Business professionals are typically people like CPAs or consultants who usually bill their clients either hourly or by project. These professionals often have trouble getting working capital financing because their income depends on the consistent acquisition of new clients. Alternative online lenders, however, offer professional loan options up to $500k to business professionals with $100k+ in revenue.
OnDeck, which sponsored this article, offers a small business line of credit that can be used to acquire new clients or for any other working capital need. You may qualify if you’ve been in business for one year, have $100,000+ in annual business revenue, and have a 600+ credit score. Find out how much you qualify for by filling out a 10-minute online application and you could be funded in as quick as one day.
Top 5 Professional Business Loans
|Business Lines of Credit||Professionals who need access to quick capital or protection from unexpected expenses|
|Short-Term Loans||Professionals who need up to $500,000 for fixed working capital and expenses|
|Invoice Financing||Professionals who invoice customers and need funding before customers pay invoices|
|Business Credit Cards||All professionals can benefit from revolving credit for unexpected or routine expenses|
|SBA Loans||Professionals looking to buy an office building for their business|
Whether you’re looking for financing to expand your practice or a short-term bridge for a cash flow gap, this free webinar will answer your questions. In it, we discuss key features and qualifications of the financing options most often used by the professional services industry.
How We Determined the Best Professional Business Loans
Business professionals often need capital to either fund a marketing program to generate new client leads or to pay the expenses on work they’re performing for an existing client before they’re paid. For example, a bookkeeper could put in hours of work closing out the month’s financials before their client ever pays them a dime and might need to cover costs until then.
We therefore determined that the best professional loans are those which offer a high speed to funding, typically between 1-3 days. This is because with these loans you can get access to capital this week to start work on a new project before you’re paid for the work.
We took several factors into account when looking at the best professional business loans:
- Speed of funding – How fast you can get funded
- Costs – Interest rates and fees
- Maximum loan amounts – How much you can potentially qualify for
- Repayment terms – How long your loan can be in repayment
- Qualification requirements – The minimum criteria you must meet to get a loan
Typically as a professional, your income is based on the next client (or the next project), and since you likely have a consistent client churn the amount of revenue you bring in varies. Advertising agencies, for example, sometimes go months in between performing work for a client. When this is the case, you need fast and flexible funding to cover your expenses until you onboard someone new.
However, some professionals have recurring clients and their financial need is related to paying the expenses to fulfill the work for their clients before the customer pays the invoice. For example, a CPA may have the same client for five years but they’ll likely have to start tax work for that client before they’re ever paid. This can create a short term gap before you receive the revenue you’ve earned.
We chose a business line of credit as the best financing fit for professionals because it helps solve both of these financing problems. You can use the credit line to prepare for unexpected expenses, to fund marketing or growth opportunities, or to pay your own operational costs while you wait for your customer to pay you.
Business Line of Credit for Professionals
A business line of credit (LOC) is a revolving financing option that you can use over and over again while only paying interest on what you borrow against the credit line. With a LOC, you can access the money you need when you need it, instead of waiting for a loan underwriting process. This is important because many professionals can get clients suddenly but may not have the capital to begin work on the project.
A business LOC is best for most professionals because it solves your biggest financing problems. You can feel confident that you’ll have access to funds when you need them for unexpected expenses and you can also finance your working capital needs for growth initiatives. Gaining a consistent flow of new clients is the lifeblood to professionals, and so it’s important for your business to constantly be spending on marketing efforts to bring in new work.
Small Business Line of Credit Costs
A small business line of credit will usually carry these costs:
- APR: 13.99 – 40%
- Prepayment Penalty: None
- Other Fees: Some lenders may charge service fees or other fees if you don’t use your LOC within a certain time frame, but these aren’t common.
Our recommended business line of credit provider offers a LOC with an APR as low as 13.99%. They also don’t penalize you for not using your LOC with extra fees, making them a great option for professionals.
Small Business Line of Credit Terms
Your small business line of credit will carry the following terms:
- Loan Amount: Up to $100k
- Repayment Term: 6 Months
- Repayment Cycle: Weekly or Monthly
- Time to Funding: 1 – 3 Days
The line of credit is revolving, which means you can use it over and over again, as long as you repay what you use. These terms are extremely beneficial to working professionals who might need to cover a client’s costs before invoicing them or who might need to deal with seasonality between client work.
Small Business Line of Credit Qualifications
In order for professionals to qualify for a small business line of credit you’ll need to meet these minimum qualifications:
- Minimum Personal Credit Score: 600 (check your credit score for free here)
- Minimum Time in Business: 1 Year
- Minimum Annual Business Revenue: $50k
You can learn more about these qualifications and the application process by reading our guide to a business line of credit.
What’s Missing From a Business Line of Credit
A business line of credit is great for professionals needing a line of credit to draw from over and over again, but the line typically maxes out around $100,000. That makes it a bad fit for professionals looking to buy real estate or make large investments into their business. For example, a term loan (depending upon the lender) allows you to borrow up to $500,000.
Where to Find a Small Business Line of Credit
OnDeck offers a line of credit up to $100,000 with rates as low as 13.99% for prime borrowers. You can see how much you qualify for by filling out an online application that only takes about 10 minutes. If approved you could get funded in as little as one day.
Short Term Professional Business Loans
Short term professional business loans are for amounts up to $500k but carry what appears to be an expensive 30-50% APR. However, since these loans are typically used by professionals for short periods of time (less than 90 days) then the total cost of capital is less than paying back a low interest offer at your local bank with longer repayment terms. These loans can typically fund in 1-3 days.
Short term business loans are a good fit for professionals that need to make a large purchase or investment in their business and need more than $100k in financing. For example, an architect or engineer might need to spend the money outsourcing a specific part of their planning process before they’re ever paid for the project. The firm will then bill back the client who will pay you off within 30 or 60 days.
Short Term Business Loan Costs
The total costs for a short term loan carry these costs:
- APR: 30 – 50%
- Prepayment Penalty: None
Note: Short term lenders generally require you to repay a certain dollar amount when you’re approved, so you don’t save any money by paying off the loan early.
Short Term Business Loan Terms
Short term professional business loans carry these terms:
- Loan Amount: Up to $500k
- Repayment Term: 3 – 36 Months
- Repayment Cycle: Weekly
- Time to Funding: 1-3 Days
Short Term Business Loan Qualifications
To qualify for a short term professional business loan you must meet these minimum qualifications:
- Minimum Personal Credit Score: 500 (check your credit score for free here)
- Minimum Time in Business: 1 Year
- Minimum Annual Business Revenue: $50k
What’s Missing From a Short Term Loan
Short term loans are great if you know what you need to spend money on and you’re looking at using more than $100k pretty fast. However, these loans are expensive if you plan on carrying a balance for a long period of time and you can’t use them over and over again like a line of credit.
Where to Find Short Term Loans
OnDeck offers short term business loans up to $500k for professionals in a variety of industries (but not attorneys). You can apply online within about 10 minutes to see how much you qualify for and you could be funded in as quick as 1 business day.
Invoice Financing for Professionals
Invoice financing, or accounts receivable financing, uses your outstanding customer invoices as collateral for funding amounts up to 100% of your invoice value. This financing works a lot like a business line of credit. You’ll make draws using your customer invoices as collateral and you only make payments on the amount you’re currently borrowing. Invoice financing is great for borrowers with a less-than-perfect personal credit profile because some lenders won’t even check your personal credit.
Invoice financing is best for professionals who constantly have outstanding customer invoices that are worth thousands of dollars. For example, architects asked to draw up plans for a long term client on a new office building might need to work with a 3rd party contractor to finish the blueprints. Your client may not pay as fast as the contractor demands his money, so invoice financing can help fund the cash flow gap.
Invoice Financing Costs
Invoice financing carries the following costs:
- Discount Rate (Fees): 0.5 – 0.7% of each invoice per week
- Prepayment Penalty: None
With invoice financing you can save money by paying off your loan faster because you’re charged for every week you’re in repayment.
Invoice Financing Terms
Invoice financing carries the following terms:
- Loan Amount: $1k – $100k
- Percent of Invoice Value: 85 – 100%
- Repayment Term: 1 – 24 Weeks
- Repayment Cycle: Weekly
- Time to Funding: 1 – 3 Days
The terms of invoice financing can be extremely beneficial for a professional who bills their clients based on a project or hours worked. This is because invoices often cause a drag on liquidity, which means that it takes a while for you to collect your revenue, and therefore your cash flow. With invoice financing, you can unlock the value of your invoices without having to wait for customers who drag their feet.
Invoice Financing Qualifications
In order to qualify for invoice financing you’ll need to meet these minimum qualifications:
- Minimum Personal Credit Score: No credit check – 530+ (check your credit score for free here)
- Invoice Qualifications: Must be due in the next 90 days
- Other Requirements: Customers must be creditworthy
You can learn more about these qualifications and the application process by reading our guide to invoice financing.
What Invoice Financing is Missing
Invoice financing is a good fit for professionals who carry a lot of unpaid customer invoices at one time and need access to that money sooner, but you can’t borrow more than $100k. This type of financing is also not giving you access to any additional funds, but instead you’re paying a fee to access funds your customer is going to pay you later.
Where to Find Invoice Financing
You can get invoice financing from accounts receivable lenders who focus on using invoices as collateral.
Business Credit Cards for Professionals
Business credit cards can be a good fit for any professional because they’re easy to qualify for and you can use them to finance any small working capital expense. Plus, many business credit cards offer rewards where you can earn points or cash back just for using your card to pay for routine expenses you’re paying for anyway.
For example, a business credit card can be used to pay a utility bill on your building or for monthly advertising costs to keep your website or online ads running. Credit cards essentially give you a 30-day interest free loan, as long as you pay off the balance within 30 days, plus you get rewards for using the card.
Business Credit Card Costs
A business credit card carries these costs:
- Interest Rate: 12 – 29%, some have 0% introductory offers
- Annual Fee: $0 – $350+
Business Credit Card Terms
A business credit card will carry the following terms:
- Loan Amounts: Up to $100k but typically less than $30k for most businesses
- Repayment Terms: 30 days interest free
- Time to Funding: Instantly – 2 weeks (time it takes to receive your card)
- Initial Rewards: Introductory APR of 0% for 7 – 18 months, and a cash bonus (or points bonus) if you spend a certain amount within the first 2-6 months.
- Ongoing Rewards: Cash back or points towards various rewards
As a professional, you should look for a business credit card that rewards your specific spending habits. For more information on small business credit card terms and rewards, check out our article on the best small business credit cards.
Conversely, if you’re doing a lot of local travel to your client sites, you might want to check out a small business fuel card.
Business Credit Card Qualifications
The minimum qualifications for a business credit card are:
- Minimum Personal Credit Score: 650+ for best offers (check your credit score for free here)
Your annual business revenue will be factored into your funding decision, but there typically isn’t a minimum amount you must meet to get approved.
What Business Credit Cards are Missing
Business credit cards are a good fit for any professional, regardless of what industry you’re in, because of the ease and speed of funding. However, you’ll generally only qualify for up to $30k and most professionals will often qualify for much less. If you need a large amount of money you’ll need to find another option.
Where to Find Business Credit Cards
Business credit cards are offered by large credit card companies and banks.
SBA Loans for Professionals
An SBA loan is offered by approved lenders, like banks, and typically provides businesses with the lowest rates and longest repayment terms available to you, typically up to 10+ years. SBA loans also have strict qualification requirements and take a long time to get to funding (90+ days). Professionals will find it difficult to qualify for SBA loans unless you have a large firm with repeating customers.
Professionals can best use an SBA loan to purchase real estate where your business will operate or pay for other large purchases that require a lot of capital and can be depreciated over a longer period of time. For example, you could save money and create an asset for your business if your CPA firm buys an office building instead of continuing to pay rent to someone else.
SBA Loan Costs
An SBA loan will typically have costs that fall into these ranges:
- Interest Rate: 5% – 10%
- Prepayment Penalty: None and you can save money by paying it off early by reducing the amount of interest you’ll pay.
- Origination Fee: 0.5 – 3.5%
- Loan Packaging Fee: $2,000 – $4,000
- SBA Guarantee Fee: 3 – 3.5% (Waived if loan amount is under $150,000.)
SBA Loan Terms
SBA loans carry these terms:
- Loan Amount: Up to $5 million
- Repayment Terms: Up to 10 years
- Repayment Cycle: Monthly
- Time to Funding: 30 – 90+ days
Remember that this type of loan is perfect for a professional looking for a long term option, particularly to purchase real estate.
SBA Loan Qualifications
To qualify for an SBA loan you’ll need to meet these minimum qualifications:
- Minimum Personal Credit Score: 680 (check your credit score for free here)
- Collateral: Typically required
- Down Payment: 10-20%
- Time in Business: Startup – 2+ years
Business professionals who invoice clients might find it hard to qualify for these SBA loans.
What’s Missing With an SBA Loan
SBA loans are great for long term financing to buy things like commercial real estate, but they’re time consuming to get. Plus, many professionals with small firms will find it difficult to qualify, especially if you don’t have repeating customers signed up for long term contracts with your business. There are also better alternatives in this article for immediate working capital needs.
Where to Find SBA Loans
SBA loans are offered by traditional lenders like banks.
How to Get Approved For a Professional Loan
Professionals may find it difficult to get funded for a loan because you don’t have a lot of collateral in your business and you may not have any certainty of long term revenue. You need to make sure that you prepare your business the best you can before you apply in order to maximize your potential in getting funded.
Keisha Rivers, a Consultant and Chief Outcome Facilitator at The KARS Group, says:
“When I have found myself in a short term gap, I’ve had to establish a line of credit for emergencies and drawn advances on my outstanding receivables. Lenders are hesitant to provide loans or large extensions of credit because there isn’t a guarantee that the pendulum will swing back the other way with your revenue and you’ll be able to repay them.”
Keisha is one of many professionals who have found it difficult finding the financing they need to either grow their business or to navigate a short term cash flow gap. We’ve put together 3 keys that can help you in your efforts to find the right financing opportunity for your business.
The 3 keys to getting funded for a professional business loan are:
1. Show Your Lender That You’re a Responsible Borrower
Professionals often have fluctuating income because the need for your services comes at different times to different clients. Your lender is mainly interested in your ability to repay what you borrow. They aren’t in the business of lending to organizations that default. This makes it important for you to clearly represent your business in a way that shows that it’s growing and that it has the capability to repay more than what you’re borrowing.
According to Ty Kiisel, Editor for OnDeck:
“Fluctuating income levels is going to be problematic. Lenders want to validate that you have the income to make periodic payments, which is difficult without a consistent revenue stream. Lenders want to know that you have the future ability to make repayments (which they evaluate based upon your income) and that you’ll decide to make those payments (which they evaluate by looking at your credit history).”
You should look at your personal credit history and see how you can improve it before you apply. Verify that everything on your credit report is accurate, make sure you’re making your payments on time, and don’t use up all the available credit you currently have. Following those three rules can help improve your score and show your lender that you’re a responsible borrower who will be able to make all of the payments on the debt you’re borrowing.
2. Get Your Customers to Pay Faster
One of the biggest problems with professional services is that your clients often pay late or they think they can negotiate every bill you send them. This can create stress on your cash flow and make your revenue numbers look like you’ve dipped in some months, even if you’ve maintained the same number of customers.
Jim Herst, CEO of the Perceptive Selling Initiative, says:
“Users of professional services tend to think that since there’s not a product involved they can delay paying you. Changing that thinking requires salesmanship! You need to have a service agreement that is precise as to how and when payment will occur and then follow up with the same language to remind them of their payment obligation.”
If you can get your customers on board with either paying you on time or with paying you early then you could make your revenue look stronger to potential lenders. You could also help your business with more cash flow to be in a better position to either find more customers or to ease the burden in getting approved for the right financing.
3. Increase Your Revenue
Most lenders will want to see what your recent revenue history looks like. You will greatly improve your chances at getting approved for a business line of credit or short term business loan if you can show your lender how your revenue has increased over the last 3-6 months. This shows that your business is growing and moving in the right direction.
However, you should take an active role in increasing your sales and not just wait to apply at the right time. Your lender will ask why your sales have increased over the past several months and you should have a marketing plan or new business initiative that you can point to as evidence that the sales are likely to continue.
Professionals will find it difficult to get many different types of loans so it’s important to seek out lenders willing to work with you. This is why a business line of credit from an alternative online provider is the best professional loan choice, regardless of your industry.
OnDeck offers a business line of credit up to $100k if you’ve been in business for 1 year, have $100k+ in annual business revenue, and have a credit score of 600 or more. Applying only takes about 10 minutes through OnDeck’s online application system and they can fund your line of credit in as quick as 1 day.