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Tom Thunstrom

Tom Thunstrom

Small Business Finance Expert

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Education & Credentials:

  • Bachelor’s degree, University of Minnesota
  • Master’s studies, University of Delaware
  • About
  • Latest Posts

Expertise:

  • SBA Loans
  • Equipment Financing
  • Business Planning
  • Business Banking
  • Financial Literacy
  • Personal Finance

Highlights

  • 15 years of small business finance experience
  • 4 years of SBA lending experience

Experience:

Tom Thunstrom is a staff writer at Fit Small Business, specializing in Small Business Finance. He holds a Bachelor’s degree from the University of Minnesota and has over fifteen years of experience working with small businesses through his career at three community banks on the US East Coast. In a prior life, Tom worked as a consultant with the Small Business Development Center at the University of Delaware.

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Hobbies:

Tom is a self-proclaimed “beach bum” and “recovering banker,” residing at the Delaware Beaches. He’s also an avid runner, reader, and occasional foodie.

Personal Quote

While I can’t take credit for originating this, one’s failure to plan in business is basically planning to fail. Planning, analyzing your plan, and adapting to changes in the market will help your business succeed.

business woman using calculator

May 13, 2022

SBA 7(a) Loan Calculator: Payments & Amortization

Our Small Business Administration (SBA) loan calculator is designed for SBA 7(a) and SBA Express Loans. Upon inputting the loan term, desired loan amount, expected interest rate, and annual net operating income, the calculator will generate an estimated monthly payment and a projected amortization schedule. SBA Loan Payment Calculator Inputs When using our SBA loan calculator, there are four essential pieces of information you’ll need to enter: Loan amount: The first and most important input into the calculator is the loan amount for which you’re applying. This should be as accurate as possible. SBA Express loans are available in amounts up to $350,000 and 7(a) loans in amounts up to $5 million. Term (in years): This is the estimated repayment term of the loan for which you’re applying. Loan terms are generally up to 10 years for working capital and up to 25 years for real estate. The longer the repayment term is for your loan, the lower the monthly payments will be. Expected interest rate: The calculator will only accept interest rates up to the maximum SBA loan interest rate. The interest rate on your loan impacts your payment amount; a higher interest rate yields a higher payment. Annual business income: Input the gross revenue that your business generates annually. Make sure to include your salary. For best results, use an average of the past two years, as most lenders use an average instead of a single year. How To Read Your SBA Loan Calculator Results Monthly payment: The primary output of the SBA loan calculator is the monthly payment. It’s important to review this number to ensure that you can afford the amount and that you feel comfortable with a payment of this size. The monthly payment is impacted by the interest rate on the loan as well as the loan amount and length of the term. Debt service coverage ratio (DSCR): The DSCR is a metric that compares your business debt to income. A DSCR of at least 1.25 is preferred by lenders. Note that our DSCR output only includes your SBA loan and doesn’t include any other business debt you may have. Amortization schedule: The SBA loan calculator generates an estimated amortization schedule based on the information entered. The amortization schedule breaks down each monthly payment into principal and interest over the course of the loan. This allows you to see how interest rates and terms affect your payments. Do you need an SBA loan? connects you to more than 75 loan providers, offering SBA loans and also non-SBA financing. Their competitive marketplace can get you pre-qualified in a matter of days with a quick application online, providing you with choices on the best financing options available for your business. What’s Not Included in the SBA Loan Payment Calculator Our SBA loan calculator is a great tool for estimating your monthly SBA 7(a) or Express loan payment. However, it isn’t an all-inclusive calculator. Our calculator doesn’t take into account the fees associated with SBA loans. These fees include costs for lender origination, SBA loan guarantee, loan packaging, and closing the loan. Some fees may be able to be rolled into your total loan amount, while others may require that you pay them upfront. Additionally, our SBA loan calculator doesn’t provide information to help you determine if you qualify for the SBA 7(a) or SBA Express loan programs should you wish to apply. SBA Loan Payment Factors We’ve briefly discussed the various inputs and outputs of the SBA loan calculator, how it works, and the items that the calculator doesn’t address. With those basics established, we can delve deeper into how each of these facets plays a part in the calculations. It’s important to understand how much an SBA loan is going to cost each month and over the life of the loan before you make a financing decision. SBA loan costs and monthly loan payments are typically affected by the following. 1. Loan Amount & Terms In general, interest rates are lower for larger loan amounts and shorter repayment periods. SBA loans have a maximum loan amount of $5 million and maximum repayment terms of 10 years for working capital and 25 years for real estate. 2. SBA Loan Interest Rates The government sets maximum SBA interest rates that lenders can charge on SBA 7(a) loans. The maximum interest rates are determined by the length of the loan term and the size of the loan amount being borrowed. The interest rate on 7(a) loans can be fixed or variable. With a variable rate, the interest rate you’re charged changes with market interest rates. If market rates rise, the loan’s interest rate and payments will also rise. This change in interest rate is typically gradual, occurring over the course of several years. 3. SBA Loan Fees The largest SBA loan fee is usually the guarantee fee. Initially paid by the lender, the fee is almost always passed on to the borrower at closing and typically is rolled into the whole loan. The guarantee fee is based on the size and term of your loan and can be as high as 3.75% on loan amounts over $1 million. Bottom Line In most cases, SBA loans offer the most affordable option for small business owners seeking financing. The SBA business loan calculator will help you estimate the monthly payment for an SBA 7(a) loan for either working capital or commercial real estate and provide you with an amortization schedule for your loan.
Accounts recievable written in a notebook.

March 16, 2022

Accounts Receivable Financing: Costs, Terms & Qualifications

Accounts receivable (AR) financing is a tool businesses use to address short-term cash flow gaps by borrowing against their unpaid invoices. AR financing, also known as invoice financing, costs as little as 0.25% of the invoice value for each week that the invoice is outstanding. The funding amounts vary from as little as $500 to $5 million or more. The lender typically collects the invoice on behalf of the business and uses the proceeds to repay the loan. offers an Express Invoice Financing program that’s geared for businesses that need small invoices financed quickly. Eligibility for the Express Invoicing Program varies based on business type, but FundThrough also offers customized solutions that businesses can take advantage of. For small or newer businesses in a cash flow crunch, FundThrough can provide needed relief. A look at AR Financing Costs, Terms & Qualifications When comparing invoice financing to invoice factoring, business owners find that AR financing is more flexible. However, factoring can provide more financing and typically has lower rates. The biggest difference between the two is the way invoice collections are handled. With invoice factoring, customers pay the factoring company directly, bypassing the business, which reduces risk but also alerts customers that their invoices are being handled by a third party. Accounts Receivable Financing Costs AR financing costs include: Starting discount rate: 0.25% to 0.75% per week Estimated APR: 13% to 80% Origination fee: Up to 1.5% Additional fees: Wire transfer fee, automated clearing house (ACH) is free Lenders charge a discount rate for invoice financing because it’s calculated against the value of the invoice financed. This rate is low, rewarding businesses that have fast-paying customers. Most AR lenders will not charge fees for origination or annual renewal of the relationship; however, some will. Accounts Receivable Financing Terms AR financing terms include: Loan amount: $500 to $5 million Advance rate: Up to 90% Repayment term: As customers repay invoices, typically no more than 90 days Speed of funding: Within three days in most cases Individual loan amounts offered by lenders will vary; however, invoice financing is one of the largest funding options available. If the lender collects the invoice from a customer, then those payments are applied to repay the financing. Most lenders will fund within three days, with more complex arrangements requiring a week or perhaps 10 days. Accounts Receivable Financing Qualifications AR financing qualifications include: Credit score: Requirements range from no minimum to as high as 600 Annual revenue: At least $50,000 Time in business: At least three months Invoice quality: Creditworthy business or government customers Paperwork: Invoices, driver’s license, voided business check, and bank statements Exact qualifications vary by lender; however, most AR financing companies require at least $50,000 in annual revenue and operational history of at least three months. This is to verify the consistency of customer payments and ensure that customers won’t default on invoices. Who Accounts Receivable Financing Is Right For There are several scenarios where AR financing makes sense. These include: Small businesses that invoice customers: Businesses must invoice customers to qualify, and they can shorten their collection period and access working capital with invoice financing. Companies with slow-paying customers: If customers are taking too long to pay, invoice financing can be an inexpensive, short-term funding solution. Independent contractors who bill clients for large projects: Long projects require contractors to cover expenses until the project is complete, or a customer pays the invoice. Business owners with low credit scores: Accounts receivable financing companies rely on the creditworthiness of a borrower’s customers and offer lower credit score requirements. There are many other situations that AR financing is right for, and each business can find some benefit in reducing the time it takes for invoices to get paid. Once a business determines that accounts receivable financing is the best option for funding, it’s important to select a provider that offers the right amount of funding with rates and terms that can help the business flourish. How To Obtain Accounts Receivable Financing AR financing can be helpful for businesses, and there are a few simple steps to follow to get financing. 1. Set Up an Account The first step to getting financing based on invoices is to create an account with an accounts receivable financing provider. After the initial setup, applicants can connect accounting or invoicing software. In some cases, business owners can upload an invoice directly for consideration. 2. Select Receivables To Finance After connecting your invoicing software to your AR financing provider, the business owner selects which invoices to finance. It may be tempting for some business owners to borrow as much as possible, but overborrowing can have a large negative impact on cash flow, especially if you have slower-paying customers. 3. Collect the Advance After selecting the invoices, the AR financing company processes the payment. Every provider advances a different percentage of the unpaid invoice. FundThrough, for example, advances up to 100% of the invoice’s value, but its competitor, BlueVine, advances up to 90%. In most cases, businesses receive the funds in one to three business days. Advantages & Disadvantages of AR Financing Accounts receivable financing offers business owners quick funding speed and a simple application process that saves valuable time. However, the option isn’t good for long-term financing, and it can be much more expensive than other financing options. Advantages of AR Financing Quick funding speeds: Lenders can approve funding in hours and deposit funds in one to three business days in many cases. This makes it a great option for businesses needing funds to take advantage of an opportunity or solve a disruption like broken equipment. Simple application process: Traditional bank loan applications can be a time-consuming process that requires substantial paperwork. AR financing requires little paperwork—it takes only 15 minutes to fill out an application and to connect accounting software to the provider. Low minimum qualifications: Businesses with outstanding invoices and at least three months of accounting history have an easier time qualifying for invoice financing than traditional loans. Businesses needing another solution after a bank turns them down may find AR financing to be the best one available. Disadvantages of AR Financing Short repayment terms: The repayment term for invoice financing is short, with terms often only extending out to 90 days. Businesses needing longer repayment terms may want to consider a small business loan or line of credit. High overall costs: The cost of invoice financing versus other short-term options is favorable if repaid quickly. However, it can become more expensive than other options if it is the financing solution of choice in the long term. Possible origination or other hidden fees: Some financing companies will charge an origination fee, an annual fee, or other charges. While these fees are often modest, they can add up. Review any agreement before you sign off on it so you can be aware of potential extra charges. Bottom Line Accounts receivable financing is a convenient way for business owners to access capital that is locked up in unpaid invoices. Rather than waiting weeks or months for slow-paying customers to send in a check, applicants can receive substantial funding at low starting rates of 0.25% per week based on the value of outstanding invoices. As clients pay their invoices, the proceeds are used to settle the debt, making invoice financing easy to manage for small businesses.

March 15, 2022

How To Get a Small Business Loan in 6 Steps

Getting a small business loan is a necessity for business growth or sustaining operations. However, it can sometimes be challenging to find a loan that you qualify for. Here are the six steps to getting the small business loan that you need: Determine what you need the funds for: Knowing the specific purpose of the funds will help you figure out the right loan. Determine your eligibility: Learn what lenders look at to determine if you can qualify for financing. Determine your capacity to repay: Knowing whether you can afford the estimated loan payment is critical before you apply for financing. Gather your information: Obtaining all of the necessary paperwork before you apply will save you time. Find the right lender: Ask questions and make an informed decision on where to apply. Submit your application: Apply for funding from the right lender and get the loan you need. Step 1: Determine What You Need Funds For An important part of getting a small business loan is knowing what the funds will be used for. There are many different loan options for a business. Some types of loans can be used for multiple purposes and others only in specific situations. The qualifications, interest rates, and terms will vary based on the type of loan you apply for and which lender you apply with. It’s important to evaluate your options and do your homework so you don’t end up applying for a loan that you may not qualify for or isn’t best suited to your business. Equipment Businesses that need vehicles, pieces of machinery, or other larger items will obtain equipment loans secured by liens placed on the equipment they’re purchasing. In some cases, equipment leases may make sense for a business owner, although the overall cost for equipment financing may be higher with an equipment lease than with a loan. Growth Loans for business expansion, such as moving into a new and larger location, often require getting a commercial real estate mortgage or a loan guaranteed by the Small Business Administration (SBA) to help finance your needs. Starting a Business If you’re starting a business, a startup loan is often needed. These loans can fund initial operations and incurred expenses as part of the launch of your business. Buying a Business Business acquisition loans typically come from banks and credit unions. Collateral is often in the form of business assets. A certified business evaluation is traditionally needed as part of the loan process. Working Capital A business line of credit or invoice factoring loan makes sense to finance working capital needs. If your credit score is high enough and business performance is sufficient, the line of credit is preferred, given that interest rates and fees are much lower. Step 2: Determine Your Eligibility Eligibility requirements will vary by lender for the loan products they offer. It’s important to understand the most important factors that lenders will consider: Credit Score Individuals with at least a 20% ownership stake in a business will have their personal credit score checked as part of the application process by the vast majority of lenders. Having a lower than optimal credit score doesn’t make it impossible to get a business loan, but it is something that banks consider to be very important. In a recent FDIC survey, 91.6% of banks consider a business owner’s credit score as an important factor in lending. Collateral For traditional lenders, collateral is important for obtaining financing. Equipment or commercial real estate will often serve as collateral for those specific types of loans. Additionally, other business or personal assets can sometimes be used. Nonbank lenders may not require collateral, but they’ll often place a Uniform Commercial Code (UCC) lien on your business assets. The vast majority of lenders will require a personal guarantee. Length of Time Business Has Operated Unless a business owner has a track record in the industry they’re starting a new business in, it is tough to get an initial loan without paying higher interest rates or utilizing a rollover for business startups (ROBS) plan. Nonbank lenders may require a few months to a year in operation before getting funding, while traditional lenders may want as much as two years of experience. Step 3: Determine Your Capacity To Repay To obtain financing, you’ll need to be able to show that your business is either profitable or on a path to profitability, as well as show that you can afford your loan payments. Banks will determine profitability and repayment ability by calculating your debt service coverage ratio (DSCR). Your DSCR is the amount of debt relative to income, calculated by dividing net operating income by the total of your debt and interest payments. Lenders prefer a DSCR of 1.25 or higher. Step 4: Gather Your Information Bank lenders will require you to obtain and submit several pieces of information to obtain financing. Nonbank lenders may require less information, but business owners should have access to this information in case you’re asked for it as it will save time. Tax Returns Many lenders will require the three most recently completed full tax returns for the business and for any owners with a 20% or larger stake in the business. Business and Personal Financials Business financials that banks and nonbank lenders may require include a balance sheet and an income statement for the current year. If you have business accounting software, these reports should be easy to generate. Personal financial statements are also used to gauge an owner’s net worth. The SBA has a comprehensive form that can be used. Business Plan, If Necessary If you’re starting a business, have experienced a year with a loss in income, or are a business that needs SBA financing, a business plan will likely be required, especially in cases of SBA financing. The plan should detail what the loan will be used for and have financial projections to show how your business will do over the coming three years. The SBA partners with several organizations, including SCORE, Small Business Development Centers (SBDC), and Women’s Business Centers, to help small businesses develop business plans. Step 5: Find the Right Lender A lender that has experience in lending to businesses in your industry will better understand what your business needs. Some larger lenders have specific lending teams that deal with specific types of loans, such as commercial real estate, equipment financing, or lines of credit. An experienced lender can help determine the right type of loan to apply for and may structure a loan package based on your specific needs. Some questions you should ask potential lenders before you apply for a small business loan are: What fees are involved with originating and closing on a small business loan? What does the application process entail? How long does it take to get a decision? What documentation do I need to provide with the application? Will I need to submit a business plan with the application? Do you require a personal guarantee? If you’re applying for a line of credit, some additional questions to ask include: What’s the annual fee? Can I draw on the line of credit online or on a mobile app? If you’re applying for a term loan, some additional questions to ask include: Is there a prepayment penalty? What’s the required repayment schedule? If you aren’t sure where to apply, is one option worth considering. Lendio partners with over 75 financial institutions and offers multiple options for financing, including commercial mortgages and lines of credit. Lendio offers SBA financing as well. Step 6: Submit Your Application The last step to getting a business loan is the application, often made online through the lender’s website. If you use a traditional lender, the application may also be made in person. The application process can take minutes for short-term financing or much longer for a commercial mortgage or a larger loan deal. Approval time on loans varies based on where you apply, how much you apply for, and if an appraisal is needed on real estate. Bottom Line There are many options for financing available for businesses. While the process for getting a small business loan can appear daunting at first, understanding the different types of financing available, getting your relevant information together, and asking questions of lenders will help you in your search for financing.
Close up shot of a hand holding a phone choosing item at Amazon.

March 10, 2022

Amazon Business Line of Credit & 4 Alternatives

The Amazon Business Line of Credit is a financing option best suited for established businesses and government institutions that make purchases on Amazon.com and are willing to pay in full within 55 days of purchase. If you want a longer repayment period, you may want to consider one of our choices for the best small business lines of credit or perhaps utilize a credit card. We have also included four alternatives to the Amazon Business Line of Credit if you decide that this line of credit isn’t right for your business. Amazon Business Line of Credit What to know about the Amazon Business Line of Credit: The is a pay-in-full credit line that charges no interest and no annual fee; however, payments are due within 55 days of purchase. This credit line is best suited to established businesses, schools, and government institutions that need account management flexibility and can make payments in full. You’ll be able to give purchasing authority to multiple employees and set up accounts for different departments or locations. You can only use the Amazon Business Line of Credit to make purchases on Amazon.com. Beyond that, Amazon prohibits numerous products and services from being used with the business line of credit. These include: Cell phones associated with a plan Textbook rentals Electronic documents Video games and software downloads Digital newspaper and magazine subscriptions Amazon Prime memberships Any “Subscribe & Save” and “Recurring Delivery” orders Print-at-home and emailed Amazon gift cards Alternatives to an Amazon Business Line of Credit If you want an Amazon-branded revolving credit account that doesn’t require you to pay in full within 55 days and that gives you greater flexibility in how that credit can be used, there are several Amazon credit card options that we also recommend. The one that we consider best is the Amazon Business Prime American Express Card (for Amazon Prime customers). One disadvantage with credit cards is that credit limits will often be lower than the limits set by lenders on lines of credit. With that in mind, we have selected four lines of credit that should meet your business needs and provide funding in a matter of days. Bluevine: Best Amazon Line of Credit Alternative Why We Recommend Bluevine: is also our recommended choice for the best small business line of credit. Bluevine will provide up to $250,000 in working capital, with weekly repayments. Note that any financing will need to be repaid within a year. Bluevine’s qualification standards are relatively easy for businesses to meet, with a credit score requirement of 625 and 24 months in business required. OnDeck: Best Option for Fast Funding Why We Recommend OnDeck: OnDeck’s line of credit offering is good for those who have been in business for a short period of time or have less than ideal credit and need quick access to funds. only requires a business owner to be in operation for a year and will approve loans with credit scores as low as 600. OnDeck’s line of credit includes a maintenance fee of $20 per month, an origination fee for your line of credit, and its lines of credit can have high interest rates that average over 35% APR. However, you’re only liable to pay interest on what is borrowed, and there is no penalty for early repayment. Credibly: Best Option for Those With Less Than Optimal Credit Why We Recommend Credibly: Credibly offers lines of credit of up to $250,000, with interest rates starting at 4.8% for 26-week terms. It’s a good choice for businesses whose owners have poor credit, as Credibly will approve loans for those with credit scores as low as 560. However, the interest rates for those with poor credit will be substantially higher. Also, may assess an origination fee on initial financing. Fundbox: Best Option for Newer Businesses Why We Recommend Fundbox:  is a good solution for newer businesses that only need a short period of time to repay the capital they borrow. Fundbox only requires a business owner to be in business for six months and have a minimum credit score of 600. Fundbox’s repayment terms are shorter than many of the lenders we evaluated, with repayment terms capping out at 24 weeks. This means that your weekly payments would be several thousand dollars if you borrow the maximum amount. However, Fundbox provides the opportunity for newer businesses to obtain a small business loan to help them make purchases. Bottom Line An Amazon Business Line of Credit is an inexpensive financing option for established businesses, schools, and government institutions that frequently make business purchases at Amazon.com. If you wish to consider using Amazon for financing purchases, it’s important to note that you’ll have less than sixty days to make payment in full. If you aren’t able to do that, there are several small business lines of credit that you can consider as worthy alternatives.
Young lady entrepreneur using innovation technology on tablet and mobile for selling online.

March 9, 2022

Purchase Order Financing vs Factoring: When To Use Each

Both purchase order (PO) financing and invoice factoring are short-term financing options used by small businesses to assist their cash flow. While both provide needed access to capital, there are differences in how both should be used. PO financing is used when your suppliers receive funds from a financing company for goods that you’re reselling or distributing but have not yet produced. Those who buy your goods ultimately pay the PO financing company. Factoring occurs when a business receives an advance from a factoring company for unpaid invoices from another business or government entity for goods already produced or sold. The factoring company then receives payment from those that you invoiced. Business owners seeking consistent small business financing for working capital needs should first consider a working capital loan. These term loans and lines of credit provide a consistent source of credit for qualified businesses. However, these loans require business owners to have good credit and show profitability to obtain good interest rates. If your situation is different, purchase order financing or invoice factoring may make more sense, depending on whether you need to finance an outstanding order or get paid on outstanding invoices. Purchase Order Financing vs Factoring at a Glance Purchase Order Financing vs Factoring: Qualifications Qualifying for both purchase order financing and invoice factoring is relatively easy, provided that those you work with are reputable. In the case of PO financing, the supplier’s and customer’s commercial credit is checked through Dun & Bradstreet (D&B). With invoice factoring, the customers who owe you money have their payment history checked. A D&B credit check may also occur, depending on the strength of the client. In both scenarios, customers should have a history of timely payments, no recent bankruptcies, and no history of serious litigation. With invoice factoring, as your invoices are sold to a third-party factoring company, you may be subject to a blanket UCC lien. This varies by factoring company and specific arrangement. With PO financing, your supplier’s reputation and ability to fulfill orders will be the strongest qualification criteria. PO financing also typically requires a 15% or greater profit margin from the business that’s applying for funding. Invoice factoring does not have a profit margin requirement. Purchase Order Financing vs Factoring: Costs & Repayment Both purchase order financing and invoice factoring fund most of the outstanding purchase orders or invoices involved. The maximum amount of funding varies based on the provider and your customer’s past payment and credit history; however, both invoice factoring and purchase order financing can advance millions of dollars if you have sufficient invoices or purchase orders to back the advance. Rates and fees vary based on the strength of your customers or, in the case of PO financing, your customers and suppliers. They also vary based on your relationship history. The biggest difference between PO financing and invoice factoring is in how quickly funding takes place and who gets funding. With invoice factoring, you are advanced money from the factoring company on outstanding invoices. Your customers pay the factoring company the amounts they owe, and the factoring company will pay you the remaining balance owed minus the fees they collect. Purchase order financing can take up to a month for funding to occur with international transactions, while invoice factoring is often funded in a matter of days. PO financing companies pay your suppliers and manufacturers to fulfill the purchase order, often with a letter of credit that guarantees payment once your order has been shipped. Your customers pay the financing company via an invoice that you issue to the customer. The PO financing company then pays you the profit margin minus fees. Purchase Order Financing vs Factoring: How to Apply Applying for both purchase order financing and invoice factoring financing occurs at different stages in the sales cycle. In both cases, you should have your financing partner selected prior to soliciting funds. Applying for Purchase Order Financing There are generally two types of financing institutions that offer purchase order financing. Traditional lenders such as banks don’t commonly advertise purchase order financing but may offer it as an add-on for long-standing customers. If you have an existing banking relationship, check with your bank first, as it may offer competitive terms. The other way to finance is with an online financing lender that specializes in purchase order financing. You would provide the financing company with both the relevant purchase order from your customer as well as a written cost proposal from the supplier detailing the cost to purchase the goods to fulfill the order. Purchase order financing is a good choice if your sales growth is outpacing cash flow, but it can be expensive and may not be the best business financing option if you have good credit. For the best rates, we suggest you have profit margins above 20% with a long customer and supplier history. If you decide purchase order financing is necessary, consider , as they can fund purchase orders ranging from $50,000 to $10 million with industry-competitive rates. Applying for Invoice Factoring Prior to receiving invoice factoring financing, you will need to find a provider you want to work with and go through the application process. An invoice factoring company traditionally isn’t a bank and will advance funds to you while your customers repay them. The factoring company will determine if you meet its eligibility criteria to receive financing. It’ll also conduct due diligence on your invoiced customers to see if they’re good credit risks. If the factoring company approves your business based on its research, it will enter into an agreement with you. The agreement will set an initial maximum dollar amount that you can borrow and will list fees and service charges that will apply. One of these fees, the discount rate, is determined in part by the creditworthiness of your customers. It’s best to use customers with good payment history for invoice factoring when possible. Invoice factoring is a good choice for businesses that have customers that aren’t the fastest at repayment. Small businesses that need to factor invoices of up to $5 million will benefit from FundThrough. offers a fast application and invoice assignment process that can sync seamlessly with your QuickBooks account. The FundThrough application process is simple and entirely online. Pros & Cons of Purchase Order Financing Purchase order financing works for profitable businesses that need to make a large order but need financing to front the purchase of goods from a manufacturer. However, if your customers are slow to repay, the cost of purchase order financing can be rather expensive. Purchase order financing also has a limited target market of B2B and B2G customers that can fully take advantage of it. Pros & Cons of Factoring There are several benefits associated with factoring financing. One is that there’s generally no minimum credit score requirement, as your customer’s creditworthiness is what matters to the factoring company. Also, your accounts receivables will be handled by experts, meaning one less thing you have to worry about as a business owner. Conversely, the factoring company may have direct contact with your customers. The costs of factoring can be high if customers are slow in paying. Additionally, your invoices are sold to a third party, which can expose you to a blanket UCC filing. Bottom Line Both invoice factoring and purchase order financing offer short-term solutions for businesses that need money to fund operations. Purchase order financing helps on the front end of the sales cycle to fulfill the production of an order, and invoice factoring helps you get fast money for goods already produced and sold to your customers. Your business may need to use one or both forms of financing at some point, and it’s important to know when either form should be used for your business needs.
Pink mini piggy bank place on top of the coins.

March 9, 2022

Microloans: What They Are & Where To Apply

A microloan is a small loan, generally up to $50,000, made to startups and emerging small businesses for working capital or the purchase of equipment. These loans are offered by nonprofit organizations known as microlenders, which have a mission to support economic development in a geographic area or for a demographic group. Microloans typically have repayment terms of up to six years and offer favorable interest rates that are lower than those available through online lenders. Who a Microloan Is Right For Microloan programs are geared toward new and small businesses and, therefore, have more lenient qualification requirements. The specific eligibility requirements for these loans vary by lender and may be based on business type, the amount you need, or the age of your business. Some business categories that microloans may be a good financing option for include: Startups and emerging businesses: Many startup businesses have difficulty meeting the qualifications required for a small business loan, making it difficult to receive the initial seed money needed to get a new business up and running. These emerging businesses may benefit from the relaxed qualification requirements offered by microlenders. Businesses unable to obtain traditional bank financing: A microloan may be right for your business if you’re currently unable to receive traditional financing. Traditional business loans typically require an excellent credit score and a strong track record for your business, both of which can be obstacles for entrepreneurs and startup businesses. You can use the microloan funds to grow your business while you build your business’s credit history, opening up more funding options in the future. Businesses in need of a smaller amount of funds: Traditional lenders often aren’t interested in making low-dollar business loans due to the administrative burden of underwriting smaller loans in comparison to the gains recognized by the bank. As a startup or emerging small business, you may not be seeking a large loan. Additionally, you may not currently have sufficient cash flow to afford the debt payments on a larger loan. Where To Get a Microloan Before applying for a microloan, you should shop around and see what different microlenders require and offer. Some microlenders lend nationwide while others specialize in particular geographic areas, types of businesses, or loan sizes. The Small Business Administration (SBA) maintains a list of microlenders in each state that offer SBA microloans, many of which also offer non-SBA microloans, making the SBA’s list a good starting point to find microlenders in your area. It’s worth noting that the SBA approved at least $60 million per year in microloans each of the last several years. Each lender will have its own requirements and process for loan applications. You’ll need to be aware of the lender’s specific requirements to avoid submitting an incomplete application. Doing some research upfront can save you from spending a lot of time applying to lenders that aren’t a good fit for you. Qualifying for a Microloan Qualifying for a microloan is somewhat easier than qualifying for a traditional business loan. When applying for a microloan, you’ll need to provide some basic financial information about yourself and your business. This will likely include documentation of your personal income as well as information about any unpaid debts you or your business have. This information will be used to determine if your business has enough cash flow to cover the payments on the loan you’re asking for. Microlenders will also want to learn about you and your goals, taking that information into consideration when evaluating your loan application. Many microlenders will require businesses to submit a business plan with their loan application that includes this information. This is one of the biggest differences between microlenders and many traditional lenders; microlenders put additional consideration into your character as a business person, not just your credit score. Your credit score will still have some influence on a lender’s decision, and a FICO score of at least 600 will often be the minimum for most microlenders. In addition to your business meeting the qualification factors, the intended use of your loan will also be considered. Microloans can be used to purchase or lease equipment, for office space or furniture, for machinery or technology needs, and even for working business capital. Some lenders restrict the use of loan funds. For example, SBA microloans can’t be used to purchase real estate or refinance debt. You’ll need to discuss with your lender whether there are any restrictions on the use of your loan. After submitting your application, you may be contacted by the lender requesting that you submit other documentation to support your application. The lender may also ask to inspect your office or storefront to ensure that it’s legitimate. Additionally, your lender may require collateral to back the loan, which will have to be assessed to ensure its value. This process can extend the timeline of the application process. Your lender should be able to provide you with an estimated timeline for your application, but most microlenders will reach a decision within 90 days (often much sooner). Microloan Rates & Terms The typical rates and terms you can expect with a microloan are: Interest rate: 6% to 15% Repayment schedule: Monthly Repayment term: Up to 6 years Restrictions on use of the funds: Determined by the microlender The specific repayment terms will depend on how much you’re borrowing, the loan’s intended purpose, the lender’s own requirements, and your personal and business financial history. Regardless of the terms you receive, you should read the loan agreement carefully and make sure you understand everything about the microloan before you accept it. Pros & Cons of Microloans There are benefits and drawbacks to microloans. While these loans are easier to qualify for than traditional business loans, they're only available in smaller amounts, and eligibility will vary by microlender. Bottom Line Microloans are offered in amounts up to $50,000 with repayment terms of up to six years. Interest rates are generally lower than other small business financing options for newer and smaller businesses. Loans can be obtained through microlenders nationwide. One significant advantage of these loans is that they’re accessible to startups and emerging small businesses that don’t have access to financing elsewhere.
Man in business suit holding a piece of paper with "Private Lender" written on it.

March 8, 2022

Private Money Lenders & How To Find Them Fast

Private money lenders are used by short- and long-term real estate investors to finance properties. Short-term buyers use private money loans when they want to compete with the timeline of an all-cash buyer and intend to flip the property after making repairs. Private money lenders are also used by long-term investors who want to rehab a rental property before refinancing into a permanent mortgage. These loans aren't offered by traditional lenders. While providing fast financing in as little as 10 days, these loans will have higher interest rates than conventional mortgage lenders. offers real estate investment loans of up to $3 million for 12 months with funding in around 15 days. Kiavi can fund both first-time flippers and experienced flippers. Flippers with experience can get better rates and a dedicated manager. Private Money Lender Rates, Terms & Qualifications Similar to other types of real estate financing, private money lenders typically loan an amount equal to a percentage of a property’s loan-to-value (LTV), often based on a property’s good condition or its after-repair-value (ARV), which is used on property in poor condition and in need of repair. These loans will often not exceed 24 months and in many instances are for no more than a year. Private Money Lender Rates, Terms & Fees Private money loans are typically interest-only. This means that private money borrowers pay monthly interest throughout the term of the loan and pay the balance at the end of the loan. Some lenders charge prepayment penalties if you pay off the loan before the due date. While the interest rates on a private money loan might be higher when compared to a conventional mortgage, the monthly payments might be lower. Private Money Lender Qualifications A national hard money lender will want a minimum credit score of at least 600. Keep in mind that better interest rates go to borrowers with higher FICO scores. Depending on the real estate investment project, some hard money lenders will look at the project’s potential more closely than the borrower’s personal financial statement. In addition to contractor bids, new investors will likely need a scope of work on the project from an experienced contractor. New investors may also need a higher credit score to qualify on their first attempt for financing. To get funded with a private money loan, borrowers will need to submit additional documentation, including proof of past experience, or licensed contractor bids. Once underwriters verify all documentation, the loan gets approved, and it moves to closing, where funds are distributed and the borrower takes possession of the property. Lenders will want closing costs and fees paid in advance, prior to closing. Additionally, lenders may require these documents prior to closing: Purchase and sales contract List of past projects completed by the investor Licensed contractor bids Scope of rehab work Property appraisals Proof of down payment funds Where to Find Private Money Loans If you don’t have a track record of completing successful real estate investment projects and don’t have a real estate investing network, getting investor capital is tricky. If you structure a solid deal and can show investors their potential return on investment, you may find one willing to fund your project. There are several hard money lenders that offer private money lending. Two of the best providers we have surveyed include and . Individual Private Investors If you choose to pursue a private money loan from an individual investor instead of through a national private lender, there are a few steps you can take: Build a network: Relationship-building is key. Seek out and develop relationships with real estate agents, attorneys, financial planners, commercial lenders, and title agents. It’s likely these individuals know investors that may be interested in working with you. Friends and family may also be able to assist in building connections to potential investors as well. Prepare materials in advance: Earlier, we outlined a list of documents that will be needed when you work with a private money lender, including a list of your past projects and scope of work on this project. Have these ready to go prior to your search for financing to expedite the application process. Be prepared to make a pitch: If you aren't working with a lending company and are instead working with an individual investor, a pitch deck and presentation may be required. This varies by investor. Pros and Cons of Private Money Loans Private money loans are advantageous small business loans for investors who want to quickly purchase and fix up a distressed or damaged investment property. The quick preapproval and fast funding time are two of the main advantages. However, there are disadvantages, including higher interest rates and shorter loan terms. Bottom Line Private money lenders typically offer loans that are secured by a real estate asset. These loans are used to purchase a house, condo, or multifamily building, often to renovate the property for short-term or long-term investment. Private money loans are available from national hard money lenders as well as investors. New investors seeking these loans will likely need the support of their contractor and stronger credit to qualify.
Driver and a passenger holding phone wih GPS.

March 7, 2022

Uber & Lyft Financing: 7 Great Ways to Fund Your Rideshare Business

Financing options for your Uber or Lyft rideshare business include vehicle rentals, business loans, and credit cards. Uber and Lyft partner with car rental companies, but don’t offer any direct financing solutions for drivers. Financing auto repairs, vehicles, and daily purchases like meals and gas will require drivers to work with an outside lender. We’ve reviewed several options based on car ownership options, intended use, and the ability for borrowers to obtain money quickly. These are seven great ways to fund your rideshare business. Uber Vehicle Marketplace: Vehicle Rentals for Uber Drivers What to know about Uber Vehicle Marketplace:  is a series of partnerships between Uber and rental car companies like Fair, Getaround, and Hertz that drivers can access to rent a car. Rentals are available by the hour, day, and week, and pricing varies by car and city. It’s a good solution for drivers that want to try working with Uber or rideshare businesses that need a vehicle while theirs is being maintained or repaired. Uber Vehicle Marketplace isn’t available nationwide, and partners vary by location. Some locations will have multiple partnerships while others will only have one or none. Note that you need to qualify as a driver and get Uber approval. Once that’s done, you can fill out a form online with your personal details and receive an instant quote from the rental company. Lyft Express Drive: Vehicle Rentals for Lyft Drivers What to know about Lyft Express Drive: Lyft doesn’t offer driver auto loans or auto leases. However, in response to Uber’s rental program, Lyft launched Express Drive. With its program, drivers can rent a vehicle for the week and collect fares from Lyft users the day they apply. The weekly costs start at $219. This service provides cars through Hertz and Flexdrive. Before applying for , you need to qualify as a driver for Lyft. This requires providing some personal information and can take a few days while Lyft verifies your driving record. For those who are thinking about rideshare as a business or need a short-term solution for driving a car while their primary car is getting repaired, Lyft Express Drive is a good option. HyreCar: National Peer-to-Peer Rental for Rideshare Drivers Why we recommend HyreCar: offers drivers an alternative with peer-to-peer rideshare vehicle rental that’s available nationwide. Rates can be lower than other rental companies and average from $25 to $40 per day. There’s a mileage restriction on the vehicle, and no roadside assistance or maintenance is provided. Applying takes minutes, and drivers can pick a vehicle and get on the road the same day. For drivers needing a rental car outside of the service area of major Uber and Lyft partners, HyreCar is a great solution. Bluevine: Best for Short-term Financing Via a Line of Credit Why we recommend Bluevine: As opposed to placing a lien on your vehicle, which is common in equipment financing, places a blanket UCC lien on businesses it lends to. This provides flexibility to a rideshare driver should their vehicle already be pledged as collateral. Bluevine will provide up to $250,000 in funding, with weekly repayments. Note that any financing will need to be repaid within a year. LightStream: Best Personal Loan for New or Used Cars Why we recommend LightStream:  offers a great personal loan with low rates and long repayment terms that drivers can use for financing major auto repairs. You could qualify to borrow up to $100,000 in funding, repayable over as long as 12 years, with rates starting at as low as 2.49% if you have your payments automatically deducted. You can complete the application online and have the funds to purchase or fix your car as soon as the next business day. Crest Capital: Best Option for Business Auto Financing Why we recommend Crest Capital: Crest Capital offers experienced Uber and Lyft drivers financing of up to $500,000 to purchase a new or used vehicle. There are no vehicle restrictions and you can qualify for an APR as low as 7%. prefers businesses to be in operation for at least two years with a credit score of 650 or higher to qualify for funding. You can complete its online application in 30 minutes, with funding available within three days. U.S. Bank Business Triple Cash Rewards World Elite Mastercard®: Best Credit Card Option for Rideshare Businesses Why we recommend the U.S. Bank Business Triple Cash Rewards World Elite Mastercard®: Business credit cards are a good fit for any rideshare operator because they allow you to float expenses for up to 30 days. Business credit cards are also the easiest type of financing for trucking companies to qualify for. This business credit card offers a great mix of gas rewards and cheap introductory financing, making it the best credit card option for rideshare businesses. You’ll earn 3% cash back on single fill-ups of up to $200. Beyond the gas rewards, you can also earn 3% at office supply stores, restaurants, and cellphone service providers. Bottom Line Financing options for Uber and Lyft rideshare operators range from approved car rental programs to personal and business options for auto financing and regular expenses. You may need to select more than one option, such as a credit card and an auto loan, to finance your rideshare business. All of these options will help drivers that are at different stages of their Lyft or Uber business to fund their operations.

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