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Frequently Asked Questions

Since 2010

86,000+ Business Trust Us

Hello, and thank you for visiting the Sunwise Capital Frequently Asked Questions page! You are no doubt here because you have questions about business loans. Either how they work or what are some of the differences. We have put together an extensive frequently asked questions page with the 107 top questions business owners ask us just like you. You’re likely to find the answer if you have a question here. Scroll down the page, pick a question that interests you most, and read the text or enjoy the accompanying video. Here’s the bottom line; if you came here to learn about business loans, you’ve come to the right place.

Sunwise Capital Common Questions

Are You a Direct Lender?

Yes. Founded in 2010, Sunwise Capital is a nationwide direct lender. Thousands of small and medium-sized businesses have turned to Sunwise Capital for fast, flexible financing due to our ability to tailor funding solutions to each owner’s unique goals and needs. We are committed to providing excellent service and innovative financing that is affordable to all.

What is the Sunwise Capital Guarantee?

Sunwise Capital Offers Best Rates with a $500 Guarantee. At Sunwise Capital, we believe you should “put your money where your mouth is.” If your business receives a written offer in a formal agreement, show us that offer before you fund. We will either beat that rate or pay you $500. Requirements: (A) Must provide us with a written agreement. (B) Type of Loan (i.e., Business vs. Personal or Equipment Lease vs. Term Loan, etc.) must be similar. (C) A loan duration must be identical (if Sunwise Capital offers an 18-month loan vs. six-month loans from the competitor, we will adjust our term to reflect the six-month rate). If the competing rate is lower than the Sunwise Capital offer and the terms are comparable (and there are no other materially different loan terms), We Will Either Beat That Rate or Pay You The $500.

What are the industries you fund?

There are over 700 industries we service. Leading categories include healthcare, restaurants, wholesale, manufacturing, retail, service industries, construction, general contractors, specialty trade contractors, trucking, to name a few.

What industries are restricted?

Credit Repair, Investment or Financial Transaction Firms, Non-US Companies, CBD/Marijuana, Adult Content, Gambling, and Crypto.

How many negative days can I have?

The maximum number of negative days we accept is 8 per month. The fewer the number, the better.

How many NSFs can I have?

The maximum NSF (non-sufficient funds) is 10 per month.

Can you get a large business loan, and what are the requirements from Sunwise Capital?

Sunwise Capital offers business loans up to $5M. The requirements are the basics: a one-page application, the last three months of business bank statements, and the revenue to support the loan request. Typically, you need to demonstrate gross revenue of $500K to receive a $50,000 loan and around $20M in gross annual sales to receive a $2M loan. For loans over $100,000, there may be additional supporting documents including but not limited to the last year or two of business tax returns, balance sheets, P&Ls, account receivables/payables, etc.

A term loan or SBA loan can be up to $100K on $500K of revenue and $4M on $20M in annual revenue.

How many types of business loans are available to me right now?

We make available over a dozen loan types, including Equipment Loans, Bad Credit Loans, Business Line of Credit, Fast Business Loans, Invoice Factoring, Large Business Loans, Long-Term Business Loans, Merchant Cash Advance, Revolving Line of Credit, SBA Loans, Short Term Business Loans, Unsecured Business Loans, and Working Capital Loans.

How fast can you get a loan from Sunwise Capital?

Once all your paperwork is in (one-page application and last three months of business bank statements), we can have approvals and funding the same or the next day.

What are the documents to get a same day business loan from Sunwise Capital?

Sunwise Capital’s minimum requirements are a one-page application (https://sunwisecapital.com/application) and the last three months of business banks statements. The statements need to be in PDF format and uploaded to our portal.

Will you pay off another loan?

Depending on the circumstances, we will pay off 1 to 2 loans. We typically want you to net 40 to 50% of the total loan amount in most cases. Sunwise Capital can consolidate all your loans if it makes sense. We study your cash flow by examining the daily average balances in the bank account. This analysis helps us figure out the affordability of your new payments and whether we could approve you for a longer-term loan. This strategy enables us to lower your payments. We will decline your application if you have a history of defaulting on prior loans.

What are the business income requirements?

Sunwise Capital requires one year in business and $15,000 a month in revenue.

Do I have to pay back my business loan right away?

Your business loan will almost always require that you start repaying it as soon as you receive it, and your payment cycle will begin either the next day, around seven days or 30 days after receiving your funds.

What regions do you serve?

Sunwise Capital provides funding in all 50 states.

Should I fill out this form?

If you’re thinking, “Should I fill out this form?” you’re not alone. No, we’re not going to spam or call you to death. One business owner just sent us an email saying, “I like that you don’t follow up like the other companies- AGGRESSIVELY.” Don’t worry if you’re asking questions. Sunwise Capital will set you up on an automatic email and text campaign, and you can opt out of either one at any time. We promise not to shower you with calls, emails, or texts. We do and will NOT share or sell your information. We share it only with the third parties that we directly interface with that help us determine your qualifications once you apply.

Can I trust you?

There is no regulation in the online alternative lending space. We are the first to admit there are some shady brokers and lenders. Unfortunately, both lenders and brokers will go to great lengths to defraud customers. Even Google’s home page features deceit prominently. “96% Approval Rates,” screams one lender’s ad. A 96% percent approval rate is virtually impossible to get. Another boasts a 2.75% APR. Think about it. When it comes to small business owners looking for financing online, the rates and terms advertised are rarely an option. At Sunwise Capital, we would rather under-promise and overdeliver. If the loan is not suitable for you, we will tell you.

If you’re looking for a call center or an aggressive 24 yr. old selling you something you may or may not need, then we are not for you.

We are hands-on in our approach. SunwiseCapital puts its money where its mouth is with our $500 Guarantee. We think that is why some of our clients have reborrowed 20 times from us over the past 12 years. Do we lose business with this approach? Probably. But we much rather sleep well at night knowing we’re helping you get the proper financing to help you succeed than pad our bank account. Our main goal is to build a long-term relationship. Period!

What is the exact process I’ll go through after submitting my information?

Our approach is simple. You submit the one-page application and the last three months of business bank statements. Once received, we process and underwrite your application.

The first step is we obtain various pieces of data. The data may include things like personal and business credit, and there may be over 100 pieces of data that go into the formula.

Next, all the data is compiled and given a score within our risk model. From there, our model will price the loan. After pricing, we create the terms. The underwriting process generally takes 24 hours or less, and it is even possible to fund within the 24-hour window if there is enough time.

If approved, your underwriter will reach out to you, letting you know you have an offer. The underwriter will then request a copy of your driver’s license and a voided check to send the agreement.

If your funding application is denied, you will receive an email stating the possible reasons.

After receiving the offer, the underwriter will call you to discuss the terms of the request.

You can talk about options for the rates and terms at this time. The underwriter will work with you to customize the perfect funding option for you.

Before funding, there may be some stipulations or other additional items to process the deal. Most of the time, it’s nothing more than a current banking month to date. Otherwise, you’ll receive the agreement for review and signature.

Distribution of the funds happens once you accept them in writing (usually electronically). The closing and distribution of the funds (the actual funding) can be the same day as the receipt of the signed agreement and verification if it’s before the bank wire window closes.

Are you eligible for a Sunwise Capital Business Loan?

With most business loan applications, lenders look at credit scores, annual revenue, time in business, and industry. Keep in mind that you may need additional items to secure a business loan. Depending on the type of loan, these may include your driver’s license, canceled check, tax returns, P&L, and Balance Sheet. Sunwise Capital requires one year in business with at least $15,000 a month in revenue. Credit scores can start at 500 or better, and there are over 700 industries that qualify.

What are the terms?

Depending on the loan type, terms can be as short as 3 to 6 months to as many as 10 -20 years with a bank or SBA loan.

How quickly do you approve loans?

Approvals can be within 24 hours of receipt of the one-page application and the last three months of business bank statements (excluding weekends).

How quickly do you fund loans?

Loans can fund the same business day or within 24 hours of the completed application. Larger loans (over $100,000 to $150,000) may require additional documentation. Loans over $500,000 can take additional time, delaying the funding process several days. The speed at which funds are transferred into your account depends on the responsiveness of the business owner. It is up to you to provide the necessary documentation quickly.

Can I get more money if I need it?

Yes, there are several ways you could get more money depending on each situation. If you didn’t borrow the total amount approved, you could borrow up the difference within the first three months; you could renew your loan after paying back half or take another loan behind your current loan if you qualify.

Is there additional information you need?

Most lenders will tell you upfront what paperwork you can expect to get approved for a loan. Supporting documentation or stipulations are sometimes required depending on the type or size of the loan before closing or funding.

What kind of business funding is this?

Applying for a traditional bank loan can be time-consuming and frustrating for many small and medium-sized businesses. We’ve been making a difference in our clients’ lives since 2005 as our team of experts has the knowledge, expertise, and experience to solve your financing needs. Since every company we work with is different, our financing options are also. We don’t have the red tape, obstacles, and games that come along with a traditional bank loan.

Fast Business Loans

What is a fast business loan?

Any financing within 24 to 48 hours with minimal paperwork is a fast business loan. A short-term loan can help businesses take advantage of opportunities and deal with unanticipated expenditures.

How can you get a quick business loan?

Many online lenders can fund a business loan request within 24 hours- to 48 hours, with some offering same-day funding.

How much down payment is required for a quick business term loan?

The borrower does not need to put any money down for most loans. That is a silver lining for businesses in need of a financial boost. It’s not necessary to make a down payment on many of the most common and widely used loans. The SBA’s most popular loan programs require a down payment. The small business owner can expect to put down 10% to 30% of their total loan amount depending on the loan type and the borrower’s personal credit history. However, even the SBA does not require a down payment for some loans.

Do traditional banks offer fast business loans?

You’ll need up to 24 documents to get a bank loan. These include but are not limited to three years of personal and business tax returns, financial statements, like P&L’s Balance Sheets, A/R, and A/P, to mention but a few. The typical entrepreneur will visit at least three banks or institutions to secure a business loan. Banks have responded by imposing 30- to 90-day waiting periods before approving a business loan application. Banks are not the fastest option to secure quick business loans as they want minute detail.

What are the best instant business loan options?

Most online or alternative lenders can provide financing 24 hours or less, depending on your needs and financial situation. A wide range of short-term and long-term financing options are available for small businesses, ranging from six months to ten years.

How many types of business loans are available to me right now?

Most online or alternative lenders can provide financing 24 hours or less, depending on your needs and financial situation. A wide range of short-term and long-term financing options are available for small businesses, ranging from six months to ten years.

What can you use fast business financing for?

As your company grows, a small business loan will provide you with the funds you need. Working capital, renovations, technology upgrades, new employee hires, business expansion, and more can benefit from the funds.

Why do certain business loan products fund faster than others?

Sixty to 90 days is the typical time frame for an SBA loan application. Because of the paperwork and documentation required, SBA loans can take longer to close than other small business loans and other alternative financing options. There is a vetting process when applying for financing for new equipment. It is necessary to evaluate it, and we must reach out to third parties regarding invoices, receivables, and payables financing. You’ll need an inspection before you can purchase real estate. In as little as 24 hours, with a simple application and a few bank statements, you can secure a business loan or MCA.

Large Business Loans

What is considered a large business loan?

A large business loan depends on your company’s annual gross sales, current debts, and overall creditworthiness. For the most part, banks and other financial institutions will only lend 10% to 30% of a company’s yearly revenue. Banks, credit unions, and national banks typically provide the most significant business loans. What you can borrow from a bank depends on your company’s finances, collateral, and borrowing requirements. Some large financial institutions, unlike community banks, do not have any borrowing limits. In the United States, businesses received an average of $663,000. To put it another way, the average loan is between $13,000 and $1.2 million, and Sunwise Capital offers as much as $2M.

Merchant Cash Advance

What is a Merchant Cash Advance?

With a merchant cash advance (MCA), a business receives a large sum of money and pays it back quickly. It is common for lenders to deduct a percentage of customers’ credit and debit card purchases to repay their funding. Repayment can be daily or weekly.

How does an MCA work?

An MCA, or Business Cash Advance, is a contract between a business owner and an alternative financing company (MCA). Company owners agree to sell a portion of the company’s future profits. The MCA, for example, is a type of business financing that may work well for your company but may not work for another.

What are some alternatives to merchant cash advances?

If your business qualifies, you can look at other short-term business loans, invoice financing, equipment loans, or a business line of credit. If those are not viable options, consider getting a family member or friend loan. A low-interest or no-interest short term loan from family or friends may be in your best interests. You can use credit cards, 401(k)s, Roth IRAs, and other retirement accounts or collateral loans as an alternative.

Who can benefit from merchant cash advances?

A significant benefit of using an MCA is how fast you can access the funds you need for your business. If you want to improve your business but lack the funds, a merchant cash advance may be an option. Decisions are, in some cases, within 24 hours. These loans can be helpful for people who need cash now but can’t wait weeks for a response from their lender.

How can you get out of a merchant cash advance?

As soon as you stop making payments on your advances, the lender will file a lawsuit against you and your company. The first creditor who obtains a judgment against you if you have multiple debts can seize your assets. Don’t stop paying until you’ve talked to your lender about possible new terms. A short-term, secured, or collateralized loan can help you pay back your merchant cash advance. If all else fails, filing for bankruptcy may be an option. A professional tax advisor or CPA can be of assistance.

Do merchant cash advances report to credit bureaus?

The business credit bureaus do not consider a merchant cash advance a loan because it does not improve or build a company’s credit profile. Find out if your lender will run a hard or soft credit check on you. An initial “soft inquiry” is the first step in a credit investigation. There is no negative impact on your FICO score from this type of credit check. Your credit rating will likely suffer when a “hard pull” is done. Inquiries marked as “hard” can reduce your score by five points.

What are some instances where a merchant cash advance loan makes sense?

A merchant cash advance is ideal for small businesses that need additional funds to boost their competitiveness and operational efficiency. They’re also speedy. You can usually get an MCA in a day or two without a lot of paperwork. Lenders look at daily credit card and debit card transactions to see if the business owner can pay. Physical proof is unnecessary, and no physical security is required as a guarantee because MCAs are unsecured. If your sales are down, you may see a decrease in payment. Repayments reflect the performance of your business, so the amount you owe will fluctuate based on that performance.

How can you use the funds from your merchant cash advance?

The merchant cash advance is for any business expenditure. Make sure the investment returns a positive return on investment over the advance term.

What are the disadvantages of a merchant cash advance?

The MCA can be one of the most expensive ways to raise capital for a small business. While the MCA is a short-term solution to business problems, liquidity sometimes suffers from daily withdrawals from your account.

How long does it take to pay back a merchant cash advance?

Most MCA’s get repaid in 3 to 6 months, and repaying your merchant cash advance can happen more quickly if your business has a high volume of credit card transactions. Understandably, you might be wary of the repayment terms and fees associated with an MCA at first because it’s not a loan but rather an advance based on the amount of credit and debit sales you have monthly.

Most MCA service providers deduct money from your regular credit and debit card purchases to pay back the MCA (though some providers allow for weekly debits instead). If your MCA necessitates daily debits, there is typically no grace period.

You should expect to begin making payments daily the day after you receive the funds. There is a few new terms you should learn as well. “holdback” refers to the portion or percentage of daily credit card transactions immediately deducted from your account.

Unless otherwise specified, holdbacks typically range from 10% to 20% of daily receipts. Many borrowers confuse the holdback with the “interest” or factor rate you will be charged for the advance.

The holdback is the percentage of sales repaid daily or weekly, and the factor rate is the total amount to be repaid. As an example, you will pay back $1.50 for every dollar borrowed (or $.50 per dollar) if you have a factor rate of 1.5. At a factor rate of 1.5, if you borrow $10,000 from an MCA provider, you will owe $5,000 in fees. The result of multiplying $10,000 by 1.5 is $15,000.

How expensive are merchant cash advance companies?

Variables like the lender, the advance amount, any additional fees, how long it takes to pay back the advance in total, and how well a company does with credit card sales all influence the annual percentage rate, which can range from 18% to 350%.

Unsecured Business Loans

Should I get a secured or unsecured loan for your small business?

Default on an unsecured loan (with no additional guarantees) means you don’t have to worry about losing your assets because there is no collateral. Lenders view unsecured loans as higher-risk investments.

If you have cash, real estate, equipment, or inventory, it is easier to secure a loan. If you don’t have any collateral, lenders may be concerned that you won’t pay back the loan on time.

Unsecured business loans have repayment terms ranging from one month to three years, making them more flexible than secured loans. You can expect better terms and interest rates with a secured loan. Keep in mind that a secured business loan allows your company to borrow more significant sums, while the interest rates on an unsecured business loan are generally higher.

Small Business Administration Loans

What is an SBA preferred lender?

A bank or financial institution that has been designated as a “Preferred Lender” by the SBA can make final credit decisions on loans that the agency guarantees. Non-preferred lenders must submit all documentation to the SBA, and it must go through their internal approval process, which adds time.

What is an SBA loan?

Participating lenders, such as banks, offer small-business loans partially guaranteed by the US Small Business Administration in the SBA program. Because of their low-interest rates and flexible terms, SBA loans are an excellent option for financing a small business.

How does an SBA loan work?

The SBA’s most crucial lending program is the 7(a) guaranteed loan. In this case, the SBA has no role to play. The lender requests a loan guaranty from the SBA, and the SBA has various options for responding to the lender’s request. Participating lenders guaranteed loans up to $4,500,000. These loans are repaid in monthly installments, typically ranging from $25,000 to $5 million. These include working capital and equipment acquisition, debt refinancing, ownership changes, and property purchases. As a rule, the length of a loan can be anywhere from five to twenty-five years.

Qualification Questions

How much income do you need to get a business loan?

Most lenders set a minimum annual revenue requirement; however, all lenders have no universal minimum income requirement. The income can be anywhere between $25,000 and $150,000.

Do I need to provide a business or personal tax return?

Banks (including applying for an SBA loan), credit unions, and traditional lenders will always require business and personal tax returns. Most online alternative or online lenders do not require individual tax returns, and some online lenders require business tax returns for loans above $100,000 to $150,000.

In business for less than 2 years?

Most traditional lenders like banks want to see at least two years if not three years of continuous operations with increasing revenues. Most online lenders want to see at least one year of operations, and some may consider newer businesses with 3 – 6 months of revenue.

Can you repay the loan?

Many business owners will ask for a loan amount that is significantly greater than their revenue will support. There is no harm in asking for as much as possible. Understand that most lenders use an underwriting process to analyze many business factors, including cash flow, to determine the maximum amount of loan a company can afford. Reputable lenders will never lend more than you can afford to repay. Why? Simple. They do not want you to go out of business, and they want to get paid back.

Do you need a business bank account?

Financing for a business requires the establishment of a separate business bank account. For a limited liability company (LLC), keeping a different bank account for business transactions is required by law. As distinct legal entities, limited liability companies have their own set of duties and resources. Sole proprietorships are allowed to operate out of personal bank accounts. In a sole proprietorship, you and your company are inseparable. It is, however, necessary for the sole prop to have a separate bank account in the name of the business to protect the owner from legal liability and secure funding.

How do I get my money?

Funds are ACH’d to your business account, and wires can be arranged and generally have a $35 wire fee. The Automated Clearing House (ACH) is a U.S. financial electronic transaction network (ACH).

How do I pay the money back?

Your loan payback is via ACH, and the loan terms will dictate monthly, weekly, or daily. The Automated Clearing House (ACH) is a U.S. financial electronic transaction network (ACH).

What if you don’t qualify for a business loan because of your credit?

Most financial institutions require credit scores as high as 680 before considering your loan application. Lenders will consider your personal FICO and business credit scores after a year of operation. Online or alternative lenders typically require a credit score of at least 500. Getting a business loan with bad credit can be intimidating for new business owners. Low personal credit or no business credit score may not disqualify you from obtaining business loans.

What if the bank has denied me for a business loan?

Loan denials can reflect a borrower’s poor credit history. Make sure you’re aware of and working to improve your credit if your score is less than 680. A rejection doesn’t mean you can’t apply for a loan again; instead, approach a different lender and find out if they can help you get a loan. Consult your local bank or credit union and online lenders for more information.

How long does my company have to be in operation to qualify for a business loan?

Most online small-business loans require a one-year business history, while most traditional bank loans require a two-year business history. Some online lenders will consider 3 to 6 months.

Can I get a discount if I pay the loan off early?

In some situations, paying back a business loan early might seem reasonable. You may be able to save money on interest if you prepay your loan, depending on your business lender and the type of loan you are taking out. Many business owners seek loan prepayment options to gain more flexibility and control over their cash flow. Ask your lender.

How soon can I reborrow?

Depending on your lender, you might be able to reborrow money once you have paid back half of the loan. Banks, however, will only let you reborrow once you’ve paid back the total loan. Ask your lender for their requirements.

Is there a personal guarantee?

Personal guarantees are almost always required for small business loans, especially if there is no collateral. An unsecured loan is when the borrower doesn’t provide collateral. If you fail to pay back your loan, you may face additional fees and a higher interest rate. Lenders have the option of sending delinquent loans to a collection agency.

How long does it take to get approved?

We strive to approve complete applications (one-page application plus the last three months of business bank statements, PDF format only) within 24 hours (one business day). Incomplete applications will delay the approval process.

What if I had a bankruptcy?

After bankruptcy, it may be more difficult to get a business loan, but it isn’t impossible. No matter how long it’s been since your bankruptcy, it’s still possible to get small-business financing after one, as long as the bankruptcy is discharged for at least one year.

I have had some problems with my credit report in the past. What’s the impact?

Bankruptcies discharged over a year are OK. Judgments and liens under $100K or have payment plans are generally acceptable. Make sure you are current with all outstanding debts and liabilities. Defaults on other business loans are usually a red flag and prevent you from borrowing. There is a national database that most lenders use to check before funding.

Can applying for a business loan hurt your credit?

Most business loans will impact your credit if you guarantee a business account with your personal credit. Depending on the outcome, you could see an increase or decrease in your credit scores. Some lenders don’t care about your credit score at all. Every lender will run an inquiry on your credit, and some do it initially, while others perform a soft credit pull and wait to make a hard inquiry before funding. Ask your lender whether they do a hard or soft pull initially and whether they report to the personal or business credit bureaus.

How long does it take to get funded?

It all depends on the type of business, location, and credit rating. The average wait time for a bank loan approval is between 30 and 180 days. Online or alternative lenders can fund a loan from minutes to the same day to 24 hours.

What credit score do I need?

Most online lenders require a credit score of 500-650 to qualify for a business loan, and banks and credit unions typically require 680 if not 700 plus.

Are there any fees?

Most online loans do not have any costs associated with the loan. You can get funding with an interest rate of 3% to 81%. The question is how much money you’re eligible for and what type of loan you’d prefer to take out. Additionally, the fees charged by different lenders may vary. Everything will end up costing you money in the end. Closing costs are standard in commercial mortgages and other commercial real estate loans. Legal fees, appraisal fees, credit report fees, and more can all fall under this category. One of the most common ways lenders collect money from borrowers is by charging an origination fee. Origination fees may be calculated as a percentage of the loan’s total value in some cases, for example, typically between 2% and 5%.

Are there any monthly premiums or broker fees?

Most lenders do not have monthly premiums or monthly fees. If there are any, you will find that all reputable brokers or lenders will disclose any costs before your loan origination.

How much money can I expect to receive?

What you can get from a business loan depends on your company’s annual gross sales, current debts, and overall creditworthiness. For the most part, banks and other financial institutions will only lend 10% to 30% of a company’s yearly revenue. Having a positive cash flow after deducting all debt payments should be the goal for your business.

Can I get an online business loan with bad credit or no credit history?

Poor credit makes it challenging to obtain a loan from a financial institution. A business loan with bad credit may still be possible. Most online lenders require a credit score of 500-650 to qualify for a business loan. Even though getting a business loan with less-than-perfect credit is more complicated, there are still options for those with good credit. Look for lenders who aren’t affiliated with traditional banks if you have a bad credit rating. Bad credit small business loans are usually available to small business owners with less-than-perfect credit from alternative lenders.

Do you qualify for equipment financing or a cash advance for operating expenses and payroll?

Equipment financing is easier than you think. At least a year of business experience and $50,000 in annual revenue are generally required. Loans are available without putting up a significant amount of money as collateral. A merchant cash advance decision takes as little as 24 hours in some cases, but it may take longer in others. These loans can be helpful for people who need cash now for operating expenses or even payroll but can’t wait weeks for a response from their lender.

General Loan Questions

First things first, why does your business need a loan in the first place?

Be clear about why you need a business loan as a business owner-having good use of funds (taking a vacation is not one of them) and understanding what the money will do for the business in terms of ROI or return. Most savvy business owners know that the cost of a loan is the investment into their business. Why do most Fortune 500 companies have debt on their balance sheets? They recognize it has less to do with the interest paid or cost of funds (which may be a write-off, talk to an accountant) but the overall return, both short and long term.

What type of loan makes sense for your business?

There is no right or wrong answer when determining the type of loan that makes the most sense for your business. Time in business, annual revenue, credit scores, type of business, or industry limit loan options. Once you get the funding, how well you manage your cash flow makes sense. As the business owner, you need to be hyper-focused on the ROI or return on investment. Think of it this way. The money is yours to spend or save as you see fit. Get a boat, go on an adventure, or buy yourself lunch every day with the money. You still owe the money, no matter what.

Is getting a loan right for my company and me?

Financing options are plentiful for small business owners. It’s not necessary to rely on loans to finance your business solely. It is possible to find investors who will give you money in exchange for a share of your company’s future growth. There is a possibility that a bank or other financial institution will lend you cash for your business. Whether it makes good business sense to borrow money for your company depends on your company’s goals and current financial situation. How you will raise money is an essential question for entrepreneurs to consider. Loan approvals are not guaranteed. What will you do if you don’t have ample cash to cover all of your expenses, including the interest? Our recommendation is to know your numbers.

What is a UCC?

A lender will file a UCC-Uniform Commercial Code-1 statement to publicly declare their rights to business assets in the case of borrowers who default on business loans by filing them in court. The UCC is a notice that the creditor or lender has the right to take possession of the assets as repayment for the underlying debt.

How does a UCC work?

Lenders protect their interest in the borrower’s assets and property through a UCC-1 filing. Creditors can take assets as repayment for a debt, and this notice gets filed publicly.

What is a business installment loan, and why would I need one?

You can use a small business installment loan to cover operational expenses, and the business then pays back the loan over the loan term, including principal and interest. Installment business loans provide borrowers with more flexibility and lower interest rates. Installment loan examples include everything from personal loans to student loans to auto loans and mortgages.

What is a revolving credit line, and how is it used?

A revolving credit account can be used and paid down multiple times as long as the account is open. For businesses that need to borrow money on a revolving basis, a revolving loan or line of credit can help. A revolving line of credit is advantageous during revenue volatility because the credit line can be reborrowed to pay bills and unexpected expenses.

How does a revolving line help me manage your cash flow better?

Using a line of credit can help businesses pay for things like inventory and payroll and other expected and unexpected expenses. Companies often use a revolving line of credit to make up for short-term declines in profits during the slow season.

Should I get business credit cards instead?

Getting a business credit card has distinct advantages. First and foremost, it separates your business from personal expenses and liabilities. In case of a lawsuit, it protects to limit the liabilities to the company and not expose you personally. It also helps prevent a lawsuit from piercing the corporate veil if you’re commingling funds between personal and business. Next, it helps build business credit. Third, it offers an option to access needed capital, especially in an emergency.

How can a line of credit help your business?

A predetermined amount of money can be borrowed from a line of credit and charged interest. Withdrawals and repayments are your discretion, so long as you don’t go over the credit limit. Using an operating line of credit to manage cash flow, buy inventory, or cover an unexpected expense is a smart business move. For the most part, you’ll need a personal credit score of 650 or higher to apply for a credit card.

What are the pros and cons of crowdfunding?

Customers become brand evangelists when you use crowdfunding. When customers buy your product, they’re not just spending money; they’re investing money in your business. Crowdfunding allows investors to retain a stake in their projects without giving up their equity. Crowdfunding is a great way to test the market. Gaining traction is much easier with the help of crowdsourcing. Crowdfunding is a great way to broaden your audience’s reach. You can use crowdfunding to raise large sums of money. A crowdfunding campaign can help you demonstrate the viability of your idea. In the same way that wildfires can quickly spread, crowdfunding can do the same. Crowdsourcing sparks change. You can quickly expand your business with the help of crowdsourcing. However, if a project fails, the reputation of your business and the people who have put their trust in you could be damaged. Not having a patent or copyright for your business idea means that it may be used by someone else. Risks associated with equity crowdfunding include loss of money, lack of information, no early income, no legal rights, and fraud.

Can you use a personal loan for business?

You can use a personal loan for business expenses, so the short answer is “yes.” You’ll need to have a good credit rating to get a personal loan. However, even though bad credit loans are available, they typically come at a higher interest rate. In some cases, borrowers may be prohibited from using the money they receive from these loans for business purposes. There are many reasons why a business owner shouldn’t take out a personal loan for your business. One concern is that if your company and you are commingling funds, a court may be able to “pierce the corporate veil.” Even though corporations, LLCs, and partnerships are separate entities, creditors can go after the owners’ homes, bank accounts, investments, and other assets to pay the corporation’s debt.

What is a term loan?

Short-term, intermediate-term, and long-term loans are subdivided into these three categories. The classification reflects how long money is paid back. Your mortgage or personal loan is an excellent example of a term loan. Bank, credit union, or online lenders make a one-time payment is how you get the money from the lender-paying back your loan with interest over months or years. The interest rates can be either fixed or variable. Term loans are both for personal and business reasons. Many business owners use term loans to achieve long-term business growth.

How does a term loan work?

In many cases, making installment payments is required to repay a loan. These payments often include the interest and a portion of the principle that hasn’t been paid. The term refers to the time it will take to pay off a loan with regular payments.

What if I need cash and not business credit cards?

Most business loans are paid in cash (ACH or business wire) to your bank account. When you apply for Unsecured Business Lines of Credit (a UBLOC), you can receive credit cards or take cash from the cards with little or no fee.

What’s the difference between a term loan, MCA, and an SBA loan?

A small business term loan allows you to borrow money upfront and repay it over time in a set number of installments (daily, weekly or monthly). The upfront funding provided by MCAs is similar to that offered by banks, but you are typically required to pay a percentage of your daily or weekly debit and credit card sales. What sets an SBA loan apart from other loans is that it typically has a longer-term and lower interest rate.

Loans, Loans, and more Loans

What do you need the money for and how long?

Maintaining an accurate accounting of your company’s cash flow is essential, as doing so allows it to meet its financial obligations and expand its revenue base. A precise estimate of your borrowing needs is critical if you apply for a loan. Getting turned down for a loan because you have requested too much money can cost you future growth and opportunities. Asking too little money could lead to financial ruin. The truth is that there isn’t a solution that fits every situation perfectly for every industry. That’s a fact. You can’t generalize about businesses, so our advice is to be realistic. Don’t ask for $1M if you’re only generating $250K in annual revenue. How will you be able to make the payments? Don’t take out a long-term loan for something that has a short shelf like (advertising, inventory that turns quickly, etc.). On the other hand, if you get more than you need, sometimes having the additional capital can cover unexpected expenses or delays and provide freedom to put it to work. Most lenders will not let you reborrow within a specific time frame, so take it if you even think you may need more money short term. Most lenders will allow you to prepay without penalty. Ask your lender for details.

How can business owners figure out how much these loans charge in terms of your interest rate?

It is mandatory to pay back a loan in full. Lenders expect a return on their investment in lending you money. As a result, your responsibilities extend beyond repaying the money you borrowed. You must repay the principal and interest on the loan. Interest is a fee you must pay if you borrow money from someone else. For example, a $20,000 loan could cost you nearly $24,000 in principal and interest throughout the loan. To maximize profits, lenders charge interest in a variety of ways. Some types of interest necessitate more calculation than others.

Do you need to purchase inventory, hire additional staff, catch up on bills?

Cash flow measures the net inflow and outflow of a company’s cash and cash equivalents over a given period. It shows how much money you have on hand, which indicates your company’s financial health. According to research, most businesses fail due to a lack of working capital. If you keep track of your cash flow, it’s much easier to spend and invest wisely if you can predict your monthly income. If you can predict your cash flow accurately, you are now in a solid position to decide if a small business loan makes sense to purchase the inventory, hire staff or pay down some expenses.

What are the most frequent reasons why companies need funding for their business?

Growing and expanding a business requires financial resources. A successful business is developing and heading in the right direction. When starting a business, it’s crucial to have the ability to raise your capital, but you can also get working capital from outside sources once you’ve proven your business concept. Don’t let a lack of resources hold you from pursuing your entrepreneurial dreams. Increasing the size of one’s business is a constant concern for business owners. Cash is available from lenders. Plan ahead of time to buy assets, make repairs, and procure workers with enough money to maintain a solid cash flow.

What kind of financing do you need for your business?

Long-term debt is typically less expensive than raising capital because of the tax deduction advantages of the two most common forms of business financing: debt and equity.

Are you willing to put up personal or business assets for collateral?

How confident are you in your business and its success? Banks will always ask for personal guarantees that include some type of collateral. Collateral, such as equipment, vehicles, buildings, and inventory, can be used to secure a business loan. You can use accounts receivables as collateral in a loan. It is possible to use any business asset with monetary value as collateral for a loan. Lenders prefer assets that can be quickly valued and converted to cash. Lenders like to use savings account money as collateral because it is easy to collect and has a known market value. If you’re unwilling to risk your collateral, why should the lender lend you money? Online lenders typically do not ask for collateral as most of their loans are unsecured. As a result, to offset the additional risk, an unsecured business line will generally have shorter terms and higher rates.

What if I want to consolidate my business debt, especially on my higher interest credit cards?

You reduce your debt when you take out a new loan to pay off your current business loans and debt. Consolidating your monthly obligations into a single, manageable one is possible with a small business debt consolidation loan. There are many similarities between debt consolidation for individuals and businesses.

Do I have to secure my business loan with any assets or collateral?

For many small-business loans requiring collateral, the borrower promises to keep the collateral for the loan duration. If you default, the loan company has the right to sell the collateral. Personal assets can sometimes secure loans for small businesses. There is no requirement for collateral on unsecured business loans such as business credit cards, a business line of credit, and short-term loans. Most traditional lenders require a personal guarantee for most business loans, even if the lender does not demand specific collateral from the borrower.

Brokers, Consultants, Or Lenders

What is the difference between a direct lender and a broker?

A broker can offer a wide array of options. Theoretically, a direct lender can provide you with better pricing. Here is the challenge. When you deal with a direct lender, they have one product or loan type to offer. If it doesn’t work for them, you will be declined. If it doesn’t work for your business, you must restart the process.

When working with a broker, if they are reputable and have vast experience, they can match you with the best direct lender(s) to get you options you otherwise wouldn’t have available doing it yourself. Think of it this way. If you were shopping for life insurance, would you work with an agent or broker? The agent represents one company. If you don’t like the rates and terms of the policy, you’ll need to reach out to another agent.

The broker, in this case, can match your requirements and, on your behalf, submit your application to multiple companies and then present you with the best one or two. Same thing if you were looking for a mortgage. Don’t be afraid to work with a good business loan broker.

NOTE: In business lending, most “direct lenders” today will broker “out” your application to other friendly competitors to see if they can still capture the deal. It’s to the point where it’s almost indistinguishable.

How does a lender make money?

The primary source of profit for lenders is the yield spread premium or YSP. This spread is the difference between the interest they charge you and their costs to replace your money.

How does a broker make money?

A broker gets paid a commission which is a percentage of the loan.

Should I pay a broker or loan consultant an upfront fee to find my company a loan?

You shouldn’t be required to pay any upfront fees by a lender, broker, consultant, or another loan officer. No legitimate lender, consultant, or broker can guarantee your approval before applying for a small business loan, and you shouldn’t have to pay for that guarantee or approval in advance.

Should I pay a business loan broker a fee after a loan is originated?

We frown upon brokers who charge either upfront or on the backend. Most lenders offer to pay brokers a commission on funding. However, there are occasions when a lender will not “pay” a broker for originating a loan. It would be customary to agree to pay out of pocket or from the loan proceeds on origination. Be certain to make sure your broker is not double-dipping.

How Many Loans Can I Have?

Can you have multiple loans?

You may wonder if you can get numerous business loans simultaneously as a business owner. A small business loan application will be affected if your current loans are still outstanding. Is there a yes or no answer? This question isn’t a one-size-fits-all answer; it depends on the type of loan you already have. If you’ve already got a business loan, you may be able to take out a second one, known as “loan stacking.”

A few loans stacked on top of each other can be beneficial, as long as you don’t have a lot of very similar loans stacked on top of each other. Any of the following loans are irrelevant to our lending parameters for a business loan: obtaining a loan solely for one’s benefit, motor vehicle installment loans, and mortgages and student loans. Most of these loans are secured. Lenders prefer collateral-based loans because they know they’ll get their money back because of the added security.

Lenders don’t seem to mind whether or not you have personal or student debt. Lenders don’t care if you have a personal bank account because the money goes to your business account, not your personal account. If the applicant already has a secured loan, they may be eligible for an unsecured and secured business loan from the same lender.

Lenders do mind when borrowers try to take out multiple loans simultaneously. Most lenders now have tools to combat this strategy to prevent a business owner from outsmarting the system, getting as much money as possible, and then not repaying the loans.

What is stacking?

“Loan stacking” involves taking out multiple business loans from various lenders to achieve a financial goal.

Can I take out multiple business loans at the same time?

Business owners can participate in online loan stacking. Loan stackers commit application fraud by intentionally defaulting on their loans, which costs financial institutions billions of dollars every year. You may violate the terms of your agreement if you have more than one loan. It is illegal to stack loans because lenders frequently file blanket liens, which lien on all or nearly all of a business’s assets, resulting in a default on your loan.

WARNING: Read your lender’s anti-stacking policy carefully (again, make sure to read that fine print). Legal action against you and your business will ensue should you break this rule.

Should I work with a debt settlement company?

Companies that specialize in debt settlement use dubious tactics. As a result of your financial situation, debt settlement may not be the best option. There is no point in settling your debts unless you can pay at least 25% of what you owe in one go. As a rule, a third-party company offers this service, which claims to negotiate a settlement with your creditor for you. However, debt settlement may initially appear to be a good idea, but it can harm your credit rating and even cost you more money.

What happens if I default on a loan?

The number one step is to speak to your lender proactively. It is often in everyone’s best interest to re-write the term or payback to help mitigate the loss or default. Be proactive and prevent unforeseen headaches. Your lender, especially with a UCC (or various guarantees), has the legal authority to sue your company to recoup the loan’s total balance and any accrued interest, penalties, and other fees. A business loan default may prevent you from successfully borrowing money in the future, as most lenders share a “Blacklist” of businesses that default.

Pet Peeves

Do I need a separate business phone number?

No, you do not need a different phone number. But what you do need is a number with an active voice mailbox (one that is set up and one that will take a message). Nothing indicates a hobby vs. a business when a lender cannot reach the business owner with a message. How can you be “real” if customers can’t call you? Think about getting a virtual phone system or VOIP. They are less than the typical cell phone and can make any small operation look like a fortune 500 company.

Should I use a @gmail.com email address for my business?

Email accounts like [email protected], @aol.com, @hotmail.com, @yahoo.com are not beneficial for business. In the eyes of your customers, a business lender, and the business community at large, a professional email address will help you gain their trust. You need a domain name and a website to get a professional email address.

Interest Rates

What are the interest rates?

Interest rates are subject to change. Please check with your lender to get the most competitive rates.

Average Business Loan Interest Rate by Loan Type

Banks, credit unions, and national banks typically provide the most significant business loans. What you can borrow from a bank depends on your company’s finances, collateral, and borrowing requirements. Some large financial institutions, unlike community banks.

Loan type Annual Interest Rate (AIR)

Traditional bank loan 2.54% to 13%

SBA loan 3.25% to 8%

Online loan 7% to 100%

Merchant cash advance 18% to 250%

Invoice financing 13% to 60%

LOAN TYPE TIME TO FUNDING ANUALIZED % RATE
Apply Now SHORT-TERM 1•2 DAYS STARTING AT 10%
SBA LOANS 7-180 DAYS STARTING AT 6.5%
LONG TERM 2 DAYS 7% – 30%
EQUIPMENT-FINANCING 2 DAYS + 8% – 30%
BUSINESS OF CREDIT 1 -2 DAYS 7% – 25%
BUSINESS OF CREDIT 1 -2 DAYS 7% – 25%
INVOICE FINANCING 1 – 7 DAYS 3% + %/WK OUTSTANDING
MERCHANT CASH ADVANCE 2 DAYS 1.14% – 1.48%
PERSONAL LOANS FOR BUSINESS 1 DAY 5.99% – 36% APR