). There are no financials required. You can often get a loan of five times the amount of current highest revolving credit limit account. So this is up to $150,000.

#5. Financing for a Small Business with Good Personal Credit: Bridge Loans

A bridge loan is a short-term loan used until a person or company secures permanent financing or removes an existing obligation. It allows the user to meet current obligations by providing immediate cash flow. Bridge loans are short term, up to one year. They have relatively high interest rates. And they are often backed by some form of collateral, like real estate or inventory.

Bridge Loans via Our Credit Line Hybrid

The Credit Suite Credit Line Hybrid has a term loan program. This bridge loan works as either an add-on to, or in lieu of, the program, when the applicant meets eligibility and is agreeable to either a portion (or all) of their funding, supplied in the form of cash term loans. There is a fixed monthly repayment.

Terms and Qualifying

The Credit Suite program is an aggregate program requiring multiple accounts to meet our prequalification. Get $25,000 to $300,000 per applicant. The APR is 7 – 24% depending on creditworthiness and selected term. Terms are 3, 5, or 7 years. You must have a 680 FICO or better, and over $35,000 in adjusted gross income. Actual pre-qualification will depend on Debt-to-Income ratio.

#4. Financing for a Small Business with Good Business Credit: Start with Vendor Credit and Retail Credit

Starter vendors are open to working with most businesses, even startup ventures. Make sure vendors report to the CRAs – not all do. Vendors report to the business CRAs within 60 days. They help you build your business credit profile and score. Terms will vary depending on the vendor, but they tend to be Net 30. And you will not need collateral, good personal credit, or cash flow.

Move onto Retail Credit

Retail credit comes from major retailers. Buy everything from office supplies to power tools. Retailers will check whether your business information is uniform everywhere. They will also check whether your business is properly licensed

Terms and Qualifying

Qualifications will vary, and there can be a minimum time in business requirement. There may even be a minimum number of employees requirement, or a minimum annual sales requirement. Terms can be revolving. You will need at least 3 (5 is better) accounts reporting to the business CRAs.

#3. Financing for a Small Business with Good Business Credit: Fleet Credit and Bank Credit Cards

Fleet credit is used to buy fuel, maintain vehicles of all sorts, and repair vehicles. Even businesses which don’t have big fleets can still benefit. These are usually gas credit cards. Requirements will vary. There may be a minimal time in business requirement. If your business doesn’t make the time in business requirement, you may be able to instead offer a personal guarantee or give a deposit to secure the credit.

A Look at Bank Credit Cards

More bank credit cards are more universal, like MasterCard. So they can be used pretty much anywhere. These cards may even have rewards programs. Terms can be revolving. Usually, you will need to have at least 14 accounts reporting to the business CRAs. There can be longer time in business requirements. And there may also be minimum number of employee requirements.

Now let’s look at financing you can get if you’re all right with sharing the profits and ownership of your business.

#2. Financing for a Small Business via Selling Part of Your Business: Angel Investing

Angel investors invest in small startups or entrepreneurs. Often, angel investors are among an entrepreneur’s family and friends. The capital they provide may be a one-time investment to help the business get started, or an ongoing injection of money to support and carry the company through its early stages. Angels are not covered by the Securities Exchange Commission’s (SEC) standards for accredited investors.

Angels could be friends or colleagues sitting on home equity, or local professionals who are looking to invest. Consider people you know well and people you don’t know so well. But keep in mind, you’re giving up part of your ownership in your business.

Angel Investing: Terms and Qualifying

Angels are informal investors so there really aren’t any terms. Technically, there is nothing done for qualifying although investors may (probably should) insist on a valuation of your business. But no matter what, it’s always a good practice to get everything in writing.

#1. Financing for a Small Business via Selling Part of Your Business: Equity Crowdfunding

This is not the same as reward-based crowdfunding (like from Kickstarter). Equity crowdfunding is a stock offering from a company that is not listed on stock exchanges. Equity crowdfunding has been around for less than 10 years. Potential investors visit a funding portal website. There, they can explore different equity crowdfunding investment opportunities. Note: there are limits on how much capital an individual can invest based on their income and net worth. Equity crowdfunding gives investors a stake in your business.

Terms and Qualifying

Equity crowdfunding tends to be covered by complex federal law. It is best practices to consult with an attorney well-versed in federal law, specifically, securities and corporations when it comes to interpreting terms and qualifications. A lawyer will also be able to comprehend any changes that may be made to these aspects of the law in the future.

Let’s move onto kinds of funding you don’t need to pay back.

Bonus #1. Financing for a Small Business via Federal Grants

Federal grants generally do not have to be paid back. Try HUD (Housing and Urban Development) for urban projects. Try the USDA (Department of Agriculture) for rural projects. Federal funding means paperwork. You often must show experience in what you are proposing.

Terms and Qualifying

Grants have varying qualifications. They are very competitive. Be sure to check information thoroughly. This includes due dates and any necessary paperwork. Some grants may offer preferences to businesses with minority, female, veteran, or disabled ownership.

Bonus #2. Financing for a Small Business via Reward-Based Crowdfunding

You can get money from the crowd for your business. Start with a service like Kickstarter. But make sure you read the fine print (always a good idea!). Many crowdfunding platforms make you give all the funding back if you do not make your goal by the end of the campaign. But Indiegogo has a flexible funding option.

Reward-Based Crowdfunding

Crowdfunding platforms will take a percentage of the donations. That’s how they make their money. Crowdfunding platforms may push to have you deliver on your promises. So you’ll have to actually manufacture a product or do whatever else your business is supposed to be doing. Given how much social media we’re all bombarded with these days, it should come as no surprise that donors can become weary of crowdfunding pitches.

Details

Crowdfunding tends to work best when donors can personally connect with a product or service. Straightforward businesses may not do so well. The kinds of businesses which do the best often associate with products not quite on the shelves yet, or artistic endeavors. But standard widgets will most likely not attract brand ambassadors. They probably won’t get donors too fired up. Because crowdfunding campaigns are time-consuming, it doesn’t make sense to try this form of funding unless you realistically feel your chance of success is better than 50%.

Terms and Qualifying

Terms will differ depending on which platform you use. Check and make sure your platform of choice will allow your industry to work with them. For example, even though recreational cannabis use is legal in Massachusetts, Kickstarter (for example) doesn’t allow fundraising for drugs, nicotine, tobacco, vaporizers, and related paraphernalia. Any major crowdfunding platform has a section for rules, a FAQ, or ‘how it works’. Be sure to read such a section thoroughly so you know exactly what you’re getting yourself into.

And now let’s look at funding via creative and different means you may not have considered or heard of before.

Bonus #3: Financing for a Small Business via 401(k) Financing

This is not a loan. You will not have to pay an early withdrawal fee or a tax penalty. You put the money back by contributing, just like with any 401(k) program. This means you won’t lose your retirement funds. This is a 401(k) Rollover for Working Capital program. The IRS calls it a Rollover for Business Startups (ROBS).

401(k) Financing

Per the IRS, a ROBS qualified plan is a separate entity with its own set of requirements. The plan, through its company stock investments, rather than the individual owns the trade or business. Therefore, some filing exceptions for individuals may not apply to such a plan. This type of financing isn’t a loan against, your 401(k), so there’s no interest to pay. It does not use the 401(k) or stocks as collateral. Instead, this is simply a movement or change of custodian.

Terms and Qualifying

Pay low rates, often less than 5%. Your 401(k) will need to have more than $35,000 in it. You can usually get up to 100% of what’s “rollable” within your 401(k). The lender will want to see a copy of your two most recent 401(k) statements. You can get 401(k) financing even with severely challenged personal credit. The 401(k) you use cannot be from a business where you are currently employed. You cannot be currently contributing to it.

Bonus #4: Financing for a Small Business with Microloans

Microloans are business loans with relatively low interest rates. Generally, these loans are offered to small or developing businesses with modest capital requirements and little to no revenue history. Microloans — as the name suggests — are smaller loans than a traditional bank loan. They generally offer anywhere from $500 to $50,000 in business financing.

Terms and Qualifying

Terms and requirements vary among providers. Kiva, for example, charges 0% interest. The Opportunity Fund provides loans to low- and moderate-income immigrants, women, and other underserved small business owners. Accion requires a cosigner. Check the specific requirements of any microloan program that interests you

Bonus #5: Financing for a Small Business via SBA 7(a) Loans

This the SBA’s most popular loan. The SBA guarantees 85% for loans up to $150,000. They guarantee 75% for loans greater than $150,000. The SBA makes the lending decision, but qualified lenders may be granted delegated authority to make credit decisions without SBA review.

Terms and Qualifying

The maximum amount on offer is $5 million. You will have to provide Articles of Organization, business licenses, documentation of lawsuits, judgments and bankruptcy or other pertinent documentation. Lenders are not required to take collateral for loans up to $25,000. For loans in excess of $350,000, the SBA requires that the lender collateralize the loan to the maximum extent possible up to the loan amount.

10 Kinds of Financing for a Small Business: Takeaways

There are all sorts of amazing ways to get business funding. You can find the one which fits your circumstances. This includes your strengths in areas like personal credit, collateral, cash flow, selling a part of your business, and getting grants or crowdfunding. Let us help!

The post 10 Kinds of Financing for a Small Business – Including Options You’ve Probably Never Heard Of appeared first on Credit Suite.

When The Most Successful Companies Look for Fleet and Vehicle Financing … Here’s What They Do …

The Perfect Business Credit Portfolio Includes Vehicle Financing

Does your business need vehicles to get the work done? This can be any number of kinds of vehicles, such as trucks for deliveries and hauling, sprinter vans, company cars, and even vans to facilitate commuting for your employees. Vehicle financing can be a smart way to afford all of them.

Vehicle Financing in a Nutshell

Much like you probably didn’t buy your personal vehicle outright, financing is a great way to go in order to get a vehicle now, without having to wait until you can just pay cash and drive it off the lot. With a car for personal use, your choices are usually buying or leasing. Providers include banks like Bank of America or the financing arm of the manufacturer, such as Chrysler Capital.

Commercial vehicle funding has certain parameters. Whether a vehicle is purchased new or used will affect the number of years you can finance the vehicle and the rates you will pay. If a vehicle is used, then the number of miles on it will also affect terms. Plus, business owners may be required to personally guarantee vehicle loans. If you are a co-borrower the loan will most likely report to your personal credit report. Some loans have a prepayment penalty and charge you for paying ahead.

In general, the following will eliminate the need to provide a personal guarantee for this type of financing: good business credit, a decent amount of time in business or good personal credit. And much like with any other kind of business borrowing, the more assurances you can give the lender, the better.

Basic Terms and Qualifying

You need to establish the amount of money you have for a down payment, and the vehicle you need. Plus, you must establish the costs associated with buying the vehicle.

You’ll need to provide documentation that proves you are the owner of a business. This includes business licenses, partnership agreements, LLC documents, and articles of incorporation (if applicable), listing you as having at least a 20% stake in the business.

You may also have to provide personal documentation like personal credit score and credit history. If you are a sole proprietor and the business is under your Social Security number, you are the borrower and guarantor. Hence you are personally liable for repaying the loan. It is also a good idea to have a loan proposal. A loan proposal should detail your business, loan needs, and financial statements.

Good Business Credit Can Help

If your company needs vehicles for operation build your business credit. This, way you will be able to qualify with no PG. Having this ability can give you the freedom to grow your fleet, and without your signature. More on this later. First, let’s look at those four keys to financing.

Vehicle Financing Key #1: Using Business Credit for Vehicle Financing

You can even finance a vehicle purchase or lease through our Business Credit Builder. These offers are in Tier 4, so these lenders will have certain requirements that business credit neophytes just won’t be able to meet. Lenders will want to see that you have the income to support the purchase.

As an example, consider Ford Commercial Vehicle Financing.

Ford Commercial Vehicle Financing Through Credit Suite

Ford offers several commercial funding options. These include loans, lines, and leases to actual business entities. This is not for sole proprietorships. You can get a loan or a lease.

Ford may ask for a Personal Guarantee (PG) if you don’t get an approval on the merit of your application. Apply at the dealership. Ford will report to D&B, Experian, and Equifax.

Ford Commercial Vehicle Financing: Terms and Qualifying

To qualify, you need:

Entity in good standing with Secretary of State
EIN number with IRS
Business address- matching everywhere
D-U-N-S number
Business license (if applicable) and a business bank account

You will need to have a strong business credit history. And you must have a good Experian business credit score.

Ally Car Financing Through Credit Suite

Ally provides personal financing. But Ally will also report to business credit bureaus. If your business qualifies for financing without the owner’s guarantee, you can get financing in the business name only. Ally will report to D&B, Experian, and Equifax

Ally Car Financing: Terms and Qualifying

For Ally Commercial Line of Credit, to qualify, you need:

Entity in good standing with Secretary of State
EIN number with IRS
Business address- matching everywhere
D-U-N-S number
Business license (if applicable)
And a business bank account
Bank reference
Fleet financing references

If you use a personal guarantee, Ally will not report to the personal credit bureaus unless the account defaults.

With Ally Commercial Vehicle Financing, you can get a lease or a loan. To qualify, you need:

Entity in good standing with Secretary of State
EIN number with IRS
Business address- matching everywhere
D-U-N-S number
Business license (if applicable)
And a business bank account

There is no minimum time in business requirement. Apply in person only, dealer will advise if approval or Personal Guarantee (PG) needed.

Vehicle Financing Key #2: Credit Line Hybrid

Yet another potential form of vehicle financing is through the Credit Suite Credit Line Hybrid. A credit line hybrid is a form of unsecured funding. Our credit line hybrid has an even better interest rate than a secured loan. Get some of the highest loan amounts and credit lines for businesses. Get 0% business credit cards with stated income. These report to business CRAs. So you can build business credit at the same time. This will get you access to even more cash with no personal guarantee.

Credit Line Hybrid: Terms and Qualifying

You need a good credit score or a guarantor with good credit to get an approval (a FICO score of at least 680). No financials are necessary. You can often get a loan of five times the amount of current highest revolving credit limit account. This is up to $150,000.

Vehicle Financing Key #3: 401(k) Financing

Another option for vehicle financing is using your 401(k) as collateral. This is not a loan. You will not have to pay an early withdrawal fee or a tax penalty. You put the money back by contributing, just like with any 401(k) program. This means you won’t lose your retirement funds. This is a 401(k) Rollover for Working Capital program. The IRS calls it a Rollover for Business Startups (ROBS).

401(k) Financing: Terms and Qualifying

You can get 401(k) financing even with severely challenged personal credit. The 401(k) you use cannot be from a business where you are currently employed. So it will need to be from older employment. You cannot be currently contributing to it.

Vehicle Financing Key #4: SBA 504 Loans

The SBA 504 loan can be used to purchase “Long-term machinery and equipment”. As a result, it’s not a standard car loan. But you can purchase a truck with it. You can use an SBA 504 loan when the vehicles being purchased qualify as heavy equipment.

Some examples of trucks as ‘heavy equipment’ can include:

Cement trucks
Dump trucks
Custom-build heavy trucks fit for specific purposes (loading/unloading septic tanks, for instance)
Semis and tanker trailer trucks

If your vehicle needs run in this direction, then an SBA loan could be perfect for your needs.

SBA 504 Loans and Credit Suite

Did you know that you can get SBA loans through Credit Suite? Established businesses with tax returns that show good revenues and profitability can get very large sums of funding with Secured Small Business Loans. If you have positive business tax returns, you should apply for secured government-backed SBA program loans from $250,000 up to $12,000,000. Approval amounts will vary based on the collateral your business has, and the amount of net profit reflected on your tax returns.

The total time to close these loans is about 2-4 months. SBA loans offer some of the longest payback terms available for business financing. Get loan terms for 10, 15, or even 25 years with the SBA. Interest will total approximately 3% of the debt. The rate may be financed with the loan.

Get approved for up to $12 million. Your credit will have to be of good quality. Your collateral will need to equal 50% of the loan amount. Financials will be necessary.

SBA 504 Loans Through Credit Suite: Documentation

The SBA will require certain documentation to qualify including:

Business and personal financials
Resume and background information
Personal and business credit reports
Your business plan
Bank statements
Collateral and any other documentation relevant to the transaction

Vehicle Financing: Takeaways

Getting vehicle funding involves variables like whether the vehicle is new or used. Heavy vehicles like dump trucks can be paid for with SBA 504 loans. There is a possibility that you would have to provide a personal guarantee to get a loan or lease. Credit Suite offers financing that you can use to purchase vehicles, and we offer even more options through our Business Finance Suite. There are four keys to open the door to affording vehicles for your business. And there are a lot of options. Let’s explore them together.

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