10 Best Small Business Loans up to $500,000

How To Find The Right Small Business Loan

Have you been struggling to find the money that you need to take your business to the next level? These resources will help you understand the many small business loan options available to you.

The information out there might seem a little confusing, but there is a small business loan product for just about every type of business need you can imagine. Whether you are looking for money to make renovations, buy supplies and inventory, or get some new equipment, there is an option available for you. Seek Capital’s experts have broken down all of these options for you so you can easily figure out the best way to get the money that you need as quickly and cheaply as possible.

Consider these key factors when evaluating each small business loan funding method:

• How much money can you get?
• How fast can you get that money?
• What documentation is required to get the funding?
• What should your personal and business profiles look like to qualify?
• How much is the type of funding going to cost you?
• What are the repayment terms?

Once you have figured out the answers to these questions, the rest is relatively easy. You will know exactly what you need to do in order to get the funding you have been seeking for your business.

Term Loans

All You Need to Know About Term Loans

Term loans sound a lot more intimidating than they are. Term business loans are the classic business loans that get taken out by small business owners every day. They’re flexible, so you can use them for almost anything, including working capital, buying equipment, servicing debt or adding machinery to your workshop.

As industries have realized how important startups are, how beneficial it is to support businesses, and how you can actually make money by lending money, thousands of lenders have emerged that are willing to give out business term loans, from traditional banks to online lenders.

That means you have plenty of choices — which is good for variety and competition but can make choosing the best loan for you more complicated. If you’re wondering which lender to go with, how term loans actually work, and what to do next, this guide can help you. Seek Capital’s experts have gathered all the information about term business loans you’ll need so that you can make an educated decision when choosing between lenders.

How Much Can You Borrow with a Term Loan?

In today’s warm lending climate, you can get a business loan for as little as $100 and for upwards of a few million dollars. Most lenders cap their minimums at $500 to$1,000 for a business loan, and you’ll generally find that the maximum you can borrow is around $25,000 to $500,000. Don’t be discouraged if you need more, though, because there are plenty of lenders that will finance a loan of up to $2 million.

The amount that you can borrow with a term loan depends on your business profile and the lender's terms. Businesses with a high credit rating, good borrowing history, strong annual revenue, and clear business plan will be able to borrow more than a business that has only been around for a year and isn’t pulling in much revenue.

How Long Does It Take to Get a Term Loan?

One of the best things about term loans is that you can qualify for them faster than other loan types. Online business lenders have online applications, so you can apply in less than five minutes. Some lenders even have the technology to respond to your application instantly. If you’re approved for the loan, funds can be in your account within as little as 24 hours. In the lending industry, that’s lightning fast.

If you apply for a term loan through your bank, it’ll take longer than that to get your money because you’ll usually have to apply in person or over the phone. Just this step can take hours, as you’ll have to discuss your business needs, go through paperwork and more. Banks also take longer to consider your application and complete the underwriting process. In some cases, however, you can still get a bank-funded business loan within a couple of days.

What Documentation Do You Need to Qualify for Term Loans?

Term loan approval is a lot like the approval process for other types of loans. You'll start by completing the lender's application form. Each lender will have different requirements, but most ask for your business credit score, proof of your time in business, and basic business finance documentation. If you're applying for a secured business loan, like an auto loan or one secured against your equipment, you'll also need to send documentation about the collateral you’re putting down.

You’ll need to provide these documents during the loan application process:

• Profit and loss statement
• Business bank account statements
• Your credit score
• Business and personal tax returns
• Your driver’s license
• A voided business check

Who Can Get a Term Loan?

Every lender has a different set of qualifications for who can get a loan, but generally, you can get a term loan if you have:

• Been in business for more than three years
• A credit score of 680 or higher
• An average annual revenue of $300,000 or more

If you don't meet those requirements, you still might have a chance. Some lenders have more lenient requirements, and some specifically cater to businesses with bad credit or startups that have been in business for less than two years. Other lenders specialize in industries like gambling or medical marijuana, which might have trouble getting traditional bank loans.

If you're a member of a minority group, a woman, or a veteran, you might qualify for a special business term loan that comes with lower rates or offers longer terms.

How Much Does a Term Loan Cost?

The interest rate you pay accounts for the lion’s share of your costs. You’ll get a lower interest rate if your credit and cash flow are both strong and you have been in business for at least three years. You’ll also get a better rate if you put up collateral to get a secured business loan.

Business term loans can have fixed or variable rates. The advantage of fixed-rate loans is that you know exactly how much you’re paying every month. There are no surprises, and you won’t need to worry about having to pay more if the prime rates change.

Variable rates can change every quarter or even every month. Even with a variable rate, however, you'll probably have a fixed margin rate that is added to the benchmark rate. Here’s what that means: The benchmark rate is usually The Wall Street Journal prime rate or the London Inter-Bank Offered Rate (LIBOR). This rate goes up and down frequently, so you’ll be charged a different interest rate (within your payment structure) each time the rate changes. The fixed margin rate doesn’t change. It stays fixed and gets added to the benchmark rate. So, if for example, your business loan has a margin rate of 2.75 percent, and the benchmark rate is 5 percent, you’ll pay a total interest rate of 7.75 percent.

The final cost of your loan is also determined by the fees and penalties the lender charges. Make sure you read the fine print before taking out a business loan because you could end up paying a lot more in fees by going with one lender over another.

Here are some of the most common fees and charges to look out for:

• Origination fee. Typically, 3 percent-5 percent, an origination fee is very common. It covers the cost of processing your loan and includes running a full credit check and confirming your financial information. The origination fee could be added to the overall cost of your loan or taken out of the original loan amount.
• Check processing fee. Typically, this fee is $10 per check. If you repay your loan amounts by check, you might have to pay a fee for every payment. Consider paying online to avoid this fee.
• Late payment, returned payment, non-sufficient funds (NSF) payment. Typically, $10-$35, or 3%-5% of the failed payment. You'll be charged a penalty any time that your payment is late, returned, or doesn't go through as a result of insufficient funds in your account.
• Prepayment penalties. These fees vary. Some lenders will charge you a penalty if you repay your entire loan before the end of the term or overpay at any point. Check if there are any prepayment penalties, especially if you hope to pay your loan off early.
• Legal or closing fees. These fees typically range from $2500 to $5000. If you’re taking out a secured business loan, or your term loan is particularly complex, you might have to pay closing costs or legal fees to cover the cost of writing your loan agreement or associated other legal expenses.

What Are the Payback Terms Like for a Term Loan?

One nice thing about business term loans is that they come with a range of repayment terms. For example:

• Short-term business loans can have a term as short as a few weeks or up to 1-2 years
• Most term business loans need to be repaid in between 1 and 7 years
• Long-term business loans can have a term anywhere between 3 years and 25 years

Usually, lenders will want you to make payments every month, but that can vary depending on the arrangement you make with your lender. Some lenders let you choose between monthly, four-weekly, or two-weekly payments. If you take a short-term loan with a term that’s under a year, you could be making payments every week or even every day. There are also lenders who’ll permit you to skip a payment once a year, or to put off a payment once every six months.

Term Loans Explained

Now that you know all about term loans and more, you can apply for a business loan with confidence. Sometimes, this knowledge is the edge that a company needs to really get out of a tough spot or take off, so apply today and watch your business grow.

Business Line of Credit

All You Need to Know About Business Lines of Credit

Imagine having a super healthy cousin who’s also very giving. Whenever you want, you can walk over to them and say, “Hey buddy, can I borrow $5,000?,” and they’ll say yes. Of course, you’re going to pay back whatever you borrow, but you can ask anytime you want, and the answer will always be yes.

A business line of credit is like your philanthropic cousin. It gives you access to a pre-approved source of funds that you can draw on whenever you want. You’ll only repay the amount that you’ve borrowed, and the rest of it waits, ready to be borrowed when you need it.

Here’s a concrete example: You’re approved for a business line of credit of up to $100,000. That means you have $100,000 that you can use whenever you want. Now, say you withdraw $60,000 for some hardware upgrades in your office. You only need to pay interest on the $60,000 you used. These borrowing and repayment terms differ from a traditional business loan. With a business loan, you’d have to pay back the full $100,000 loan you took out initially, regardless of whether you use it, plus interest on the total amount borrowed.

Business Lines of Credit Explained

Business lines of credit can be secured against some type of collateral or can be unsecured. You can get something called a revolving line of credit or a non-revolving line of credit.

Revolving lines of credit let you borrow from the credit line as soon as you pay it back. So, once you pay back the $60,000 from the last example, you can take out $60,000, $80,000, or even the entire $100,000 if you need it. This option is extremely helpful because it ensures that you always have a source of funding available when you need it as long as you pay it back responsibly.

Be careful. Some lenders will cap the number of times you can make a withdrawal even for revolving lines of credit. For example, you might only be able to take two, three, or four draws on your business line of credit. Other lenders offer unlimited draws.

As the startup generation continues to evolve, so do the ways and methods for obtaining the necessary funding to keep a business running. A business line of credit remains one of the most flexible and variable loan options of all however. There are usually no restrictions; you can use it for payroll gaps, expanding your inventory, or even getting a Nintendo Wii for the office. Businesses generally use these lines of credit for short-term business costs, making up the occasional lull in cash flow or sudden unexpected expenses.

How Much Line of Credit Can You Get

Each lender sets its own minimums and maximums when it comes to lines of credit, but most have a minimum of $1000 to $2,000 for businesses and a maximum of $1 million. How much credit you can get depends on whether you have a revolving or non-revolving line.

Returning to our previous example, say you took out $60,000 from your $100,000 line of credit and paid it back. In doing so, you have basically recharged your line back to $100,000. Now you want to take out the full $100,000 for an all-expenses-paid corporate retreat. If you have a revolving line of credit, that’s not a problem. Essentially, what this means is you have taken out $160,000 worth of credit because the line keeps recharging every time you pay it back. Having a revolving line of credit makes a huge difference. With a non-revolving line of credit, you have to reapply before you can make another withdrawal. However, reapplication is typically a smoother and faster process than your first application.

How Long Does It Take to Get Approved for a Line of Credit?

Approval for a business line of credit is fast by loan standards —faster than getting a traditional business term loan. Online lenders make use of online resources, so it’s possible to get a reply in less than 10 minutes and funds in your account on the same business day. Some banks and even some online lenders take longer — up to two weeks sometimes — to process your application. Generally speaking, the more you want to borrow and the longer the repayment term, the longer it will take to get an answer.

What You Need to Apply for a Line of Credit

Traditional banks usually ask for the same documentation for a line-of-credit application that they would for a term loan application. Online lenders might have a more streamlined approach. You’ll probably need to complete an online application, provide proof of your credit score, show business standings, and supply any borrowing history you have. Some online lenders automatically connect with your bank accounts and online accounting or payment services for faster processing. They’ll just scan your accounts to assess your business performance.

You’ll almost always need to give the lender the following:

• Proof of age and/or citizenship, like your driver’s licens
• Bank statements, profit and loss statements, balance sheet
• Your credit history
• Business and personal tax returns

If you apply for a secured business line of credit, you’ll also need to provide details about the collateral you’re using, such as business equipment, real estate, or stocks and shares.

Who Can Apply for a Line of Credit?

Anyone can apply for a business line of credit, but your business is more likely to get approved if you have:

• Been in business for over 1 year
• An average annual revenue of over $180,000
• A credit score of 630 or higher

But these are not “make it or break it” requirements. It’s a lot easier to qualify for a business line of credit than for other types of business funding. Startups with as little as six months of business history can get a line of credit, and poor credit won’t deter lenders in this situation. If you’re worried about approval because of a weak profile, you might want to apply for a secured business line of credit. Doing so can increase your odds for approval and bring your rates down.

How Much Does a Line of Credit Cost?

How much a business line of credit will cost you depends on a few things, such as how much you withdraw, whether you have a positive borrower history with that lender, and which lender you use. Watch for these costs when you apply for a business line of credit:

• Maintenance fee: These are usually $10 to $20 per month. Many lenders charge a monthly maintenance fee for your business line of credit. Lots of lenders don't charge this fee or waive the fee if you've made payments on time for six consecutive months, however.
• Origination or application fee. This kind of fee is typically 1 percent-5 percent of the total amount. You could be charged an origination or application fee to cover the cost of processing your business line of credit application.
• Withdrawal fees: You will likely have to pay $1 to $4 per withdrawal. Some lenders charge you each time you make a withdrawal from your business line of credit. Many don’t, however.
• Late payment fees, returned payment fees, NSF fees: You will be charged $10 to $35 each time you miss a payment. If your monthly or weekly payment doesn’t come through for any reason, most lenders will charge you a penalty, so be sure to pay on time.
• Renewal fee: If you have a non-revolving line of credit, you might have to pay a fee every time you renew your credit allowance.

By far, the biggest cost of your business line of credit is the interest that you pay when you repay the money you withdrew. Interest could be anything from 2.9 percent up to 40 percent, depending on your loan terms, with interest calculated at a fixed rate or variable rate. Some lenders don’t charge any interest at all, however. Instead they charge you a fixed maintenance fee plus a certain percentage of your total borrowed amount each month.

What Are the Payback Terms Like for a Business Line of Credit?

Although some lenders allow you up to five years to repay the full amount, most lenders will expect you to repay the loan within six or 12 months. Business line of credit repayments are usually made weekly or monthly.

If you have a revolving line of credit, then once you’ve repaid the amount you borrowed, you can withdraw more money and reset your repayment term again. If you’ve made multiple withdrawals at different points, however, each withdrawal might have its own repayment term, so you could have multiple repayment dates to juggle.

Is a Business Line of Credit Right for You?

A business line of credit can be incredibly useful for making large purchases or covering unexpected expenses. If you can get approved for one, these can be your lifeline when you’re in need. Choose a reliable lender to get the security your business deserves.

Invoice Financing

What Does Invoice Financing Mean & Is It Right for Your Business?

Starting and maintaining a business can be tough, especially when customers don’t pay you on time. Although there are great options for business financing, including personal business loans, there’s one option that will let you turn those IOU’s into an asset instead of a liability: invoice financing. This guide explains what invoice financing is, how it helps, and what you can do to take advantage of this practice.

Invoice Financing: What Is It?

The world of business primarily runs on credit. A major home improvement retailer isn’t walking into its supplier’s office with a wad of cash for a shipment of lumber. Instead, the company places an order, the supplier ships the order, and then the supplier sends out an invoice with a due date. The company then pays the supplier through whatever payment arrangement it has set up with them.

The supplier doesn’t receive payment for the goods immediately, and this kind of transaction can take a long time to complete. In the meantime, the supplier still needs capital to buy more supplies to keep its customers supplied and happy. Where does the supplier get the money to keep buying goods, pay its employees, grow its operations and invest in its own company? Invoice financing can help.

Invoice financing — also known asaka accounts receivable financing or receivables financing — is best described as short-term borrowing. It’s a way for businesses to get needed funds using the money owed from customers as a form of collateral. This practice can be helpful because businesses can use the money to pay salaries, buy more inventory, pay off suppliers and more. The beauty of invoice financing is that you can take advantage of dividends (customer invoices) that haven't actually paid out yet.

You will, of course, need to pay a small percentage of the actual invoice amount as a profit to the lender, but can be worth it because you get the funds right away rather than having to wait out the full length of the invoice. Lenders, on the other hand, love these types of “loans” because it’s pretty much a sure deal, much more so than a typical line of credit or business loan, because the customer invoice is sort of like a form of insurance on the loan.

How Much Can You Get from Invoice Financing?

There are three basic types of invoice financing: invoice factoring, invoice discounting and asset-based loans. Review each of them to give you a basic understanding of the invoice financing process.

Invoice factoring

• Invoice factoring is the most common form of invoice financing. For example, a lender will pay you 70 percent to 85 percent of the original invoice total. When the customer pays the entire invoice, your company will get the other 15 percent to 30 percent, minus any fees or interest payments due to the lender for the service it has provided. The reason a business might not like this option is that the lender is the one collecting the money from the invoiced client, so your clients know you’ve turned to a lender to take care of these matters.

Invoice Discounting

• Invoice discounting can seem a little more agreeable for businesses because the customer doesn’t know you’ve turned to a lender for the upfront cash. Instead, the lender forwards you up to 95 percent of the total invoice amount, and you collect the invoice, so it’s business as usual. Then when the customer pays you, you repay the lender.

Asset-based loans

• An asset-based loan is another form of invoice financing. This financing option lets you put up some of your assets, such as machinery, supplies, or in this case, invoices, as the financing tool. It's kind of the happy medium between invoice factoring and a bank line of credit. Unlike other types of invoice financing, however, asset-based loans require a much larger monthly accounts receivables tab (more than $1 million, for example). You must have a good financial background, solid financial statements, and assets that aren't going anywhere. So, if you’re a small or startup business, you probably won’t qualify.

Depending on the type of financing you apply for, you can get 70 percent to 95 percent of the total invoice.

How Long Does It Take to Get Invoice Financing?

There are two stages of invoicing factoring. In the first stage, the lender will transfer around 80 percent of the invoice total to your account, typically within one business day. in the second stage, the deposit of the other 20 percent of the invoice, minus whatever fees you owe the lender, only happens after the customer pays the invoice.

The only time-consuming step in this process is the verification stage, when the lender verifies the invoice before sending you the cash. Lenders want to make sure there’s nothing wrong with the invoice, there are no chargebacks, there are no disputes, payments are received, and everything can be processed correctly. Verification can take a little while, but generally, if everything is on the up and up, it won’t take that long.

What Documentation Do You Need to Qualify for Invoice Financing?

Another nice thing about invoice financing is that you don’t need all of the documentation that is required for other types of loans, such as many years in business, a thorough business plan, or a detailed list of how you’re going to spend the money. For invoice financing, lenders will generally ask you for proof of the invoice for their verification process. If you can prove the invoice is in good standing, you don’t need much else to qualify.

Who Can Apply for Invoice Financing?

Technically, anyone with open accounts receivable can apply for invoice financing. Of course, the more reliable your company is and, more importantly, the more reliable your clients are, the easier it is to get approved. Moreover, the better and more often you sell to credit-positive customers, the more likely a lender will be to pick up your invoices.

Another benefit of this type of business financing is that it is open to more businesses than the average business loan. Because the client invoice acts as collateral, lenders are more willing to take a chance on even small businesses with little experience or startups. Businesses most likely to get approved for invoice financing include those with invoices that:

• Are free from any legal issues
• Aren’t weighed down by tax problems
• Won’t be tied down by liens
• Are from reliable customers that pay back invoices within 90 days

Invoice Financing: How Much Will It Cost You?

How much invoice financing will cost you depends on the lender you’re working with, the size of the invoice you’re selling, and the creditworthiness of the client holding the invoice. The average rates can vary from 1.15 percent to 3.5 percent per month. But the better the creditworthiness of the invoice, the lower the rate you’ll get.

What Payback Terms Can You Get for Invoice Financing?

In most cases, how long you are given to pay back the lender will depend on how long your clients take to pay off their invoices. Some types of invoice financing will allow you to collect the invoice yourself and only ask you to pay the service fee once you've collected the money from your clients.

Invoice Financing: The Easiest Option There Is

Invoice financing is an easy way for businesses large and small to get the upfront capital they need during slow seasons and drawn out invoice payouts. It can be a great option for most businesses because it gets you the money fast, offers a more fluid cash flow, and even allows you to offer a faster service and longer payment options to your clients.

If you have clients that like to take their time paying off their balances (but always do eventually), you are a candidate for this type of business financing. Fill in your financial gaps using this smart and easy-approval option for your business.

Small Business Startup Loans

The Small Business Startup Loan Primer

The startup generation is arguably more adaptable, tech-savvy, and internet-equipped than any previous generation. But, as everyone’s favorite web-slinging superhero will attest, with great power comes great responsibility.

Creating a startup isn’t that big of a challenge. Keeping a startup, on the other hand, is a major undertaking. One thing that separates the survivors from the ones that didn't make it is their ability to grab an opportunity when they see it. A small business startup loan is one such opportunity. Will you grab yours or just let the opportunity pass you by?

Here’s everything you need to know about small business startup loans.

What Is a Small Business Startup Loan?

There are different types of loans that will help small businesses and even startups succeed. SBA loans, invoice financing, and business lines of credit are all available, depending on the borrower’s type of business and other factors.

A small business startup loan is any of several types of financial assistance specifically geared toward new businesses and startups that could use that extra bit of help to kickstart their endeavors. Because most financial assistance requires a minimum of three years in business to apply, a small business startup loan intentionally caters to businesses with little or no business history. Here’s a short list of the funding possibilities for startups:

• SBA startup loans, such as an SBA 7 (a), CDC/504 or SBA microloan
• Community advantage loans
• Equipment financing
• Invoice financing
• Business lines of credit
• Business credit cards
• Crowdfunding

There are alternative options, but these are the most viable, reliable and feasible financial options for most startups. If you want to fund your budding business, research each of these types of funds and find the one that best fits your bill, literally.

How Much Can You Borrow with a Small Business Startup Loan?

How much you can get from a small business startup loan will really depend on what type of funding you are looking for. From SBA microloans to small business grants and even crowdfunding, each option opens up new possibilities and opportunities. You can get anything from $500 to $250,000, depending on the type of loan, the business you are starting, your business plan and many other factors. Things like your own personal credit history, what type of business you’re opening, and your financial record will factor into the overall amount a lender will let you borrow.

Calculate your startup costs based on a well-written business plan. This should include all essentials and beginners' basics for running a business, like:

• Legal fees
• Office space rentals
• Inventory purchasing
• Equipment purchasing
• Building and maintaining a website
• Advertising and marketing
• Salaries

Once you have an approximation of how much you'll need — it's always a good idea to round up on this total figure — start applying to see what options are available to you.

How Long Does It Take to Get a Small Business Startup Loan?

Startup loans can take a while to complete. From start to finish, the process could take 30 to 45 days. That sounds like a lot of time if you need the money right now, but if you look at some other financing options, it's not that bad. Besides, if the lender is willing to work with someone who doesn't have any business plan or credit history to show for themselves, a little patience isn’t much to ask.

If you need capital in a hurry, online lenders are typically faster than brick-and-mortar banks. They can often be more economical as well, but not always. If timing is your main concern, online lenders are your best option. The application process is all online, so there is no time wasted waiting in lines, sitting in offices and listening to sales pitches. Apply online in a few minutes, and you could receive an answer on the spot from some lenders. Others will take a bit longer, but most will respond within a day or so.

Once you’ve been approved for a loan, again, depending on the lender, you could have the funds in your account within one or two business days. All of these circumstances vary by lender and situation, but it doesn't have to be a month-long process every time. And, if you have the time to invest, it's worth it to search for a small business startup loan with better terms.

What Documentation Do You Need to Qualify for a Small Business Startup Loan?

Although each lender will differ depending on their self-governed rules, most will require the following documentation:

• Income tax returns (business and personal)
• Business balance sheets
• Bank statements (business and personal)
• Driver's license or another valid photo ID
• Business license, if applicable
• Some sort of business plans for future projections

Not all lenders will require all of these documents, especially when you’re dealing with online lenders, but it’s always a good idea to have as much as possible readily available before applying in case it is requested. For some financial assistance like a business credit card, you’ll only need a basic tax ID number and Social Security number.

Who Can Apply for a Small Business Startup Loan?

Every lender will have their own requirements and rules about who can apply for their loans, so shop around to see what the market has to offer. The younger your business is, though, the better. Six months or less is a good fit for small business startup loans. By the time your business reaches its first birthday, other lines of financial assistance become available, so take advantage of startup loan options while you have the chance.

Want to give your small business startup loan application its best shot? Check off these boxes before you apply:

• Build up your credit score, personal and business. The better your personal credit score is, the better are your chances.
• Know what the requirements are before applying. Different lenders have different qualifications, so do your homework. For example, to apply for a small business loan, you’ll usually have to make less than a certain amount of net revenue per year to qualify; you must be a for-profit business; and you really shouldn’t have bankruptcies on your record.
• It's also a good idea to have some form of collateral, an asset you can use as an insurance plan against the loan. It builds lender confidence and makes getting approved easier.

Having a diverse business plan, wide customer audience, and a winning business model will just open you up to more options and greater possibilities.

Small Business Startup Loans: How Much Do They Cost?

There is no telling how much a small business startup loan will cost you until you’ve applied. You can typically expect the following, however:

• The smaller your loan, the higher the interest will usually be.
• The better your credit score, the lower your interest rates will be.
• The longer your repayment terms, the higher your interest rates will be

You could find rates ranging anywhere from 2.25 percent up to 5.32 percent for SBA loan options, for example.

What Payback Terms Can You Get for Your Small Business Startup Loan?

Lenders set their own repayment terms, and these can vary from biweekly payments up to 25 years for larger business loans. A great thing about small business startup loans is that you can get exceptional terms. Sometimes, you’ll find amazing offers like interest-free payments for the first year to 15 months. Some lenders will waive the prepayment penalty as an act of good faith. Every lender has different rules, but overall, you’ll find lenders willing to be more flexible and even generous when dealing with startups. Discuss your repayment options with each lender you are considering and use an online tool to help compare your offers.

Small Business Startup Loan: The Only Way to Fly

Startups are the future. Check out your options for financial assistance and see how, with a little backing, your new business can build a new tomorrow.

Equipment Financing

How Equipment Financing Works & How to Make It Work for You

Equipment financing is one of the many ways a business can get funding for its business operations. Basically, anything that provides a company with the capital it needs to purchase equipment is considered equipment financing, such as leasing the equipment, government loans like SBA loans, or other funding options.

The upsides to equipment financing are that it is a quick and easy way to access cash, doesn't require loads of paperwork to apply, and uses the equipment itself as collateral. The downside is that your equipment might be outdated before you've even paid back the loan, so you're essentially paying for a piece of machinery that is an older model or may even become obsolete quickly. This concern is particularly an issue for high-tech businesses. The pros generally outweigh the cons of equipment financing, however. Just keep this in mind when considering one model over another and opt for the newer model to ensure you get your money's worth.

Need a new piece of equipment for your office, warehouse or factory but don’t have the upfront cash to make the purchase? Check out how equipment financing works, who is eligible to apply, and what you can do to improve your chances of approval today.

How Much Can You Get Through Equipment Financing?

The beauty of equipment financing is that the equipment you buy acts as your collateral. That means that if you can’t repay the loan, the lender can come take the equipment instead of waiting an extended period for repayment. Although it might make you a little antsy to think about that possibility, this stipulation makes lenders more willing to offer equipment financing loans, even to smaller businesses with less history to show for themselves.

With such odds in their favor, lenders are willing to give you a lot more than they would with a standard loan. In fact, some lenders will enthusiastically extend the full amount for the cost of new or used equipment purchases. You won’t always find highly agreeable loan terms, but it is common to get as much as $500,000 from an equipment financing loan, and you can almost always get at least 80 percent without any issues.

At times a lender will still ask for some other form of collateral, such as a blanket lien — a legal statement that gives the lender claims to your business assets if you foreclose on the loan — or a personal guarantee in case your business isn’t able to pay back the loan.

How Long Does It Take to Get Equipment Financing?

Because lenders understand that when a business needs a piece of equipment, they need it now, equipment financing is set up to be a fast process. You can get the requested funds wired to your business account in as little as two business days. Considering some business loans can take a month to process, two days is a real relief to most business owners. Having your required documentation ready will make the process go faster. If you're not prepared, you could be looking at a few weeks’ delay.

Another thing that’ll help move things along faster is working with an online lender. Traditional banks have more red tape to deal with, so the whole process can take longer. Online lenders, on the other hand, have fewer costs and requirements — and fewer regulations in some cases — to deal with.

What Documentation Do You Need to Qualify for Equipment Financing?

Because equipment typically includes big-ticket items, lenders are thorough when it comes to reviewing equipment financing loans. You'll need to prove good creditworthiness, so be ready to hand over documents like:

• Bank statements
• Business balance sheets
• Income tax returns

Lenders, particularly banks, will want to see both personal and business statements. Personal documentation is asked for because, at the end of the day, the name behind the business might be responsible for paying back the loan if the business folds and can't afford to pay it back.

Who Can Apply for Equipment Financing?

Anyone in business can apply for equipment financing, but not everyone will get approved. Many businesses that get approved for equipment financing loans have more than $130,000 in annual revenue, credit scores that are 630 or higher (or at the very least 600) and have been in business for at least two years. You stand a better chance of getting approved if you have:

• Good personal and business credit history/scores
• Solid annual revenues
• Been in business for a couple years or at least one year

How much you’re asking for and what type of repayment terms you’re asking for will also factor into the overall decision. The type of equipment you want to buy is also a factor. Because equipment financing uses the equipment being purchased as a form of collateral, the lender is essentially investing in that equipment. For that reason, if you are investing in high-end, high-quality, or value-retaining equipment, a lender is more likely to approve your loan request and even work with you for more flexible terms. If you are trying to purchase an outdated model, niche machinery, or less useful piece of equipment, however, you might have a harder time getting approved.

Financing: How Much Will It Cost You?

Interest on equipment financing loans can be significantly more than for other types of loans. You can expect to pay anywhere from 8 percent to 30 percent, depending on the lender, type or cost of equipment, and your own creditworthiness. How much interest you pay will also depend on whether you have taken a fixed or variable rate loan. Some lenders will also ask for a 20 percent down payment for the loan. A down payment is a good thing if you can afford it because it means you’re taking out a smaller loan, so you pay less interest overall.

If you can’t afford equipment financing, leasing equipment can be a more affordable option because it doesn’t require a down payment, guarantee or collateral. Just be careful to do the math beforehand because leasing can also work be more expensive if you plan to lease the equipment for a long time. Generally, if you want a piece of equipment you’re going to use for the long haul, it’s worth purchasing it instead of leasing. Leasing, however, is typically easier to get approved for if you have a short or spotty credit history.

What Payback Terms Can You Get for Equipment Financing?

Equipment financing loans aren't like most other business loans. Rather than setting a fixed repayment date and breaking up your overall debt into equal monthly payments like you normally would with a business term loan or SBA loan, equipment financing calculates the expected lifespan of the equipment you are buying and uses this as a baseline for your loan repayment time frame. In general, you can expect a three- to seven-year term for most types of equipment, though more than 10 years is not unheard of.

Equipment Financing for Everything, Even the Kitchen Sink

Whether you need new computers for your office, a job-specific piece of machinery, or a professional-grade vehicle to get the job done, equipment financing can help you buy equipment that you couldn’t afford otherwise. The perfect solution for new businesses or companies looking to grow, equipment financing can open new doors for your business right away.

Short Term Loans

Small Businesses: Short-Term Loans Explained

Short-term loans are an ideal solution for most small businesses and startups. They're easier to get than typical loans; they come in faster so that you have the money right away when you need it; they are extremely flexible. Plus, this funding option is paid back quickly, so you don’t have debt hanging over your head for years.

That’s short-term loans in a nutshell. Now, here is everything else you need to know about this smart business financing option.

Short Term Business Loans: How Do They Work?

New businesses and smaller businesses usually need upfront capital right away for immediate use like paying salaries, buying equipment or purchasing supplies to get started, which makes short-term loans a great financing option.

Here’s a good scenario that’ll help you see how this type of business financing works: You’re a small business owner, and it’s the beginning of the month. You need to buy supplies to service your customers with but you don’t have the money to make those kinds of purchases because you haven’t made any sales yet. You know the money will come in once the business is up and running, so you only need to borrow the initial cash flow for a short amount of time. This kind of scenario is exactly what short-term loans are meant for.

Here’s a look at how short-term business loans work to help business operations:

• You get the working capital you need to get the ball rolling
• Once sales revenue starts to build, you pay back the loan
• You can avoid a loan stretching out for years, forcing you to make substantial interest payments. Instead, you take care of the loan quickly and easily.

Short-term loans are fast, easy, and don’t come with the complications that other loans do.

How Much Can You Get from a Short-Term Loan?

If you are looking for a huge sum, short-term loans might not be your best option. That's because in general, short-term loans are approved for much smaller amounts than your typical business loans. Some lenders even offer minimum loan amounts of $50.

You can get higher amounts many lenders too. It’s not unusual to even get a short-term loan for as much as $250,000. The average short-term loan is usually in the range of $100-$2,000.

How Long Does It Take to Get a Short-Term Loan?

Short-term loans are one of the fastest financing options for businesses. If you’re taking out a short-term loan for an emergency or so that you can get the supplies you need to start your business, you want the money now. Assuming all your paperwork checks out and you are approved for the loan, money from your lender can be in your account within 24 to 48 hours, or two business days.

What Documentation Do You Need to Qualify for a Short-Term Loan?

Every lender, from traditional banks to credit unions and online lenders, will ask for specific documentation when you apply for a short-term loan. Details might vary from one lender to the next, but the general requirements include:

• Bank statements and other business cash flow documentation
• Previous loan repayment history documentation
• Income tax statements (personal and business)

Who Can Apply for a Short-Term Loan?

If you own a business, you can apply for a short-term business loan, but these loans are most helpful for:

• New businesses
• Cyclical businesses
• Companies going through a bit of a rough patch
• Service providers that are seasonal

For example, a holiday season boutique needs the upfront capital to buy supplies and get the business up and running before the holiday shoppers come calling. With a short-term loan, this business owner can purchase everything they need to get started and then pay back the loan quickly with the season’s income.

The beauty of short-term loans is that they are fast and easy. Most lenders are even willing to work with startups or businesses with little history because the risk for this loan type is lower. The loan repayment is coming in a relatively short amount of time, so lenders are more willing to hand out these types of loans.

In terms of qualifications, most short-term lenders will be pretty flexible. Some places will lend money to businesses that have been running for just three months, though most lenders will require a year in business. Business owners with credit scores as low as 500 can apply, but the higher your score, the more likely you are to get approved.

Short-Term Loans: How Much Will the Loan Cost You?

The overall cost of a short-term loan will be the total of any fees the lender charges plus the interest rate you are given. In most cases, interest rates will be higher for short-term loans than for long-term loans. Generally, interest rates are calculated by taking the base prime interest rate and adding a premium to that. The premium is calculated by factoring in the amount you are asking for and the risk the lender is taking in giving you a loan.

Take the following steps to save yourself money on a short-term loan:

• Improve your credit score
  Better credit scores will receive better interest rates from any lender, so the more attractive your report is, the less you’ll pay in the long run
• Take a Shorter Repayment Plan
  The longer you are given to pay back your loan, the more interest you will end up paying over the life of the loan. Paying off your loan faster means fewer payments. A word of caution here, though: Make sure your interval payments are doable. Don’t set up your repayment terms so that you are being forced to pay more than you can afford. For example, if you take out a loan of $2,000 and split it up into four weekly payments, you’ll be finished paying off your loan in one month. Just make sure you have $500 per week to make those payments.
• Shop around
  Explore numerous online, traditional and crowdfunding options for borrowing money. Don’t just settle on the first offer you receive. Check out several services, see what they have to offer, compare terms, and go for the one that is the most appealing.

What Payback Terms Can You Get for a Short-Term Loan?

Short-term loans are usually no longer than a year — often less — so the whole business is done within a short amount of time. But even though most short-term loans are paid back within a year, you can find repayment terms for as long as three years. On the other end of the spectrum, some loans can be paid back within three months or even two weeks. It is not uncommon to find short-term loan repayment terms that are paid back daily.

Short-Term Loan: Your Lifeline When You Need It

If you need a big sum of money that you want to pay back slowly over several years, short-term loans are not the best option for your business needs. If, on the other hand, you need fast cash, don't have a long business history, and want to be done with the whole business of borrowing quickly, short-term loans could be the best solution for you.

Whether you’re dealing with an unexpected crisis at work, need the upfront cash to buy inventory for your seasonal business, or are waiting for customers who work on credit to come through, short-term loans can be the resource your business needs to keep going during a lull in revenue flow.

Merchant Cash Advance

Merchant Cash Advance: How to Know If It’s Right for Your Business

A merchant cash advance might be your best business financing option if you’ve been rejected for a loan or aren’t able to get other forms of help. Not as straightforward as a typical bank loan, merchant cash advances can make your head spin if you don’t know much about the topic. Here’s a step-by-step guide to this confusing subject so you can understand exactly what a merchant cash advance is, how it works, when it can help (or hurt), and what you can do to get one fast.

Merchant Cash Advance: How Does It Work?

A merchant cash advance is when the lender gives you money upfront, and, in exchange, you agree to give them a percentage of your future sales, like this:

• You and the lender sign a contract
• You receive the cash advance into your business bank account
• Each day (or other agreed-upon time period), a given percentage of your daily revenues will be taken from your business bank account and deposited into the lender’s account. This is the repayment method for your merchant cash advance.
• This holdback payment continues until you’ve paid back the entire amount you borrowed, plus whatever fees or interest the lender charges you.

A merchant cash advance is not a loan. A loan gives you money, and you pay back the loan plus fees and interest according to a certain arrangement you make with the lender. With a merchant cash advance, you also get the money upfront and have to pay it back at specified intervals, but the same rules don’t apply. Keep reading to learn about the specific differences, but for now just realize you’re playing a totally different ballgame here.

Though this type of borrowing is available for different industries, a merchant cash advance works best for businesses that work primarily with credit or debit card payments, such as restaurants and retail stores.

How Much Can You Get from a Merchant Cash Advance?

How much you can get from a merchant cash advance depends on your business. The lender will look at your average credit card sales and, based on these figures, tell you how much they’re willing to advance you. They’ll usually look at three to six months’ worth of receipts to make this decision. For some businesses, lenders are willing to give anywhere from 50 percent to 250 percent of your average credit card revenues. What’s more, the upper limit on a merchant cash advance is as high as $1,000,000 from some lenders, so you can help your business if you have good sales.

How Long Does It Take to Get a Merchant Cash Advance?

The other good thing about a merchant cash advance is that you can get an answer within a few hours. You’ll see the money within a day or three at most once approval has been given. So, if you need the money fast, this can be an obvious solution.

What Documentation Do You Need to Qualify for a Merchant Cash Advance?

You don’t need much to apply for an MCA. All you'll need are your books and credit card receipts for the last few months. Lenders rarely look at much else for this type of financing.

Who Can Apply for a Merchant Cash Advance?

Merchant cash advances are much easier to process than traditional business loans. They’re not subject to the same regulations, so there’s no need for a personal guarantee, and bad credit is welcome.

Instead of business history, a structured business plan, and sterling credit record, an MCA lender will look most closely at your daily credit card transactions to assess the risk of lending to you. Because you’re essentially selling off a piece of your future business, sales records are what’s important here. The good news is that even if your business was rejected for a loan, you can still apply and get approved for an MCA if you have a steady flow of credit card transactions.

Merchant Cash Advances: How Much Will They Cost You?

How much you’ll pay for a merchant cash advance is calculated by multiplying the loan amount by the risk factor your business poses to the lender. It’s usually on a scale of 1.2 to 1.5 (with 1.5 being the riskiest type of business). So, if you multiply a cash advance of $50,000 by a risk factor of 1.4, you’ll get a $70,000 repayment total (that’s the total amount you’ll have to pay back by the end of your repayment plan including the fees incurred).

Because there’s no guarantee on merchant cash advances, this form of financing tends to come with higher costs than others. Merchant cash advance fees vary from month to month because of the way the payments are structured.

Here’s how this works: Your business takes out a merchant cash advance. Each month, you pay a percentage of the sales you made that month. In slower months, you pay less because your revenue was lower. In better months, you pay more because your revenue was higher.

The amount that you pay fluctuates based on your sales. The percentage never changes — that’s a fixed rate — but the amount you pay will change as your monthly sales revenue changes.

Here’s an example: Your merchant cash advance holdback percentage (aka retrieval rate) is 10 percent. In January, you make $10,000 in sales. You’ll pay $1,000 toward your merchant cash advance. In February, sales dip to a low $6,000. So, in February, you will only pay $600.

You can expect to pay somewhere between 20 percent and 40 percent of the cash advance as a repayment fee. The repayment fee is not the same percentage as the holdback percentage, which can be anywhere from 5 percent to 20 percent

For example, a lender gives you $10,000, arranges a 10 percent holdback, and takes 20 percent as a repayment fee. Each day, you’ll give the merchant 10 percent of your credit card earnings (regardless of what that is each day). The overall repayment that you’ll need to make is $10,000 plus 20 percent, or $2,000, for a total of $12,000. So, you have to pay back $12,000, and that is spread out over the amount of time it takes you by making daily payments of 10 percent of your credit card receipt revenue.

The benefits of this system are:

• If you have a slow month, your repayments won’t cripple you because they are always just the percentage of the sales you made (so you aren’t owing $1,000 every month when you make less than that, for example).
• When business is better, you can pay off your debt faster.

What Payback Terms Can You Get for Your Merchant Cash Advance?

Merchant cash advance repayments depend on how much business you do each day because the payments are usually based on your credit card charges, though this is not always the case. In general, MCAs have a range of repayment terms, spanning from 90 days to as long as 18 months, depending on how much you take out and your lender’s terms.

You can structure your repayments in two ways:

• Percentage-Based Payments
  With this type of repayment plan, you will hand over a slice of your earnings pie from every credit or debit card sale you make.
• Fixed-Rate Payments
  Alternatively, you can agree upon a fixed amount that you pay via a direct withdrawal system that uses the Automated Clearing House. This option is directly connected to your bank account, and ACH payments are usually structured to be made daily or weekly. This process is more like a traditional loan.

Fixed-rate payments are popular with businesses that don’t work frequently with credit cards. The downside to the fixed payments is that they have to be made regardless of your revenue. If you’re having a dry spell, coughing up weekly or even daily payments could set you back or even put you in the hole. For this reason, many business advisors suggest looking into other forms of business financing like short-term loans or lines of credit before exploring a fixed-rate merchant cash advance

Merchant Cash Advance: Is it the Right Choice for You?

Merchant cash advances can be complicated. On the one hand, it could be easy to let payments swallow you up if you aren’t careful. On the other hand, they’re more flexible in terms of repayment. Plus, there’s no collateral necessary because the lender is attached to your bank account. It’s easier to get approved for this type of financing. Weigh your options, know your current business finances to make an informed decision.

SBA Loans

All You Need to Know About SBA Loans

Small Business Administration loans can be a great way for new businesses to get much-needed startup funding. SBA loans are backed by the government, so you actually have Uncle Sam covering your loss if you default on your loan. It’s a lot more reliable and gives new businesses the assurance and financial capital they need to focus on launching a new venture.

Getting an SBA loan isn’t as easy as walking into a bank and applying, however. You have to qualify for these loans. These loans are easier to get approved for than others, however. When banks or other lenders are deciding whether to offer you a loan, they look at several factors to see how likely it is that you’ll be able to repay the loan in full. Assessing the risk of the loan helps them avoid losing massive amounts of money on bad loans. With an SBA loan, however, the government promises to repay up to 85 percent of the loan amount if you can’t pay it back, so banks and other lenders feel a lot safer approving these loans.

If you're considering an SBA loan for your new business, here's everything you need to know about how this type of loan works.

SBA Loan Terms: How Much Can You Get?

Different types of SBA loans allow you to take out different amounts of money. There are three options types of SBA loans:

• SBA 7(a) loans
  These loans are the most popular type of SBA loan. You can use an SBA 7(a) loan for a lot of different purposes, like paying off existing debt, working capital, leasing equipment, or renovating your office space. You can borrow anywhere from $500 to $5 million through an SBA 7(a) loan. There’s also an Express 7(a) SBA loan, but this loan type is capped at $350,000.
• SBA 504 loans
  SBA 504 loans can be used only for buying major fixed assets like real estate or fixed equipment. The maximum you can get through an SBA 504 loan is $5.5 million.
• SBA Microloans
  SBA microloans are small business loans up to $50,000. They can be used for working capital, buying inventory or supplies, or investing in furniture, fixtures, machinery, or equipment for your business.

Know your business needs, financial parameters and industry requirements to get a better understanding of which SBA loan is right for you.

How Long Does SBA Loan Approval Take?

The one downside to SBA loans is that it can take a long time to qualify for the loan and receive the money. It is not uncommon for the full process to take 45 days to three months. Some applications are processed and accepted in just three weeks, however. You should still expect it to take more than a month in most cases. SBA Express loans take less time, but even these can take a few weeks to go through.

The reason for this time frame is that your loan requires double the work to process. Both the lender and the SBA have to review your application, business documents and financial statements. Once you’ve been approved for an SBA loan, it can still take another few weeks before the funds clear in your account. Bottom line: SBA loans take time, but the low rates and reassurance of government backing make them worth the wait.

What Documentation Do You Need to Qualify for an SBA Loan?

Applying for an SBA loan can be a lot of work. You’ll need to prepare a substantial amount of documentation, including information about your current financial situation, your business history and your plans. No matter which lender you go through, you'll have to complete a loan application that asks about your average revenue, what collateral you’ll be using and why you need this loan. You’ll need to prove that you can repay the loan and that you intend to use it according to the SBA loan guidelines, too.

A typical SBA loan application will require the following documents:

• A detailed business plan that shows how you’ll use the loan money
• A business debt schedule to show how you’re going to pay off the debt
• Your personal and business tax returns
• Business documents, including your balance sheet and profit and loss statements
• Recent business bank account statements
• A copy of your driver’s license
• A voided business check

If you’re applying for an SBA 504 loan or most types of SBA 7(a) loans, you’ll also need to make a down payment. For an SBA 504 loan, that’ll be 10 percent of the total loan amount. For an SBA 7(a) loan, it could be between 10 percent and 20 percent of the loan amount.

Who Can Get an SBA Loan?

Lenders look for businesses with a strong credit score, realistic business plan, and a proven ability to repay the loan when considering SBA loan applicants. If you want to qualify for an SBA loan, make sure your business can check off these boxes:

• Has a credit score of 680 or higher
• Has more than $180,000 in annual revenue
• Has been around for at least four years

To apply for an SBA loan, you need to:

• Be defined as a small business — that means fewer than 500 employees, an average net income of less than $5 million, net worth of less than $15 million, and an average yearly revenue of less than $7.5 million
• Operate primarily in and have a physical location in the U.S.
• Have no bankruptcies, defaults or government debts
• Be a for-profit business
• Have invested personal funds into your business
• Not have previously received an SBA loan
• Have been running your business for at least three years
• Be able to prove that you need the loan

How Much Does an SBA Loan Cost?

The cost of your SBA loan will depend on which type of loan you get and how much money you ask for. For example, if you get an SBA 7(a) loan, you can generally expect to pay between 0 percent and 3.5 percent of the total dollar amount, depending on the amount you borrow and the loan’s maturity. This fee is charged by the SBA, and some banks pass it on to the borrower. For an SBA 504 loan, you’ll usually pay around 3 percent of the total amount, but this fee could be absorbed into the total cost of your loan. SBA microloans don’t come with any fees.

The main cost of your SBA loan depends on your interest rate. Interest rates for SBA 7(a) loans can be fixed or variable, but either way, they are limited by the SBA. The SBA has a cap on the interest rates for SBA 7(a) loans, allowing a maximum of 2.25 percent above the base interest rate, or a maximum of 2.75 percent if your loan term is over seven years. This makes average interest rates for SBA 7(a) loans 6 percent to 13 percent.

Interest rate calculations for SBA 504 loans are more complicated, but you can expect to pay between 5 percent and 6 percent in interest. With microloans, the lender is the one who sets the interest rates without any regulations from the SBA. These rates are usually higher, typically between 8 percent and 13 percent.

Watch out for loan origination fees that some banks charge. Check out bank policies and compare fees from different lenders before you sign.

What Are the Payback Terms Like for SBA Loans?

The repayment term for your SBA loan depends on which type of loan you have.

SBA 7(a) loans have monthly repayment requirements for the following loan terms:

• 7 years for working capital loans
• 10 years for equipment loans
• 25 years for commercial real estate loans

SBA 504 loans have terms of 10 or 20 years. SBA microloans vary, up to six years.

SBA loans are giving startups the financial foundation they need to launch new ideas, products and services. Apply for an SBA loan today to enable your business to change the world tomorrow.

Personal Loans For Business

When & When Not to Use Personal Loans for Business Purposes

A personal loan can be one of the best ways to fund a budding business of your own, but it also can have drawbacks. I When is it the right idea to use a personal loan for business instead of applying for a traditional business loan? How are the two different? What do you need in order to apply and get approved for a personal loan? Keep reading to learn about the pros and cons of using personal loans for business purposes and how to get the loan you need.

Personal Loans vs. Business Loans: What's the Difference? Personal and business loans are similar at their core. Here’s how their pros and cons differ:

Business Loans

Pros:

Limited uses: Business loans are designated for specific business purposes only. That means if you have some extra cash left over, you can’t use it to go on vacation to Tahiti. The parameters for business expenses are wide-ranging, but you must stay within them. It can include business lunches with anyone who is a prospective client, any equipment you use for any business purpose, salaries, supplies, business investments, or anything else you need to grow your business.

Bigger payouts: Business loans also come in bigger amounts than personal loans because businesses usually have big expenses.

Cons:

Harder application and approval processes: The downside to business loans is that they can be harder to get than personal loans. Because you’re dealing with bigger numbers, lenders are more particular about who they lend to. Also, there’s a lot more paperwork involved in these applications. Lenders want to see your business plan, your income tax returns, your bank statements, your driver’s license and much more.

Time in business requirements: One of the primary issues lots of people have with business loans is the required time in business needed for approval. Many lenders won’t approve these loans unless you have been in business for at least a year (sometimes three or five years minimum). That requirement rules out a lot of startups and small businesses that are would otherwise be prime candidates for business loans.

Personal Loans

Pros:

Flexible: Personal loans are more flexible in how you can use them and who can get them. For example, you will have the flexibility to use the money as you please, no questions asked. You can spend it on your business and on anything else you want.

Lower APRs: Sometimes, personal loans can come with lower annual percentage rates than business loans but not always. Look at the terms you qualify for and compare them with business loans you could get.

Easier qualifications: This is without a doubt one of the biggest perks of personal loans. Only about 25 percent of businesses are approved for a business loan from a bank. You might have a hard time obtaining a business loan if:

• You haven’t started your business yet
• You want a small amount, less than $25,000, without high interest rates.
• You don’t have any collateral.

Personal loans, however, can be easier to get. You don’t need to have any business history (because it’s not a business loan); you can have lower a credit score; and you can ask for a smaller amount without getting hit with high rates. Moreover, you don’t need collateral to make these loans happen.

Cons:

Fees and taxes may apply: On the other hand, you might have to pay a prepayment penalty if you finish paying off your loan earlier than the repayment date. Often you won’t get a tax credit for your interest payments on a personal loan like you would with a business loan.

Personal loans make you the guarantor: Personal loans put your own personal assets in danger because if you're unable to pay back the loan, your assets will be seized as payment.

All that said, using personal loans for business purposes can be a big help and can work out well for most business owners. Now that you’ve decided you want to consider personal loans for business purposes, here are more details you need to know before applying.

How Much Can You Get from a Personal Loan?

Personal loans are usually given in smaller amounts, generally from around $1,000 up to $50,000. Some lenders offer up to $100,000, but you’ll need to have some impressive qualifications to get approved for that amount. The typical personal loan amount is $50,000.

How Long Does It Take to Get a Personal Loan?

When working with online lenders, the process of getting a personal loan can be fast. It can take up to a week for the entire process to go through, but sometimes you can receive the funds in as little as one day. The loan processing time will depend on the papers you provide, the lender you are working with and your creditworthiness.

What Documentation Do You Need to Qualify for a Personal Loan?

Personal loans are easier to qualify for than business loans. Whereas business loans applications require an extensive amount of documentation, personal loan applications only ask for a few things. Requirements vary depending on the lender, but you can expect most to ask for:

• Proof of ID, such as a driver’s license or passport.
• Proof of residence
• A few bank statements
• Pay stubs

That’s it. Like we said, a lot simpler than a business loan.

Who Can Apply for a Personal Loan?

Personal loans are designed for the average person. That means that anyone can apply for this type of loan. You’ll stand a much better chance of getting approved for the loan if you have good credit and a long credit history, but there are several lenders that cater to people with no credit or low credit scores. To get the best rates, you’ll want a credit score of 680 or better.

How Much Will It Cost You?

Personal loan APRs can range from 4.08 percent to 36 percent, depending on your creditworthiness, the amount you borrow and the lender. In general, though, if you have good credit, your APR will average in the 10 percent range. The longer you stretch out your repayment plan, the more you’ll end up paying in interest over time. So, if you can afford to, make your monthly payments larger to avoid long repayment terms.

What Payback Terms Can You Get?

Personal loans offer some of the most flexible repayment terms of any loan type. The average small personal loan will require repayment in one to five years, but there’s a lot more flexibility built into this financing option. In some cases, you can get a personal loan repayment plan that spans 10 years.

Personal Loans for Businesses of Every Shape & Size

Ready to launch your business but need some capital? Getting a personal loan for business expenses might be the best choice for you. Compare your business financing and loan options, select reliable lenders, and equip your business to be successful.

Paycheck Protection Program (PPP) Loans

What You Need to Know About PPP Loans for Small Businesses

Paycheck Protection Program loans, or PPP loans, are a special type of SBA loan issued specifically to keep small business workforces employed as the world faces the coronavirus, or COVID-19, crisis. A large portion of PPP loans can be forgiven if terms are followed correctly, which has incentivized many small businesses in need to apply and retain employees.

In order for the loan to be forgiven, at least 75% of the loan amount must be used towards payroll costs of full-time employees for an 8-week period after the loan is issued. Additionally, businesses must maintain the number of employees on payroll to qualify for forgiveness. Like other SBA loans, you apply and receive a government-backed PPP loan through a traditional lender like your bank or credit union and when the time comes, you will submit documents and information to your lender to receive loan forgiveness.

PPP loans can be used for other costs such as mortgage interest, rent and utilities under certain conditions, however if you want the loan forgiven, 75% of the loan amount must go towards payroll while 25% of the loan amount can go towards the other costs listed. Keep in mind, costs for independent contractors do not count as payroll costs.

For each round of PPP loans, the SBA has a set amount of total funds it can lend out and once that’s happened, no more loans will be reissued unless a new round of funding is announced. What does this mean for you? Act fast. The sooner you apply, the better your chances are of getting the loan you need.

How Much Can You Get from a PPP Loan?

The maximum loan amount you can apply for and be approved for is based on your existing company numbers. Loan amounts are calculated based on your average monthly payroll costs in 2019. You can apply for 2.5x your average monthly payroll amount up to a maximum of $10 million so loan amounts will vary for every business. According to the SBA, you can only receive one PPP loan even though there may be multiple rounds of PPP lending so consider applying for the maximum amount when you apply as you’ve only got one shot.

How Long Does It Take to Get a PPP Loan?

How quickly can you get a PPP loan? The short answer is: it varies. PPP loan applicants have been approved anywhere from a few hours to a few weeks after applying, according to USA Today. Once approved, borrowers are supposed to receive funds within 10 days. Inquire with your lender for details.

What Documentation Do You Need to Qualify for PPP Loans?

To apply for a PPP loan, you’ll need to submit a detailed application with information in regards to your payroll costs, mortgage or rent payments, utility payments, among other financial documents.

The real document work happens when you apply for loan forgiveness — that is after the loan has already been dispersed and used. You’ll need to provide documents such as:

• Bank account statements
• Payroll reports
• Tax forms
• Payment receipts
• Documentation showing that the number of full-time employees did not change during a defined period of time
• Business mortgage interest payment (if applicable)
• Business rent or lease payments
• Business utility payments

For a full list of documents required to submit for PPP loan forgiveness, review page 10 of the PPP loan forgiveness application. Businesses are required to maintain additional records that they do not have to submit unless specifically requested, also detailed in the forgiveness application.

Good recordkeeping is critical for any business’s success, but these circumstances make diligent accounting and recordkeeping more important than ever.

Who Can Get a PPP Loan?

If any of the following apply to you, then you will be automatically disqualified from getting a PPP loan, according to the website Workest:

• You have previously defaulted on an SBA loan
• You have a felony on your record from the last 5 years
• You are currently incarcerated, on parole or probation or “are subject to arraignment or indictment for any criminal charges.”
• A federal agency has suspended you from participating

PPP loans do not require a traditional credit check, according to Nav. That said, your lender may still pull your credit to confirm your identity, Womply reports. Some small business owners who applied for PPP loans have reported that their lenders did do a “hard pull” on their credit. Hard inquiries can cause a credit score to drop temporarily.

“Since the Paycheck Protection Program is intended to get emergency business funding into the hands of as many of America’s struggling business owners as quickly as possible, the SBA has apparently temporarily suspended the requirement of a credit check for this type of loan,” Womply reports.

This means those with less-than-stellar credit may qualify for a PPP loan with favorable terms and rates (and may even have the loan forgiven); it’s an opportunity that doesn’t often present itself to those with subpar credit so it may be worth pursuing.

How Much Does a PPP Loan Cost?

The reason PPP loans are so appealing is that 100% of the loan can be forgiven if you meet the criteria so if you approach the process correctly the cost could be absolutely nothing. That said, even if you don’t end up qualifying for loan forgiveness, the terms are quite favorable. Eligible small businesses can borrow up to the maximum amount they qualify for (2.5x its average monthly payroll up to $10 million) at a fixed interest rate of 1% over a two-year term. If funds are not used according to the program terms, which you will have to prove, then your loan will have to be repaid with interest.

What Are the Payback Terms Like for a PPP Loan?

As stated previously, the big draw here is that your loan can be entirely forgiven if you qualify, meaning you’d have no payback terms of any kind. That said, not every business will qualify for loan forgiveness. In that case, they have two years to repay the loan with a fixed interest rate of 1%, which is about as favorable of terms one can find in the current business lending landscape.