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How to Get a Small Business Loan.
What is it?
Non-profit provider of start-up small business loans as well as loans to established small businesses of up to $50,000.
How popular is it?
Accion lends worldwide and is divided into 5 regions in the US. In the East region covering 34 states, Accion has lent over $132 million and issued over 20,000 loans. Contact your region for more information:
Accion Texas (now called LiftFund)
Who will qualify for a loan?
Startup and established business owners with credit scores above 525 (check you credit score here for free). Other qualification criteria depend on the type of loan you’re applying for.
Who are they right for?
Startups and established businesses that need less than $50,000 and are unable to obtain loans from other sources.
Weapons sales, real estate development, money lending or financing, multi-level marketing programs, environmental polluting activities, or adult businesses.
Personal Guarantee required?
Yes. In addition, Sprout loans (described below) require proof of an external source of income, and the Emerging/Transition loans require a cosigner who is not involved in the business.
Some borrowers may have to put up collateral. It depends on the overall strength of the application.
Pre-approval after completing 10 minute online application, and funding is available within 2-3 weeks after submitting all documents.
Where do they lend?
All 50 states in the US and more than 30 countries.
How much do they lend?
Between $500 and $30,000 for startups and between $500 and $50,000 for established businesses.
How much can I qualify for?
You should have at least 2 times more cash left over each month than your estimated monthly loan payments (e.g. if your estimated monthly payment is $400, then you should have $800 available in cash each month).
For how long?
6 months to 5 years.
Cost/Interest rate of loan?
Annual Percentage Interest Rate ranges from 18 % to 35 % (see cost section for more details).
How do payments work?
You can initiate payment each month, or you can choose for Accion to automatically deduct payment monthly from your business bank account.
Business information, such as industry and number of employees; recent pay stubs and business plan (for Sprout loans). Additional documents, like business tax returns, may be required after pre-approval. For complete listing, click here.
Accion lends a helping hand to startups as well as existing businesses that have been turned away by banks and other lenders. The minimum credit score is just 525, they have no hard revenue requirements, and even brand new startups can qualify for a loan if the owners have sufficient cash left over every month after business expenses to make monthly payments.
Accion loans are relatively affordable, with APR’s ranging from 18 % to 35 %. This is lower than what alternative lenders such as OnDeck, Kabbage, and CAN Capital charge. While it is higher than what banks and SBA lenders charge. Accion lends to startups that would be turned away by traditional and alternative lenders.
As a microlender, Accion only lends small loan amounts: between $500 to $30,000 for startups and $500 to $50,000 for established businesses. Although these amounts are tiny when compared to other lenders, it may be just the boost your business needs to get going and to build credit.
Startups interested in applying for a loan should also keep in mind that they may need an external source of income other than the business itself or may need to provide a cosigner.
Personal Credit Score: At least 525. (Check your credit score here for free.)People that are new to the country or have no credit score for some other reason may qualify for a small $500 to $2,500 “Promesa” loan intended to help you build your credit.
Years in Business: Depends on the loan type. Brand new home-based and incubator startups may qualify for a “Sprout” loan. To qualify for a larger loan, businesses should have at least 6 months sales history.
Revenues: Cash flow at least 2 times higher than monthly loan payments. For example, let’s say you want to take out a $10,000 Accion loan, and your estimated monthly loan payments are $1,000. After you pay all your monthly expenses and bills, you should have about $2,000 – $2,500 left over in order to qualify for an Accion loan. If you’re a startup, this cash flow can and most likely would come from a source other than the business (e.g. another job).
Industry Exclusions: Weapons sales, real estate development, money lending or financing, multi-level marketing programs, illegal or polluting activities, or adult businesses.
- Past due amounts on liens or other loans should total less than $3000 for most loans and less than $500 for Sprout loans (flexible for loans under $2,500).
- No late payments on your rent or mortgage in last 12 months (flexible for loans under $2,500).
- No foreclosures in last 24 months, and no bankruptcies in the last 12 months (flexible for loans under $2,500).
- Own fewer than 4 mortgaged properties.
- If you own a home, your mortgage should be fixed rate. If variable, it should be adjusted outside the term of the loan, preferably 2 years or more after the date you apply for the loan.
- Additional qualifications for startups: must have external source of income (e.g. a job or spousal income) for Sprout loans and must have a cosigner for Emerging/Transition loans.
Note: Accion loan requirements vary depending on which loan you’re applying for. View more details here (click on “Loan Products and Services”).
Collateral Required? It depends. Accion evaluates applications on a case by case basis. Depending on the overall strength of your application (e.g. credit score, business revenues, age of business, etc.), you may be required to put up collateral.
Does the loan require a personal guarantee – From who? Yes. Accion requires a personal guarantee. This means that your personal credit score can be affected if you don’t make timely payments, and Accion can come after your personal assets (e.g. car and house) if you don’t pay back the loan. For the Emerging and Transition loans (and in some instances, for Sprout loans), Accion also requires a cosigner who is not involved in the business and has a steady source of income. Your cosigner is also personally responsible for the loan.
- Closing fees of 3 % to 5 % of the loan amount are charged on all loans (the average closing fee is 5 %).
- One-time $135 processing fee applies to all closed loans.
Servicing Fees: None.
Are interest rates variable? No. Interest rates are fixed and range from 8.99 % to 15.99 %, with 12.99 % being the average interest rate. The interest range is the same regardless of whether you apply for a startup loan or an ordinary business loan.
How Loan Costs Work With Accion
There are 3 fees associated with a loan from Accion:
- Closing fees of 3 % to 5 % of the loan.
- One-time $135 processing fee.
- Annual Interest Rate Charged by Accion – Accion charges interest of 8.99 % to 15.99 % on its loans. In general, interest rates are lower for larger loan amounts borrowed for shorter time periods (2 years is Accion’s average loan term).
Using the calculator below, we converted the cost of an Accion loan into an Annual Percentage Rate (APR) to make it easy to compare Accion loans with other loan products. The APR takes fees and interest into account to give you the total cost of the loan over one year, expressed as a percentage.
Here is what the effective APR and monthly payments would be for different Accion loan amounts. We assume closing costs of 5 %, an interest rate of 12.99 %, and a 2 year term in all cases.
- $1,000 = 34.64 % APR ($48/month)
- $2,500 = 24.37 % APR ($119/month)
- $5,000 = 21.24 % APR ($238/month)
- $10,000 = 19.72 % APR ($475/month)
- $25,000 = 18.82 % APR ($1188/month)
- $50,000 = 18.53 % APR ($2377/month)
If you take a midpoint interest rate, the APR for Accion loans fluctuates from 18 % to 35 %. Everything else being equal, a larger amount results in a lower annual interest rate. In addition, if you borrow for less time, you will save money. For example, if I borrow $5,000 from Accion and take 5 years to pay it off, I would have to pay back around $6,824. If I pay back that same loan within 1 year, I would only have to pay back around $5,359.
One thing to keep in mind when evaluating these rates is that Accion issues microloans to businesses that wouldn’t qualify with other lenders, both alternative and traditional. Given that they are open to taking a risk on new businesses, Accion may be worth considering.
It takes about 10 minutes to fill out Accion’s online pre-approval questionnaire, and you will immediately learn if you pre-qualify for a loan. If you pre-qualify, an Accion loan specialist will contact you. He or she will direct you to a more detailed application and ensure that you have all the documents you need, such as tax returns and financial statements. After you submit your application, the loan specialist may ask you for additional supplemental documents, such as proof of independent income and investor information (if you have equity investors). Once you’ve submitted all the required documents, the loan specialist will send your application to Accion’s underwriting committee. Once they provide approval, you may sign loan documents online or at your local Accion office, and funds will be deposited into your account.
The entire process from submitting the online application to receiving the funds takes about 2-3 weeks. While this is significantly longer than alternative lenders such as Kabbage and PayPal Working Capital, it is significantly shorter than banks normally take. It may also be worth the additional wait time if you’ve been turned away for a loan from other lenders.
Note that this is an overview of Accion’s application process, but the timeline can vary based on the region you’re applying in.
What documents need to be provided? Business name and address, industry, number of employees, credit score, date of birth, social security number, credit limit on personal credit card, purpose of loan proceeds, 2 recent pay stubs (for Sprout loans), business plan with 12-month cash flow projection (for Sprout loans). Additional documents, such as business tax returns or bank statements, may be required after pre-approval.
View more details on what paperwork you need to submit here.
Do they need online access to any systems – Quickbooks, PayPal, bank accounts? No.
Is there a credit report pull? If so at what point in the process? Yes. You authorize Accion to pull a credit report when you submit your online application. It’s a “hard” credit pull, so it can temporarily hurt your credit score.
Does Accion report to the personal and business credit bureaus? Accion only reports to the personal credit reporting agencies. Your loan will show up on your personal credit report as an Accion business loan.
What credit reporting service do they use? Equifax.
Loan Sizes and Terms
What is the minimum / maximum length of loan? The minimum loan term is 6 months, and the maximum loan term is 5 years. 2 years is a typical term for Accion loans.
What is the minimum / maximum amount of the loan?
- Sprout Loans: Home-based and incubator startups with less than 6 months sales history can borrow between $1000 and $5,000.
- Emerging Business Loans: Businesses with at least 6 months sales history but that are break even (not profitable yet) can borrow between $500 and $30,000.
- Transition Business Loans: Businesses that want to acquire another business and have at least 6 months sales history can borrow between $500 to $30,000.
- Established Business Loans: Established businesses can borrow between $500 and $50,000.
- Promesa Loans: Startup entrepreneurs with little or no credit history may borrow between $500 and $2500.
Payment Methods & Schedule
- Schedule of Payments: Monthly.
- Payment Initiation: You can initiate payment online or by sending a check to Accion monthly. Alternatively, you can choose to have Accion deduct a fixed monthly payment from your business bank account.
- Method of Payment: ACH.
- Penalties for Missing Payments: 10 % of the due amount
- What Happens on Pre-Payment? There is no pre-payment penalty if you want to pay off the loan early. You save money by borrowing for less time.
Accion has phone and email support for borrowers and applicants. There is an FAQ page as well. You should reach out to your local Accion office if you have questions.
US-based or International? Both. Accion has US offices in New York City, Chicago, San Diego, and Albuquerque. Accion’s lending network also provides loans in over 30 countries.
Support Hours: Varies. Check with your local office.
Other Lending Products
Accion’s primary focus is small business loans. As a non-profit organization, they also provide financial education and resources such as business workshops and training. Accion provides loans to certain types of businesses, such as daycare businesses, that are excluded by other lenders.
Need some money for your business? Click here to get our FREE Guide:
How to Get a Small Business Loan.
The Bottom Line
Accion provides loans to startups and established businesses that may not qualify with other lenders. With a credit score of at least 525 and sufficient cash flow to meet monthly payments, most startup owners and existing businesses should be able to qualify for an Accion loan.
Their loans are relatively affordable, with APRs ranging from 18 % to 35 %. This is cheaper than alternative lenders, such as OnDeck and CAN Capital, but it is higher than what a bank or SBA lender would charge. However, Accion often lends to businesses, such as startups, that are turned away by both alternative and traditional lenders.
Since it is a microlender, Accion only lends small loan amounts: between $500 to $30,000 for startups and $500 to $50,000 for established businesses. Depending on their age, startups should keep in mind that they may need an external source of income other than the business itself and may need to provide a cosigner.