8 Business Loan Options Small Business Owners Need to Know


0:01 Intro
Are you considering getting some financing for your business? If so this video should
make it a lot easier. If you’ve started the process, you realize that business funding
is a lot more complicated than consumer lending, say if you’ve gotten a mortgage or an auto
loan before. So we’re going to take some time in this video to break down all the different
products in the market that you might find as a business owner. 0:17
My name is Meredith Wood, editor-in-chief at Fundera and I spend a lot of time walking
through business loans with business owners to help them understand the differences of
what it can mean for their business, so I’m going to do the same for you today. And if
you have any questions about anything in this video feel free to leave comments as you’re
watching this. We’re always happy to answer them and help clarify anything that we talked
about during the video. So to jump right in, the thing to know about the business lending
market is that it’s not what it was 10 years ago. There’s now a ton of products that you
can find online through online or alternative lenders. So we’re going to talk about both
those today and what it can mean for your business. 1:01 Bank Loans
So the first product I want to talk about is the one you’re probably most familiar with,
which is the bank loan or bank line of credit. They are by far the most affordable product
on the market for small businesses. Now that being said, bank loans and lines of credit
can be very hard to qualify for in terms of eligibility. They can also take quite a bit
of time. If you’re considering getting funding for your business and you need it in the next
couple weeks a bank loan or line of credit might not be your best option, but if you
have the time it’s definitely something for you to consider. So what are the requirements
for a bank loan? You’re going to want to have a minimum credit score of 700, a minimum
revenue requirement of $200,000 annually, and a time of business of over two years. So what do bank loans look like? The term
is usually five to 10 years in range, the interest rates are less than 10%, and it takes
about one month to get this loan. So the process of applying for a bank loan
is certainly not an easy one. There’s going to be a lot of documents required. Every bank
is going to ask for something different. But if you’re approaching the process and you
want to be prepared, here’s what you should expect to have on hand. What do you need to apply for a bank loan?
Your resume for anyone who owns more than 20% of the business, a business plan, business
tax returns, personal tax returns, your financial statements, your bank statements, an explanation
of what you will use the loan for, a debt schedule, a statement of collateral if you’re
going to use some, and you might be asked for some legal documents like articles of
incorporation, licenses, or more. Bank loans and lines of credit are great products for
business owners and while they can be tough to qualify for and can take some time, if
you’re eligible for one it’s a product you should absolutely consider. 2:48 SBA Loans
The next product I want to talk about is an SBA loan. SBA loans are long-term loans that
are partially guaranteed by the government. SBA loans are similar to a bank loan in that
they are longer-term loans that have really great interest rates that start in the single-digit
range, and they’re something that can be really affordable for business owners who
are both eligible and again have the time to apply for this type of funding. So what
are the eligibility requirements for SBA loans? The minimum credit score is about a 640 plus,
the minimum annual revenue is $150,000 dollars, and you’ll about a time in business over
two years. So what do SBA loans look like? Well the loan amount is usually $5,000 to
$5 million dollars in range, the term is about 10 years, and we’re talking about SBA 7(a)
loans right here. The interest rate, right now in Winter of 2019, is 8.25% and up. And
you can get these loans in as fast as three weeks. If you’re watching this at a later
date, those interest rates might be different because these rates are based on the market
as we all know fluctuates. So that’s something you want to double check on the SBA site before
you apply. So what do you need to apply for an SBA loan?
A driver’s license, a voided business check, your bank statements, a balance sheet, your
profit and loss statements, your business tax returns, personal tax returns, a business
plan, a debt schedule, and a personal financial statement. 4:16 Term Loans
So the next product we want to talk about is a long-term loan offered through online
lenders. These are loans that again should feel very familiar because they are traditional
term loans that you already know because of a mortgage or auto loan, but they’re offered
through these alternative lenders which make the whole process quite easier and in some
cases the eligibility requirements can be a bit looser. So what do you need to qualify
for a long term loan? You’ll need a credit score of 650, minimum annual revenue of $120,000,
and a time in business of over three years. What do long-term loans look like? The term
is 1-5 years. The loan amount is usually $10,000 to $500,000 dollars. The interest rates are
between 7% and 30%, and you can actually qualify for this loan in as little as two days. What
do you need to apply for a long-term loan? A driver’s license, a voided business check,
bank statements, a balance sheet, your profit and loss statements, your business tax returns,
and your personal tax returns. 5:21 Line of Credit
The next product I want to talk about is a short-term line of credit. These are somewhat
similar to short-term loans in the sense that you can get them just as quickly and with
similar eligibility requirements. When you need money very, very quickly, it will definitely
put you in a position where you’re not getting the most affordable financing for your business.
But if you have a line of credit for your business you have those emergency funds to
go to if there is something last minute that you need. So, if you’re looking for traditional
term loans right now, know that it’s actually a smart thing to possibly get a line of credit
alongside a term loan for your business. So what are the requirements for a line of credit?
They can definitely vary greatly by lender but typically you’ll want to have a minimum
credit score of 550, a minimum annual revenue of $100,000, and a time in business of over
6 months. What do these lines of credit look like? The loan amount ranges from $500 to
$1 million dollars, the term can be 6 months to two years, the interest rate can be about
7 to 25 percent, and you can actually qualify for lines of credit on the same day you apply. 6:30 Interest Rate
The one thing I want to talk about the interest rates here is you only pay interest on what
you use for your line of credit. So that’s something to consider as you’re thinking about
what this could cost your business. What do you need to apply for a line of credit? Again
this varies greatly by lender, but typically you’ll need a driver’s license, a voided
business check, bank statements, a balance sheet, your profit and loss statements, a
business tax returns, and a personal tax return. Now there are some line of credit lenders
that will ask for much less than this so don’t be shocked if you go apply for a line of credit
and you don’t see all these documents on there. But we’d rather be more prepared
than less prepared. 7:05 Invoice Financing
Now let’s talk about invoice financing. Invoice financing is something that has been around
for quite some time, but I would say in the past handful of years it’s sort of gotten
a makeover. You have both invoice factoring and invoice financing, and the difference
there is that with factoring these people are buying your actual outstanding invoices
from you and then they’re in charge of pursuing any outstanding debt on that. With invoice
financing, the invoice more so acts as collateral for any financing you receive. What do you
need to qualify for invoice financing? A minimum credit score of 500, there’s no minimum
revenue requirement, and a time in business of three plus months. You’ll see the eligibility
requirements are looser here, because it’s really more about your clients and their ability
to pay back than your own. What does invoice financing look like as a
loan product? Well the maximum loan amount is usually up to 100% of an invoice’s value,
the term is until the customer pays the invoice, and the interest rates are really a flat fee
upfront, let’s say 3%, and then a specified percent interest per week the invoice is outstanding.
So if it’s one percent, that means you pay one percent every week the invoice is outstanding
until it’s paid back. And you can qualify for invoice financing in as little as one
day. What do you need to apply for invoice financing?
A driver’s license, voided business check, bank statements, outstanding invoices, your
accounts receivable aging, and your accounts payable aging. There are some lenders who
will require less than this if you are able to hook up your accounting software to their
system in order for them to find this information automatically 8:44 Equipment Financing
All right, we’re getting close to the end here, I promise. I have three products left
and they’re definitely ones you’re going to want to learn about so stick with me!
So the next one I want to talk about is equipment financing. As you’ll see we’re sort of in
this realm now where we’re talking about things that can specifically collateralize funding
for your business. So if you’re looking for funding right now because you’re trying to
buy a piece of equipment, say, a new oven for your restaurant, this is a type of funding
for you to consider because the equipment you’re looking to purchase will actually collateralize
the loan, which, as you can imagine, makes it a bit easier to qualify for and helps with
the pricing. What do you need to be eligible for equipment financing? A minimum credit
score of 630, a minimum annual revenue of $130,000, and a time in business of at least
two years. What does equipment financing look like? The
maximum loan amount is up to 100% of the equipment’s value, the term is the expected life of the
equipment, interest rates range from three to 30 percent, and you can actually qualify
for equipment financing in as little as two days. You can expect the maximum loan amount to
be up to 100% of the equipment value. The term will be the expected life of the equipment,
interest rates are usually 3 to 30%, and you can get this in as fast as two days. What
do you need to apply for equipment financing? A driver’s license, a voided business check,
your bank statements, your business tax returns, and the quote for the equipment you’re financing. 9:59 Merchant Cash Advance
I want to talk to you about a merchant cash advance. Tread carefully here! These products
are the most expensive products on the market, and if you are currently looking at it I want
to make sure I emphasize that you want to check all your other options before this is
something you consider. So with a merchant cash advance, lenders actually purchase a
portion of your daily credit card sales and that’s how the loan is paid back and the good
thing about this is that when cash flow is great, you’ll pay back more when and cash
flow is slow you’ll pay back less, but obviously you’re essentially giving over a portion of
your cash flow every day which can be really tough for businesses. What do you need to
qualify for a merchant cash advance? A minimum credit score of 550, a minimum annual revenue
of $10,000, and a time in business of at least two years. So what does a merchant cash advance look
like? The maximum cash advance amount is from $2,500 dollars to $1 million dollars. The
term is paid daily via your merchant account. And the factor rate starts at 1.14 but can
get much more expensive. And you can qualify for merchant cash advances in as little as
two days. And you can qualify for merchant cash advances in as little as two days. What do you need to apply for a merchant cash
advance? A driver’s license, a voided business check, bank statements, business tax returns,
credit card processing statements, and I want to be clear; making sure you’ve also gotten
offers from everywhere else before you apply for this product. Like I said this product
can get very very expensive so you want to check the APR’s on this so you understand
how much it is going to cost your business. 11:37 Business Credit Card
The last thing I want to talk to you about is a business credit card and you’re probably
like, what, why are we talking about business credit cards when we’re talking about business
loans? And it’s because a lot of new business owners especially don’t realize they can actually
use a credit card to help finance your business. You spend so much as a business owner and
if you think about the cashback offer s that some card providers offer, or the travel rewards
you can get, it’s essentially money you’re leaving on the table if you aren’t choosing
a great credit card. Of course, using a credit card requires a lot of discipline and that’s
something that you absolutely need to adopt as a business owner because credit, both personal
and business is going to be instrumental for your business going forward from getting financing
to a trade line and all sorts of other things. What are the requirements for a business credit
card? Minimum credit score starts at 580 and the higher your credit score goes the more
options and better options you’ll have. There’s no minimum revenue requirement,
no time in business requirement. What does a business credit card look like? Well the
credit limit will depend on your home credit worthiness, the term is month-to-month payments
which you probably know from your own consumer credit cards, and the interest rates will
vary by the card but the nice thing is you can be instantly approved for business credit
cards. What do you need to apply for a business credit card? Your business name, your tax
ID number, whether that be your social security number or your EIN depending on the type of
business you have, you’ll need to give them your business entity information, your estimated
monthly spend, your monthly revenue, and other business information depending on the provider.
Applying for a business credit card should be a pretty easy process but of course, if
you have any questions, providers are great about providing a lot of information up front
so you know what you’re getting yourself into. 13:17 Outro
Whoa, that was a long list but this is what I’m telling you the business loans market
is so much more complicated and diverse than we find on the consumer side. You’ve done
yourself an awesome thing here by watching this video and being introduced to everything
that’s out there because what’s most important is that you get into the right loan for your
business, and right can mean a lot of different things: it can be most affordable, it can
be quickest, it can be fastest payback period, it could be the lowest monthly payments. The
right thing for your business is ultimately up to you. So if you have any questions, visit
Fundera.com right below or you can leave questions or comments, and we’re happy to answer them
for you. Just know we’re here to help you through this process, but hopefully, it appears
a little bit less intimidating after watching this. Thanks for sticking with me on this,
I hope it was helpful and more to come to future.

, , , , , , , , , , , , ,

Post navigation

4 thoughts on “8 Business Loan Options Small Business Owners Need to Know

  1. Lutherangrants org helped me financially for my business funding .I just received a grant of $30,000 all thanks to them .

  2. Great video! Very informative and helpful for all. Keep up the good work.

    Small Business Loans At Best Interest Rates | Finfree Enterprises

    https://loansparadise.com/mortgage-loans.php

  3. It is very helpful and easy,thank you so much for your fast work on me

    i really appreciate you so much and hope to hear from you next time.

  4. Lutherangrants org saved me from bad credit .They got me a business grant of $50,000 credited to my bank account .

Leave a Reply

Your email address will not be published. Required fields are marked *