Do you need a Small Business Loan?
Many business owners make the common mistake of waiting too long to apply for small business loans. Chances are the more desperate you are, the more difficult the process will become. Getting approved for most small business loans can take time, and they’re much easier to get when you can demonstrate your business is performing well. In addition, lenders want to be assured you’ll be able to pay them back in a timely fashion. Let’s look at some reasons why you might want to consider starting the loan process:
- You need cash flow. Do you offer longer payment terms like net-30, 60, or 90 days? While waiting for those outstanding invoices to be paid, there are operating expenses, wages, and inventory to pay for. You’re generating positive revenue, but a loan or a business line of credit could help you bridge the gap.
- It’s time to expand. Your business is booming, and you know you need to expand or add a second location. Do you need a bigger warehouse or an expanded dining room? Real estate is expensive, and so is construction. You may need a small business loan to accommodate your growing customer base.
- Need more inventory. You just got the opportunity of a lifetime, and a large order has been placed. It is likely you need additional products, updated machinery, temporary help, or extra space for more inventory. To fulfill the sudden demand, you may need a little upfront cash to make it all happen.
- You got an offer you can’t refuse. When you least expect it, you get a chance to buy out a competitor or acquire a complementary business. But, even if your existing business is sound and thriving, you may still need a small business loan to make the deal happen.
Since there isn’t a one-size-fits-all option for borrowing money, let’s look at some of the available options.
Types of Small Business Loans
There are a number of choices available to the small business owner needing extra capital, all with their own sets of criteria. Your approval will depend on your creditworthiness, average monthly revenue, and the amount of time you’ve been in business. And though they may have some common requirements for qualification, you’ll want to consider what the different types of small business loans offer. Loan amounts, interest rates, and payment terms will vary based on the type of loan and the lender.
Business line of credit: A business line of credit can be anywhere between $1000 and $500,000. Qualifying is relatively easy, as long as you’ve been in business for more than six months, have a credit score over 560, and generate at least $50,000 in annual revenue. Then, instead of receiving the money as a lump sum, you can access the amount you need when you need it.
Rates vary from 8-24%, and the lender may require you to sign a personal guarantee.
SBA loan: A Small Business Administration Loan (SBA) is a federally backed small business loan designed to assist business owners that may not qualify for a traditional bank loan. The arduous application process can take several weeks, but qualified applicants can borrow up to $5,000,000. With 10 to 25-year payment terms, it can be worth the wait. The SBA doesn’t provide the funds; however, they will guarantee a good portion of the loan. These assurances encourage otherwise reluctant lenders to assume the additional risk.
To apply for an SBA loan, you’ll need a business license, two years of business and personal tax returns, your YTD Profit and Loss statement, a YTD balance sheet, and a debt schedule. There are non-profit organizations that assist with understanding all the paperwork and requirements.
Short-term loan: These loans are built for quick turnarounds, so if your application is approved, you can get your funds in as little as 24 hours. With interest rates start as low as 8%, small business owners can borrow up to $500,000, with one to three years to pay them off.
Short-term loans work to cover the unexpected expenses that come with running a business. For example, hire staff, repair equipment, or push through lost revenue due to circumstances beyond your control. To qualify, you’ll need good credit and documentation of at least two years of operations. In addition, some lenders may require you to secure the loan with personal collateral, like a house, vehicle, or real estate property.
Business term loan: These loans are very popular with fixed interest rates as low as 6% and repayment terms of one to five years. If they qualify, small business owners can get between $5000 and $2,000,000 in less than a week.
Merchant cash advance: With a merchant cash advance, entrepreneurs can borrow between $5000 and $2,000,000 and receive funding within 24 hours. Interest rates are relatively high, starting at around 18%. Payback terms are unique in that you repay the loan by giving an agreed-upon percentage of your daily credit card receipts to the lender.
Qualifying is simple due to a lower risk of default and often can be completed online in a few simple steps. For example, lenders may want to check your receivables for a few months, but many don’t even bother with a credit check.
Business credit card: Like a personal credit card, a business credit card is relatively easy to qualify for as long as your credit score is above 680. Based on the issuing bank, you can access amounts of up to $500,000, with interest rates from 8-24%. And just like personal credit cards, there are often perks like credit card rewards programs and 0% introductory rates. (Be careful though, those 0% introductory rates usually disappear after the first year.)
Equipment Financing: Many small business loans provide you with all-purpose funding, but there are times when you need equipment. Not just for heavy industrial equipment, equipment financing can include anything from forklifts to payment processing programs. With a credit score of over 650 and proof your business has a steady cash flow, you may qualify.
If approved, you can get your funding quickly, for as low as 7.5%, without a down payment or collateral. The equipment itself serves as collateral in case of a default.
There are additional forms of loans available such as commercial mortgages, startup loans, and business acquisition loans. If you need to explore other options because you lack the business history or have questionable credit, try to find an investor or use crowdfunding.
How to Choose the Right Lender
Banks deny 74% of small business loan applications, so the best place to start your search is through a vendor marketplace like Lendio. A vendor marketplace can give you access to hundreds of loan options without ever setting foot in a bank. Check current interest rates, payment terms, and customer reviews. You’ll want to select a responsive, flexible, and helpful lender during the application process.
Who is Lendio?
Headquartered in Utah, Lendio is a leading business loan marketplace with hundreds of available loan options, high customer ratings, and an award-winning culture. From the very beginning, the company’s mission has been to fuel the American Dream by helping small business owners find the financing they need to expand, develop, or keep the doors open in times of crisis. Lendio facilitated $8 billion in Paycheck Protection Program (PPP) loan approvals for 100,000 small businesses. Partnering with 300 SBA-approved financial institutions and fintech lenders across the country, Lendio helped secure COVID-19 relief funds for many underserved segments of the small business community.
The Lendio marketplace features loan options from more than 75 of the best small business lenders helping small business owners get over $12 billion in funding. Fill out one simple application, and you can browse, compare, and choose a lender that fits your needs. There are no fees or obligations, and your search will not affect your credit score.
The best part is that you don’t have to make decisions on your own. When you apply through Lendio, your dedicated personal funding manager will help assess your needs, discuss different available loan options, and help you choose the perfect small business loan. There’s no need to deal with banks, pushy brokers, or page after page of financial and legal jargon.
Lender Marketplace Comparisons
There are other lender marketplaces out there, so how do they compare with Lendio regarding available funding, interest rates, and lender requirements?
- Loans $5000-$5,000,000 (starting at 6%)
- Any business in the US or Canada with a business bank account can apply
- Credit score over 560
- Loans $10,000-$5,000,000 (starting at 6%)
- Must have been in business for more than three months
- Must make at least $180,000 in annual sales
- Loans $5000-$5,000,000 (6.75%)
- Must have been in business for one year
- Must make at least $25,000 in monthly sales
- No open bankruptcies
Lendio is your best choice for an online lending marketplace with its flexible offerings and sizeable roster of lenders. The process is easy. Take 15 minutes to fill out an application, and Lendio’s innovative technology platform connects you with hundreds of different loan options with low interest rates and easy qualification. If you own a small business, you need capital to generate revenue. The Lendio marketplace provides capital for businesses lacking long business histories and high monthly revenue.
Payline + Lendio
How can Payline help you start a small business loan application? The process is easy. Take 15 minutes to fill out an application, and Lendio’s innovative technology platform connects you with hundreds of different loan options with low interest rates and easy qualification. If you own a small business, you need capital to generate revenue. The Lendio marketplace provides capital without the roadblocks: long business histories, high credit scores, and high monthly revenue.