Business Loans Blog and Resources

Part one of this series People starting a new business venture are bound to get advice from others, whether they want it or not. Although some advice can be helpful, business owners may also receive advice that could ruin their business plans. How do you know the difference between good and bad business advice? We turned to real business owners and asked them about the best and worst business advice they've ever received as well as the advice they would give to future business owners. Here's what they said: Fiona Adler, Founder of Actioned.com Best Business Advice: "The best advice I've received is to imagine the business 12 months from now. This simple tip really helps me make decisions about hiring people, investing in marketing, automating processes, and generally stepping the business up to the next level. If you just think about the business today, you can probably get by without doing these things, but if you think about how you want the business to be in a year's time, it often becomes clear where you need to make changes." Worst Business Advice: "The worst advice I've received is that 'the customer is always right.' Not only are there some really crazy customers out there, but even well-intentioned customers can also sidetrack you if they're not the right type of customer for your business. Of course, you always want to provide great customer service, but you don't necessarily need to change your business to suit every customer whim. Having a clear vision for who your ideal customer is and how your business is positioned in the market is essential." Her Advice: "The advice I give business owners starting out is to think about how they actually want to be spending their time. Of course, there are always things we dislike, but they need to build their business so that they are spending the majority of their time doing things they actually like doing. For instance, someone who likes jewelry might open an online store but then find that the majority of their time is spent packaging and shipping items. You need to think about how you can use your interests and skills in the best way possible." Jessica Tappana, Owner of Aspire Counseling Best Business Advice: "The best business advice I ever received was to read Profit First. Reading and implementing Profit First has given me a lot of peace of mind in how we are handling our business finances, confidence that I can afford my own salary, a way to make financial decisions overall, and reduced the amount of time I spend worrying about the finances of my business." Worst Business Advice: "It was probably all the people who discouraged me from taking the risk of opening my own business. I wish I could have tuned out the naysayers more easily because it would have allowed me more mental space to focus on getting things done. I've found that pessimism isn't very helpful in business. Being realistic, seeing problems for what they are, and having an attitude that problems are meant to be solved is much more helpful than worrying about people who have said, 'that will never work.'" Her Advice: "Advice I'd give future business owners would be to be confident enough to know your own areas of weakness. By having a clear picture of where you need to grow, you can target those areas for growth. When I finally realized, 'Hey, I can do this business thing,' I was able to stop focusing on every little insecurity and instead acknowledge my biggest weaknesses: technology and finances. I was then able to seek out opportunities to learn more about those weaknesses and improve in those areas. Being able to feel confident overall gave me the freedom to tackle my true weaknesses, and now my business is able to grow, thrive, and help more people than I had initially dared to dream." Lauren Hawkins, Owner of Flame Point Global Solutions, LLC Best Business Advice: "Capitalize on my vulnerabilities to show my female side, my human side, my empathy, and demonstrate that I have feelings just like the people I lead. People want to see me as a mentor, a confidante, and a trustworthy leader. Business schools forget to tell you 'be human!' I am a Human Resources Leader and one of the best compliments I ever have received is 'you really put the HUMAN back in Human Resources!'" Worst Business Advice: "'Get a thicker skin!' This flies in the face of the above. When people have told me this, they have told me to act like a machine, stuff down your feelings, and put on your big boy pants. Expressing feelings opens up communication and builds relationships." Her Advice: "If you don’t ask, the answer will always be 'NO!'. When people say 'NO' to that meeting, presentation or whatever else you ask for, they are saying 'not now!'. Keep that in mind. Take tiny steps to get out of your comfort zone. If you struggle with confidence in starting your new business, remember you are 100 steps ahead of those who never even tried." Marcy Phelps, Owner of Marcy Phelps & Associates Inc. Best Business Advice: "Listen to and focus on the customer. Talk to people in the industry to understand their needs and wants, find ways to fill those needs, and make it easy for clients to work with you. Always keep updating what you know about your customers and others like them."   Worst Business Advice: "As a private investigator, I would never be taken seriously as a woman and should bring in a male partner. Never did that and never had trouble being taken seriously."   Her Advice: "You need to understand what your clients value. Don’t decide what you want to offer without determining if it’s something they value."   Ladan Davia, CEO of Beeya Best Business Advice: "The best advice I’ve ever received was to say 'yes to everything.' As an entrepreneur, especially one starting at a young age, you have to be everywhere and take advantage of every opportunity given to you. For every 100 meetings, maybe one will go well, but you still have to go to every single one. The one you don’t go to could be the one that changes the course of your business."   Worst Business Advice: "The worst advice I’ve ever received was when I was going to a networking event and someone said 'you’re not here to make friends, you’re here for business.' WRONG. Part of networking and advancing in life is off of relationships. I have gotten more partnerships and accounts by starting off as friends than when I cold call people asking them for favors. When I’m at an event, I always have the mindset of 'I’m going to try and make one new friend today.' Who knows, that friend could be your next business partner (true story)."   Her Advice: "The advice I would give my younger self or a future small business owner is that it gets worse before it gets better. I truly believe the biggest component of being a great entrepreneur is if you can withstand the roller coaster ride that is starting a business. There will be high highs and low lows but as long as you don’t get off, you will make it."   Geoff Gross, Founder and CEO of Medical Guardian Best Business Advice: "Surround yourself with great people who fit in with you and your business." Worst Business Advice: "The worst advice I've ever received was to say 'No' to as much as you can. Over the years, I've realized the more I say 'Yes,' the more opportunities and success it leads to!"   His Advice: "Constantly focus on getting better at your job. When you start a business, you are a one-person show. As your business continues to grow, it's important to also evolve within your role or the company can't grow to your standards. Business success takes a vision, desire, guidance, and practice."   Alex Tran, Owner of Schimiggy.com Best Business Advice: "Try it all and use what works best for you! Through trial and error, I've found that SEO optimization works best for me. I've created my brand by seeking out people who are looking for what I have to offer."   Worst Business Advice: "Focus on Instagram. It will bring you all the business. I try to avoid sticking to one platform because it severely limits my reach. Also, if it's a platform I do not believe in (IG can be flighty and ROI is difficult), I will not be happy or passionate with using it."   Her Advice: "Not only will you learn what works for you, you'll learn to become your own consultant and boss. It's amazing what the human mind is capable of doing when it has a goal in mind."   Christopher Earley, Owner of the Law Office of Christopher Earley Best Business Advice: "Always avoid problem clients, no matter how much you are giving up. Problem clients are just never worth it."   Worst Business Advice: "If things don't work out, you can always try something else."   His Advice: "I would advise my younger self/future business owners to lunch more often with possible referral sources."   The Bottom Line Business owners, especially new business owners, typically have a full plate. They have to figure out their finances, how they will go about getting the right business loan, how to understand their target market, where their physical business location will be, etc. The list seems endless at times. Clearly, getting advice from business owners can be hit or miss, but it's worth a try. Just keep in mind that some advice may be misleading as you seek advice for your new business venture.

If you’re looking for a new venture in your life, consider starting your own business. While being your own boss is the dream, here are a number of other reasons to start your own company:Click the link to find the best business lending company for you! 1.  Create new jobs Starting a new business creates more jobs in your community. 2.  Choose your environment style Being the boss means you can start “Pizza Fridays” and have a relaxed dress code. If that’s not your style, you can have a more formal office environment with a work uniform. It’s entirely up to you. 3.  Reduce your work commute Tired of getting stuck in traffic on your way home? Choose a location closer to home to cut down on your daily commute, so you can spend more time doing the things you want to do. 4.  Change the industry Over the years you have probably thought of numerous ideas to improve the industry. Starting your own business is a great platform to bring those ideas to life. Create a solution to a common problem or design something that no one has ever seen before. This involves some risk as the industry might not be ready for change, so come prepared to defend your proposal. 5.  Socialize with new people Networking is part of the life of any start-up business owner. Whether you attend networking conferences near you or decide to chat up the owner of another local business, you’ll be doing a lot of talking.  Networking will help you build your client base and get you referrals. 6.  Help others Ask yourself, is there a service you could provide to help those in your community? Maybe you know a more productive way to clear snow off the road. Or perhaps you know more about buying a house than anyone you know. Using your knowledge to help others is an excellent reason to start a business. The services and products you provide will be beneficial to those around you. And at the end of the day, you’ll be glad you could help someone in need. 7.  Build your dream team One of the best perks of owning your own business is hiring who works for you. You might not want your uncle running your accounting department, but you do know someone else perfect for the job. Choose people you’ll enjoy working with and who compliment your personality. Knowing your strengths and weaknesses will help you hire people who will continue to challenge and innovate your business. 8.  Expand your skill set Running a business requires more than just providing a service or selling a product. You’ll be required to develop new skills and see where your strengths lie. Maybe you want to try attracting new customers by designing an ad for a local magazine. Or perhaps you want to be involved in the hiring process. Whatever your reason, adding some new skills to your repertoire will help you to understand all aspects of your business. 9.  Be an expert It always feels great when someone comes to you for advice. When you first start a company, you might not feel like an expert, but after years of experience, you will know all the ins and outs. If there is a question, you most likely will know the answer or know who to ask for the answer. Learning through first-hand experience will make you a business guru. 10.  Do what makes you happy Working toward something you care about will make work feel less like work. Not only will you love what you do but you’ll work harder to achieve your goals. You will inspire others, as they watch you struggle, take risks, triumph, and finally achieve your dream. Whether or not your business takes off and changes the world, you’ll feel proud that you went for something you are passionate about.

If you've heard of PayPal Working Capital, you're probably wondering if it might be a good financing option for your small business. The program, which began just two years ago, offers PayPal merchants (as in, merchants who use PayPal for their transactions) the ability to borrow up to 8% of their annual revenue and then automatically deducts a set percentage of incoming receipts until the loan is paid off. In its short time, Working Capital has already made $1 billion in loans to small businesses, as the company reported last week. And this isn't a huge surprise. PayPal Working Capital seems like a win-win for the company and merchants alike. The risk is low for PayPal-since they can see all of the historical cash flows of their merchants, they know exactly how healthy each one is. For merchants, the program is convenient and less expensive than many other financing options out there. The application process, for example, takes just minutes with no credit checks and no extra fees. Also, because payments are automatic and based on a percentage of revenue, merchants never have to worry about forgetting a payment or a payment causing them to be over-drafted. So is PayPal Working Capital the perfect lending option for a small business? As with so many things in lending, it depends. There are certain aspects of the program that make it not ideal for every small business. It pays to know about Working Capital's limitations before you go too far down the road of considering it for your small business. If any of these five drawbacks apply to you, you might want to pass on PayPal Working Capital: 1. You must have done plenty of business on PayPal Yes, the PayPal Working Capital application is fast. At an estimated five minutes and without the hassle and worry of credit checks, it's bound to get small business owners' attention. But there is a reason for that fast application process. When extending financing to a small business, PayPal doesn't go off of your credit score or many of the other factors that banks and other creditors use, as stated earlier. Instead, they go off of the money that flows through your PayPal account. For this information to be reliable, however, they need a significant amount of it. For this reason, if you want to qualify for the program, you must meet these requirements: "[Y]our business must have a PayPal business or premier account for at least 3 months and process between $20,000 and $10 million within those 3 months or within any time period less than or equal to 12 months." With requirements like these, your small business might not qualify. For instance, if you don't conduct business on PayPal, the program isn't for you. If you do business on PayPal, but it's only in small volumes, it's also not for you. But those aren't the only things that could disqualify you... 2. You have to pass PayPal's "mystery" requirements While the requirements above are clearly stated, they also seem to have some requirements that aren't so publicly stated. The complaint below, left on eBay community forum by an unhappy merchant, tells of this problem: "We do over $500,000 a year in sales and we were turned down after getting a msg from paypal telling us to apply. We spoke to paypal and of course they came up with various reasons such as maybe our business is seasonal or not enough cash flow... Both are wrong... After pushing submit we were immediately turned down within three seconds, so obviously none of our info was even evaluated... Getting the invite letter means nothing." The message of the story is, even if you get an email inviting you to participate in the PayPal Working Capital program, don't assume that you will qualify. While there are mostly positive reviews about the program, a significant number of complaints about the program targeted this very issue. When merchants are turned down, even when they meet the revenue and time on PayPal requirements, they often aren't privy to the reasons why. 3. The loan amounts might be too small for your needs Sometimes your business just needs a small infusion of cash to expand its capabilities or invest in better resources. For these situations, PayPal's program may be exactly what you need, since it allows merchants to borrow up to 8% of their revenue that goes through PayPal. But what about when you need a much larger small business loan? In this case, most small business owners are going to find that PayPal's loans fall short. Said one anonymous reviewer on SuperMoney.com: "Many of my small business owners friends have loved getting smaller loans through them, but I needed something larger at the time. They only give out loans up to a certain amount, and that number is smaller than ordinary lenders. From what I've heard, they're fast and easy to use, but they just didn't work out for my particular needs." 4. The APR is higher than some small business loans from your typical bank PayPal lets you choose what percentage of your revenue will be automatically deducted to pay off your loan, anywhere from 10% to 30%. As a result, the APR on a Working Capital loan usually ends up being about 15% to 30%. This is better than what you'll find on comparable lenders like Kabbage or On Deck Capital, which tend to offer APR around 40% to 80%. However, if you qualify, you're likely to find lower APR on a small business loan from your local bank or credit union. For this reason, it's highly recommended that you seek financing with a traditional lender before turning to online lenders, including PayPal Working Capital. 5. Once you get a PayPal Working Capital loan, you're stuck with it As you've probably gathered by now, PayPal's Working Capital program was designed to work within the confines of their service. If a merchant were to take out a loan through the program, however, and then stop using PayPal, the company would have no way to collect loan payments from the merchant. That's why, as part of the terms and conditions of the program, merchants agree to continue using PayPal until their loan is paid off in full. According to the company, if a merchant leaves PayPal before their loan is paid off, they must pay the full remaining balance immediately. If a merchant defaults on the loan, PayPal can seize funds from other bank or credit accounts connected to the merchant's PayPal account. In short, don't take out a loan with PayPal unless you plan to stick with them for your business' payment processing needs. Is PayPal Working Capital the right lender for you? If you process a high volume of your revenue through PayPal, you can live with the higher APR, you don't need a very large loan, and you're planning on using PayPal for a while, then the answer is probably yes. Barring any problems from those "mystery" requirements mentioned above. Seriously, at a time when small business loan requirements from traditional banks are getting tighter, if you fit the bill, PayPal Working Capital might be just what you need to keep your small business growing. To see how real customers rated PayPal Working Capital, visit our PayPal reviews page today!

When dealing with large banks, getting the funds your business needs can be a long and arduous process. Over the last several years, many alternative online lending companies have entered the scene to make the process of getting a loan easier and faster. Two of the largest alternative lenders, Funding Circle and Lending Club, offer similar low interest rates and high loan amounts. When comparing companies, the question becomes: which one is right for you and your business? We put the companies side by side so you can see for yourself. Funding Circle Funding circle offers an alternative to to traditional banks for business loans. Funding Circle features peer to peer loans up to $500,000 with repayment terms from 1 to 5 years. These of loans are good for financially stable companies or franchises that want to expand. To date, Funding Circle has provided over $2 billion in loans to help small businesses. How To Qualify To qualify with Funding Circle, borrowers must have a minimum credit score of 620, the business must have been in operation for at least two years, and the revenue must be at least $150,000 per year. Additionally, a borrower must not have filed for bankruptcy within the last 7 years and must provide a personal guarantee. Application Process The online application only takes about 10 minutes. On the same day that you submit the application, you will hear back from a loan specialist who will ask you to submit documents for verification of the application. Once you are approved (usually within 72 hours), you will receive the funding in 10 to 14 days. What It Costs Funding Circle is transparent about its interest rate information. According to the company's website, interest rates range from 5.49% to 18.29%. If a business decided to take out a $100,000 loan over a 12 month term, the borrower would pay just over $0.18 on the dollar. Funding Circle also charges a one-time origination fee from 0.99% to 4.99%. However, there are no prepayment penalties which can help borrowers save on interest should they choose to repay the loan early. Summary Must have strong credit and revenue Loans up to $500,000 Quick and easy online application Check out our Full Review of Funding Circle. Lending Club Lending Club is a peer to peer lending company that offers business loans from $15,000 to $300,000 and lines of credit from $5,000 to $300,000. Loans from Lending Club are typically for well established businesses with good finances who need quick capital or want to expand. Since its launch in 2007, Lending Club has issued over $16 million in funds. How To Qualify In order to qualify for a loan from Lending Club, the business must have been in operation for at least two years and have at least $75,000 in annual sales. Additionally, the borrower must own at least 20% of the company, have no recent bankruptcies or liens, and have a personal credit score of at least 600. Application Process The online application can be submitted in 5 to 10 minutes for pre-qualification. After submission, you will receive a quote for a loan. Once you are approved for the loan, you will be required to submit documentation for verification. The funds may be delivered to you in as little as two days or as many as 14. What It Costs Lending Club charges interest rates ranging from 5.9% to 21.6%. For a $100,000 loan over a 12-month term, the APR amounts to $0.32 on the dollar. These rates are slightly below the industry average. Like Funding Circle, Lending Club charges a one-time origination fee ranging anywhere from 0.99% to 5.99%. This origination fee is deducted from the loan principal. Summary Must have fair to strong personal credit Loans up to $300,000 Fast online application and approval time Check out our Full Review of Lending Club. The Bottom Line These two alternative lending companies are quite similar on many points. Both lenders offer terms of 1 to 5 years, and they both charge similar origination fees. However, Funding Circle has the advantage with lower interest rates and a higher maximum loan amount. At the end of the day, your approval, rates, and terms will largely depend on the decision of the underwriting team of either company. It may be a good decision to get quotes from several different companies. Check out our Top Rated Business Loans Companies.

The small business lending landscape is changing. According to a 2014 report from Ernst & Young, "nearly one in five [small businesses] reports having changed its primary bank in the past year." The reason: access to capital; an increasing number of small business owners feel they can no longer rely on traditional lending channels to provide needed funds-regardless of a long-standing history with the bank or other provider. And the feeling is mutual; not only are small business owners departing from traditional lending routes, but banks are also losing interest in lending to small businesses, in favor of larger corporations with greater borrowing potential. Not to say the demand for small business loans isn't there; it's the supply of traditional lenders that's running out. For example, in 2013, the Small Business Administration only approved 13 percent of applicants seeking a small business loan. The lack of response from traditional lenders has opened the door for a number of alternative lenders to pick up the slack. This group includes venture capitalist firms, peer-to-peer lenders, direct lenders, and crowdfunding. Companies like CAN Capital, OnDeck, and Lending Club are also meeting the demand of small business borrowers by providing more flexible terms, and faster access to capital. To be clear, not all banks offer unreasonable terms meant to deter small businesses; in fact, banks tend to offer much lower interest rates than alternative lenders. But interest rates aren't everything. In fact, more and more small businesses are willing to absorb higher interest rates in exchange for these other perks offered by alternative lenders: 1. Alternative Lenders Are Faster than Banks One area in which alternative lenders are literally outpacing traditional banks is in how fast they can transfer funds to their customers. The top business lenders have streamlined every step of the process by shifting their platforms online. Now, rather than filling out stacks of complicated forms and paperwork, customers can answer a series of simple questions about themselves, their business, and the size of the desired loan; instead of waiting months just to see if they've been approved for a loan, borrowers can know within hours, and receive funds within days-not months. Application According to an article from NerdWallet, the process of applying for a bank loan for your business can be both lengthy and complicated. "Expect to spend 25 hours or more just taking care of the necessary paperwork," the article warns. Borrowing through an alternative lender, meanwhile, can take as little as 10 minutes. Approval and Disbursement NerdWallet also estimates that borrowers will have to wait anywhere from two to six months for a bank to both approve the loan and disburse the funds. According customer data from one alternative lender, some customers achieved pre-qualification status within a hour, and customers on average will receive funding in as little as 11 days. 2. Alternative Lenders Have Lower Requirements than Banks One of the main reasons why alternative lenders can get funds to borrowers faster is because of their less stringent applicant requirements. Since the 2008 recession, banks have upped their lending restrictions so as to only approve what they consider "low-risk" borrowers. This status applies to business owners with excellent credit, whose businesses are well established and not struggling financially. By this standard, many small businesses are considered high-risk, and will have no success obtaining a loan though traditional means. Alternative lenders have remedied this problem by offering lower requirements and more flexible terms, the tradeoff being they charge higher interest rates than traditional banks. Credit Score To receive a small business loan from a bank, you need excellent personal credit. Maintaining good credit indicates to lenders that you are a reliable borrower, that you'll pay off your loan within the terms set by the lender. Business Finance says a credit score of 800 will get you a loan practically everywhere; 700 is considered ideal by most banks; and most banks will not approve an application for anyone with a credit score less than 640. On the other hand, alternative business lenders provide options to borrowers with personal credit scores as low as 550-some will even provide working capital loans to borrowers with a score of 500. Time in Business It's no secret to those in the small business realm that a significant portion of small businesses will fail within the first few years. The SBA reports that half of businesses will fail in their first year. One of the main contributing factors to this statistic is the fact that business owners are poor money managers; they can't pay their bills, or they invest their capital in areas that don't produce scalable results. Not surprisingly, traditional banks see businesses that have been around for at least two years as good investments, and younger businesses as statistically bad investments. Not the case with alternative lenders. The top business loan providers will offer options to businesses at nearly every stage of their development. Many of these companies provide terms to businesses as young as four months! Business Revenue Another important metric banks look at before approving a loan application is how much revenue your business brings in. Simply put, the more money your business makes, the more you can borrow, and the more money the bank will be able to collect in interest. A report from Inc.com claims that in order to qualify for a typical bank loan for your small business, you'll need to be making at least $250,000 in annual revenue-not exactly an obtainable figure for many new businesses. Alternative lenders, meanwhile, will accept applicants with limited resources; and while no company can offer a term loan to a business with anything less than $100,000 in annual revenue, they do provide merchant cash advances to companies that make at least $55,000. 3. Alternative Lenders Require Less (or no) Collateral Speaking of lower lending requirements, a big reason why alternative lenders are becoming a more attractive option is that few of them require collateral. Simply put, collateral is an asset the borrower promises to give the lender in the event that the borrower cannot pay back the loan. There are two types of collateral a bank may require you to borrow against before you can qualify for a loan: personal collateral refers to an asset such as a home or car that can be transferred to the bank and sold; business collateral refers to assets directly associated with the business. Nearly every bank requires some type of collateral before approving a loan. For example, Wells Fargo and Bank of America both require business collateral, while KeyBank requires both business and personal collateral. Meanwhile, top alternative lenders require zero collateral. While dedicated small business lenders are a good alternative to traditional banks, not all alternative lenders are created equal. Some lenders, while offering flexible terms, will also charge hefty origination or prepayment fees. You'll also need to pay close attention to the lenders cents on the dollar, as well as your overall likelihood of getting approved. For a full list of the top small business lenders in the industry, click here.

So you've already come up with a great business idea? You're probably working out the kinks of day-to-day operations, but you've probably been wondering what it takes to get a loan. When you finish this article, you'll know the difference between an unsecured loan and a secured loan and which to go with. What Is an Unsecured Business Loan? An unsecured business loan is based solely on an individual's financial integrity, business record, and character within the community. Based on these aspects, a lender may decide to provide a loan to an individual without requiring any collateral if they are in good standing. In order to obtain an unsecured loan, a business owner must have very good records and a great reputation within the business world. Because of this, unsecured business loans are often called "signature loans". With essentially a signature and good credit, you can attain an unsecured business loan. Because an unsecured loan does not require any collateral, there are much higher interest rates associated with them. Lenders do this to provide some form of protection for themselves in case the loan defaults. With higher interest rates, the lender gets some sort of profit off of the loan that can make up for collateral as a cushion. Interest rates vary as the market fluctuates, but as a business owner, you can plan on a substantially higher rate than a secured loan would have. Unsecured loans are a lot like credit cards in this way-credit cards do not require any collateral when you sign up for them. The lender assumes, based on your current and past credit, that you will be able to pay the loans back. The most obvious benefit of getting an unsecured business loan is the fact that you do not have to provide collateral. Your business assets are protected from being seized in the circumstance of a default on the loan. This is especially beneficial if you do not have a lot of business collateral to pledge. For example, your business may not be based on manufacturing physical products that you could provide as collateral, as well as the equipment to produce these goods and you would be forced to use personal collateral instead of just business collateral. Even though there are benefits for an unsecured loan, there are understandably some disadvantages as well. One of those disadvantages is that an unsecured loan is more difficult to obtain than a secured loan if you have poor credit. When a lender agrees to give you an unsecured loan, they are taking a huge risk on you. Therefore, their qualification terms are going to be more difficult to meet. Another large disadvantage, as before mentioned, is the interest rates associated with unsecured loans. When all is said and done, you will end up spending considerably more on an unsecured loan over the lifespan of the loan than on a secured loan. What Is a Secured Business Loan? A secured loan is a loan in which collateral is provided in order to secure the loan. The purpose behind this is to provide protection for the lender in case the loan defaults. In the case of a default, the lender can appropriate the collateral pledged. As always, there are different advantages and disadvantages to different kinds of loans. One of the advantages of a secured loan is that because collateral is pledged, interest rates on the loan are lower. The risk of lending to you is lower when you provide collateral because the lender can obtain the worth of what they lent to you through that collateral, either by keeping it or selling it. The lower interest rate means that you will pay less over the lifespan of the loan, and if you pay it off in a timely manner, you won't have to worry about surrendering your assets. Another advantage of a secured loan is that you will be able to get a loan of greater worth versus if it was unsecured. Lenders are willing to put more money towards secured loans because they are less risky. This is especially true if you have good credit as well as collateral. The combination of the two is a great reassurance to the creditor that you are a good investment who will pay back the loan. Good credit in secured loans is definitely in your favor, but it is not as crucial as in unsecured loans. Because you pledge collateral, the creditor will care less about your credit. This is especially beneficial to newer companies and business owners who haven't had the time to build up the business credit that is important in the eyes of creditors when securing business loans. One disadvantage of a secured business is, understandably, that you as a business owner have to provide collateral. This can be tricky in businesses that do not produce physical goods and do not have the equipment that makes those goods-both of which are often used as collateral. In business more oriented in financial transactions, the collateral will have to be pledged portions of profit, financial assets, property, and sometimes even personal collateral. For a new business that is not extremely stable, promising collateral can be a little bit intimidating. Another disadvantage of secured loans is that they take longer to obtain than an unsecured loan. Secured loans take more paperwork because of the assets and collateral involved in the loan agreement. This can be a major problem for businesses who need cash fast.

Microloans were established and are funded by the U.S. Small Business Administration. The idea behind microloans is to provide a quick start up for smaller companies or for lower income individuals. The limit for a microloan is $50,000, but most loans are usually under $20,000. The SBA provides these funds to lenders who then distribute the funds to qualifying individuals. Each individual lenders has their own requirements for qualification; however, there are some commonalities between all of them. Some of these commonalities include credit, personal guarantee, collateral, and sometimes special training or classes. Individuals must be 21 years old or older in order to qualify. In most cases, the individual taking out the loan must be the sole owner of the business that will be funded by the loan. Microloans can be used for a variety of purposes which include things like machinery, furniture, working capital, etc.-whatever it takes to start up a small business. However, microloans cannot be used towards purchasing real estate or towards paying off existing debt. In order to secure a microloan, individuals have to go through an application process with a SBA approved lender. On the SBA website, there are lists and links to loan providers. The application process is different for each lender. One example of such lender is Kabbage. Kabbage provides microloans from $500 to $100,000. The SBA itself also provides microloans to small business owners. They, of course, have their own terms and conditions, including what the microloans can and cannot be used for. The repayment process is different for each microloan because the loans are provided by the different intermediary lenders. Usually, the repayments include processes similar to normal loans. Microloans can have interest rates, just like traditional loans which will have to be paid off. The time frame of paying off microloans must be within six years of signing. Crowdfunding is one major alternative to microloans if you can't qualify for one or don't feel like it is the right fit for your business. Crowdfunding is basically mass fund-raising for your business. This can be achieved through networking or other means. Go Fund Me is a rising resource for crowdfunding. It is a way to use social media as a platform for fund raising. Users can ask their Facebook and other social media friends to donate to their business causes. For more answers to your business loans questions, check out our Business Loans Page!

A Merchant Cash Advance, or MCA, is the agreement between a merchant and a lender to allow for smaller payments on an amount borrowed, rather than larger payments over a longer period of time. In this agreement, merchants essentially "sell" a percentage of their debit and credit card earnings to the lender. The lender is not a bank. Because of this, they are not subjected to laws surrounding loans because the MCA is not technically a loan. Lenders can charge a much higher interest rate than banks because of this. The biggest benefit of a MCA for a merchant is that the payments are smaller in a shorter period of time rather than having to pay a bigger chunk of money monthly or quarterly. For lots, it is easier to make smaller payments, even though those payments are usually every business day. This also shortens up the time of paying back the debt, usually to under two years. MCA's are also easier to get. MCA's do not require as good of credit scores as traditional banks do. The biggest drawback of MCA's is, of course, the interest rates. As previously mentioned, MCA's are not governed like traditional bank loans are, which means lenders can charge much more than banks. Merchants have to be careful about which lenders they borrow from because of this. A term loan is also a set amount loaned to a borrower, however, banks provide these loans. Term loans are paid back in smaller amounts. Unlike MCA's, however, these payments are not daily. Also unlike MCA's, the payments are a fixed amount on a fixed schedule. MCA's are different payments every day based on the income that merchants get on a daily basis. Term loans are usually fixed on a time period under five years. Term loans are not based as much on financial assets like MCA's. Instead, the payments are often attained through the income produced by products that a business or merchant uses like machinery. The biggest benefit of having a term loan is, like MCA's, the loan is paid back in smaller amounts in a shorter amount of time. Contrariwise to this benefit, the biggest drawback to term loans is that a lot of term loans have a "floating" interest rate. This means that the interest rate fluctuates according to the market. This can be risky, especially to small business owners. However, there are some term loans that have fixed interest rates, but those can be a bit trickier to procure. For more answers to your business loans questions, check out our Business Loans Page!

A lien is a legal filing giving a lender the right to your property or other assets if you fail to repay a loan on time or in full — or both.  Essentially, a lien is a protection for the lender.  Think about it this way: It is risky to lend money without knowing if you’ll get it back. When someone borrows money from a lender, the lender needs some kind of insurance that the chance they take on a business won’t result in their own financial demise.  If the lender has secured the loan with a lien and you don’t make your monthly payments, the lender can sell the assets you’ve put up as collateral to cover their loss. Another example of default would be borrowing more than agreed upon in the contract. What are some common lien types?  General lien Liens can apply to a mortgage, a personal loan, or any other loan type. Besides promising assets to the lender, a lien also prevents the borrower from selling or transferring the pledged assets without first paying off his or her loan. For example, if someone pledges their house as collateral, they cannot sell their house without first paying off their loan. UCC lien The contract that legalizes a lien is called a "lien letter" or a "letter of set-off.” This letter, signed by both the lender and the borrower, signifies that the borrower gives up their rights to their assets if needed.  In a business loan setting, lenders file Uniform Commercial Code (UCC) liens, also referred to as UCC filings, with their respective state secretaries of state when a borrower takes out a loan.  Collateral lien A lien can be placed on specific items of collateral.  A personal lien can be placed on the following:  Property Equipment Vehicles Jewelry Furniture Other personal assets  A business lien can be placed on the following:  Real estate Equipment Vehicles Accounts receivable Business income or cash Patents, computer code, or other proprietary non-physical assets  Blanket lien While specific collateral liens place limitations on what a lender can take, a blanket lien gives the lender authority to seize and sell any and all business assets if you stop making payments on your loan. Blanket liens give the lender more power than specific collateral liens.  For example, if I pledge my home equity, that is what the creditor takes if I default. However, if a "blanket" lien is agreed upon, this means that the creditor can take possession of business assets in general. Blanket liens can become complicated legally if a business owner defaults because of the court process involved in determining what business assets the creditor can and cannot seize. Tax lien Another type of lien relevant to small business loans is a tax lien. The federal government via the Internal Revenue Service (IRS) or a state tax agency can issue a tax lien against a business or individual for unpaid taxes, including income tax or sales tax. How can I get rid of a lien?  To remove a lien, you have two options:  Pay off your debt File for bankruptcy  A business can have multiple UCC liens filed against them at the same time, but the lender who files the first lien has first claim to a business’s assets if they default on their loan. Therefore, some lenders choose not to loan to businesses with existing UCC liens. What if you have an existing UCC lien but need additional financing before you can pay off the existing lien?  You may be able to get the existing lienholder to verify you’re making good on your debt if you’re making regular payments toward the full amount. This can help your case if you need to take out additional funding with a different lender.  Can I avoid a business lien?  UCC liens are required by most lenders as a routine part of small business financing so you’ll have a hard time avoiding a lien if you’re taking out a business loan. But as long as you repay your debts and don’t default on your loan, a UCC lien won’t impact your credit score.  However, tax liens can lower your credit score and impact your chances of future loan approval, so prioritize being up to date with your tax-related documentation and payments each year.  Sometimes, instead of (or in addition to) a lien, a lender will have you sign a personal guarantee, pledging your personal assets to repay a loan if your business entity can’t.  But the most important thing you can do is to understand the personal and business assets you’re putting at risk (via a lien or a personal guarantee) before signing any loan agreement, and only pledge the assets you can be prepared to lose. Ask your lender if they require a personal guarantee or collateral and if they file a lien on borrowers’ assets.  Then make a plan to pay back the loan on time and in full.  Ready to Finance Your Business? Learn more about the ins and outs of small business loans and browse the top-rated companies and their loan products. Learn More

The five C's of credit include: Capital, Collateral, Capacity, Character, and Conditions. Capital Capital, in general terms, is one's wealth. This wealth is determined by an accumulation of one's assets, and these assets are things like investments, homes, property, and finances. The amount of capital that a potential borrower has is important to lenders because capital has a lot to do with collateral: the more capital a person has, the more they will be able to provide for collateral. Capital is different than net worth-net worth is a person's capital minus their debts. For example: If I make $200,000 in a year and have about $50,000 locked up in investments with another $300,000 worth of property, my capital is about $550,000. Collateral Collateral is a pledge to a lender that if a borrower cannot pay their debts, the lender can take away pledged assets. Collateral protects the lender in the case a loan defaults. With collateral, they will be able to seize most, if not all, of the amount (either in financial assets or physical assets) that they lent to the borrower. As mentioned before, collateral has a lot to do with capital. Hypothetically, all of a person's capital could be used as collateral in securing a loan, though that is in most cases excessive and unnecessary. Capacity Capacity is a person's capability of paying a loan back. Capacity is calculated with a formula referred to as the debt income ratio. The ratio is: monthly debt payments divided by gross monthly income. However, monthly income does not just include salary-it is the income accumulated from financial investments as well. For example: if I make about $16,000 a month with another $1,000 monthly from investments, my total monthly income is $17,000. If I have $5,000 dollars of debt a month, my capacity (according to the debt income ratio) 29%. The lower the percentage, the better the chance of securing a loan. Character Character is the reputation of a borrower. Character can be calculated by looking at the payment history of a borrower. If the borrower is timely on all their debt payments, a lender is more likely to give them another loan. Character is also based on word of mouth-the reputation of a borrower in his or her community is also important to a lender. Conditions Conditions are the most ambiguous part of the five C's because they range greatly depending on the loan situation. Conditions can include borrowers' investment plans, business plans, terms that the lenders expects the borrower to follow, etc. Conditions tend to be more contractual than anything else.   For more answers to your business loans questions, check out our Business Loans Page! (Sources: www.businessdictionary.com, www.financesformulas.net, www.bankrate.com)