What are the business funding options? There are a ton. For example, a startup may choose to seek a business loan, find an angel investor, pitch to a venture capital investor, or try crowdfunding. An established business might look to traditional loans or credit cards. But, what if these options will not work? What if you do not qualify? What if you can’t wait for the cash?
Find the Right Funding Options for Your Business Right Now
There are options for funding that will work for most businesses right where they are. Some require collateral, some do not. Some require good credit, while others look at alternative factors to determine the business’s ability to repay. Here are 9 funding options to help you get the money you need for your business right now.
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Funding Options With No Collateral
If you are looking for fast, flexible funding options that do not require collateral, you need one of these.
9. Credit Line Hybrid
The credit line hybrid is unsecured business financing. It is available to pretty much anyone for any type of business expense. You can use it for real estate, equipment, working capital, and even startup expenses. There is no down payment, and you do not have to provide income documentation. It is completely no-doc financing.
You do need to have personal credit of 680 or above. Also, there cannot be any late payments in the past 24 months, there can be no open collections or bankruptcies, and there should be less than 6 inquiries in the past 6 months on your consumer credit report. In addition, you need at least 2 open credit cards with a $2,000 limit or higher and 2 years of good payment history on those cards.
If you do not meet these requirements, you can still get this funding. You have the option to take on a credit partner that does meet them. The payments will still be reported on the business’s credit report. That means you will build business credit whether you get the financing on your own or with a credit partner.
You can get up to $150,000, and often interest rates are as low as 0% for the first 6 to 18 months.
8. Business Line of Credit
A traditional business line of credit is like a cross between a traditional loan and a business credit card. You go through a traditional bank and apply just like you would a loan. It may be collateral based or not, depending on your lender’s requirements. You may also use a guarantor to help reduce rates and get better terms if needed.
The difference between a traditional loan and a traditional business line of credit is that the line of credit is revolving credit rather than a term loan. Like a credit card, you only pay back what you use. Also, lines of credit typically have lower interest rates than business credit cards. The trade off is, there are no rewards like cash back or air miles.
At Credit Suite, our funding partners offer an unsecured line of credit that has a minimum FICO score requirements of 600. You also must show business tax returns with net profits over $20,000 if you have been in business between 6 months and a year. If you have been in business for over a year, you need to show $10,000 in monthly revenue. These requirements are much easier to meet than those typically set forth by lenders.
Terms are 6 to 18 months and interest rates range from 12% to 25%. You can get up to $250,000.
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Funding Options for Bad Credit
If your credit isn’t exactly good, you still have options. The following funding options are available with a minimum credit score of 500.
7. Business Revenue Lending
A business that has consistent revenue of $120,000 per year or more may qualify for this type of funding. Lenders verify revenue using bank statements. There can be no recent bankruptcies, but the minimum credit score to qualify is 500.
The business must also be in operation for a year or more, and it must do over 5 small transactions each month to get business revenue financing.
6. Merchant Cash Advance
A business that accepts credit card payments and has at least a 500 FICO can get up to $750,000 in a merchant cash advance. Credit rates are usually lower compared to traditional financing as well.
There must be $100,000 or more per year in credit card sales, and typical approval equals one month’s credit card financing volume.
5. Accounts Receivable Financing
Outstanding account receivables can also be a source of funding for your business. Get as much as 80% of receivables advanced in less than 24 hours. You get the rest of the accounts receivable amount once you collect full payment for the invoice. Closing takes 2 weeks or less.
Receivables should be with the government or another business. Getting financing with receivables from individuals is not as easy.
4. Retirement Account Financing (Rollover for Business Startup, or ROBS)
This Credit Suite program offers a flexible and powerful way for a new or existing business or franchise to leverage assets that are in a 401(k) plan or IRA.
It doesn’t take long either. In as little as 3 weeks you can actually invest a portion of these funds into your own business. Then, you not only have more control over the performance of your retirement plan assets, but you also have the working capital you need.
According to the IRS, a ROBS qualified plan is a separate entity. It has its own set of requirements. The plan technically owns the business, not the individual. That means some filing exceptions for individuals might not apply to the plan. That said, always check with a tax expert when it comes to tax matters.
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Do You Qualify for a ROBS?
You do not have to submit financials or have good credit to get approval. In fact, all the lender will ask for is a copy of your two most recent 401(k) statements.
If the plan has a value of more than $35,000, you can get approval. This is true even if you have really bad personal credit. You can get however much of your 401(k) is “rollable.” Sometimes, you can secure a low-interest credit line or loan for 100% of your current 401(k) value.
The plan you use cannot be from a business where you currently work. It will have to be from previous employment. Also, you can’t still be contributing to it.
The cost is 5.25% prime + 2, and the term is 5 years. There is a $1995 lender fee. This includes 5 years worth of management and consulting.
Funding Options for Equipment or Real Estate
If your credit is lacking but you do have equipment or real estate to use as collateral, you may find these options to work well.
3. Equipment Financing
You can secure this type of financing by using existing equipment or new equipment you want to purchase as collateral. Funding is available up to $10 million.
Terms range from 5 to 60 months, and you need a minimum 550 FICO.
The equipment must be new, and most types of equipment are acceptable, including software.
You’ll need to provide details on the equipment to be financed and, depending on the loan amount and certain risk factors, you may need to show 2 years corporate and personal tax returns.
2. Commercial Real Estate Financing
As you might expect, this is a loan that is secured by commercial real estate. You can get up to $10 million with terms from 6 to 60 months and interest rates ranging from 6% to 22%. The minimum credit requirement is 500, so this can be a good option if you don’t have great credit as well.
Funding Options with Good Credit and Collateral
SBA loans are an option if you are close to meeting the requirements for a traditional loan but not quite there. They offer the highest dollar amounts and typically the best terms.
1. SBA Enterprise Loans
You need to have collateral worth up to at least 50% of the loan amount, but you only need a FICO of 620. There also can be no bankruptcies in the past 4 years. Only for profit companies qualify, and they must have positive trends in sales growth. Generally amounts are available of up to $12 million with terms up to 25 years.
Which Funding Options Are Best For You?
If you only qualify for one type, this is a no brainer. But, what if more than one option will work? You need to weigh the cost vs. the benefit. For example, is not having to use collateral worth a higher interest rate? Can you get the amount that you need? Will one option get cash in your hands faster than the other? Do you need the money faster, or can you wait a bit to take advantage of better terms or rates?
When it comes to any of these funding options, it is best to work with a business credit expert. This is someone that can listen, take what you need, apply it to what is available to you, and help you choose the best option that you can get.
Not only that, but they can help you evaluate the fundability of your business and make changes if necessary to ensure you can get the best funding options available far into the future.
Start the process now with a free consultation.
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