Published By Faith Stewart at August 25th, 2020
Everyone wants the best of the best, and it should be no different when it comes to business loans. However, you may need to change your thinking about what actually makes the best business loans the best.
For example, do great terms make a loan one of the best? Could it be low rates? These things are awesome. However, the best business loans are the loans you can get. Of course, you can look at the cream of the crop. Still, if you cannot access them, they will not do you any good. You need to know what the best business loans are that you can access. Furthermore, you need to know how to gain access to those that are even better.
Fortunately, U.S. News helps us out by outlining the best business loans in various categories. When compiling their list, they consider such factors as product availability, terms, and service ratings.
BlueVine takes the prize in this category. The minimum loan amount available from them is $5,000 and the maximum is $100,000. Annual revenue must be $120,000 or more and the borrower must be in business for at least 6 months. Personal credit score has to be at least 600. It is also important to know that BlueVine does not offer a line of credit in all states.
They report to Experian. They are one of the few invoice factoring companies that will report to any business credit bureau. This helps build business credit and in turn, fundability.
The winner in this category is Funding Circle. Honestly, if you’re looking for a low APR, then this is your go-to. They have fixed rate term loans and require a credit score of 620 or above. There is no minimum revenue requirement, but they do require you to be in business for at least 2 years.
OnDeck offers lines of credit and term loans with fixed interest rates. You can get up to $500,000 with a term loan. The minimum FICO they require is 600. In addition, you must have $100,000 minimum annual revenue and be in business for at least one year.
With a large selection of financing products that includes term loans, Rapid Finance can be a great option for larger amounts. In addition to term loans, they offer bridge loans, healthcare cash advances, and lines of credit. Terms are from three to six months. Amounts range from $5,000 to $1,000,000. Unfortunately, they do not make their minimum credit score readily available on their website. However, you can use their quote tool to get an idea of what you qualify for.
StreetShares offers invoice financing, term loans, and lines of credit. The number of years in business requirement is one. They require less minimum annual revenue than the others at only $25,000. The minimum credit score is 600.
The key with each of these loans is, your ability to get them is dependent on the fundability of your business.
Fundability is, in short, the ability to get funding. It is the complete picture of your business and personal financing and your ability to repay debt. If you think of fundability as a puzzle, there are hundreds of pieces that come together to complete it. The problem is, a lot of business owners cannot see the complete picture because they are unaware of what additional pieces may be floating around out there.
Also, unlike a puzzle, the pieces are not all the same size. Some are very large, while others are smaller. If your large pieces are in great shape, the smaller ones may not matter so much. If, however, your large pieces, like credit history, are not so great, the smaller pieces can make a much bigger difference in your ability to get the best business loans.
What are these puzzle pieces and how can you make sure they are in the best possible shape? Hold on to your hats. Some of these may surprise you.
Incorporating your business as an LLC, S-corp, or corporation is necessary to fundability. It lends credence to your business as one that is legitimate. It also offers some protection from liability.
You have to open a separate, dedicated business bank account. There are a few reasons for this. First, it will help you keep track of business finances. Also, it will help you keep them separate from personal finances for tax purposes.
Additionally, there are several types of funding you cannot get without a business bank account. Many lenders and credit cards want to see one with a minimum average balance. Also, you cannot get a merchant account without a business account at a bank. As a result, you cannot take credit card payments. Studies show consumers tend to spend more when they can pay by credit card.
For a business to be legitimate and fundable it has to have all of the necessary licenses it needs to run. If it doesn’t, warning signals are going to go off all over the place. Do the research you need to do to ensure you have all of the licenses necessary to legitimately run your business at the federal, state, and local levels.
Your business website, or lack thereof, can affect your ability to get funding. In fact, these days, if you don’t have an online presence you may as well not even exist. Still, a poorly put together website can be even worse. Truly, it is the first impression you make on most. If it appears to be unprofessional, it will not look good to consumers or potential lenders.
Spend the time and money necessary to ensure your website is professionally designed and works well. Pay for hosting too. Don’t use a free hosting service. Similarly, your business needs a dedicated business email address. Make sure it has the same URL as your Website. Don’t use a free service such as Yahoo or Gmail.
Much like your consumer credit report does for the individual, business credit reports detail the credit history of your business. Basically, they are a tool to help lenders determine how credit worthy your business is.
Where do business credit reports come from? There are a lot of different places, but the main ones are Dun & Bradstreet, Experian, Equifax, and FICO SBSS. You have no way of knowing which one your lender will choose. So, you need to make sure all of these reports are up to date and accurate.
In addition to the business credit reporting agencies that directly calculate and issue credit reports, there are other business data agencies that affect those reports indirectly. Two examples of this are LexisNexis and The Small Business Finance Exchange. These two agencies gather data from a variety of sources, including public records. This means they could even have access to information relating to automobile accidents and liens. While you may not be able to access or change the data these agencies have on your business, you can ensure that any new information they receive is positive. Enough positive information can help counteract any negative information from the past.
In addition to the EIN, there are identifying numbers that go along with your business credit reports. You need to be aware that these numbers exist. Some of them are assigned by the agency, like the Experian BIN. One, however, you have to apply for. It is absolutely necessary that you do.
Dun & Bradstreet is the largest and most commonly used business credit reporting agency. Every credit file in their database has a D-U-N-S number. To get a D-U-N-S number, you have to apply for one through the D&B website.
Your credit history is the crux of your credit score, which is a huge factor in the fundability of your business.
It includes a number of things like:
The more accounts you have reporting on-time payments, the stronger your credit score will be.
On the surface, it seems obvious that all of your business information should be the same across the board everywhere you use it. However, when you start changing things up like adding a business phone number and address or incorporating, you may find that some things slip through the cracks.
This is a problem because a ton of loan applications are turned down each year due to fraud concerns simply because things do not match up. Maybe your business licenses have your personal address but now you have a business address. You have to change it. Perhaps some of your credit accounts have a slightly different name or a different phone number listed than what is on your loan application. Do your insurances all have the correct information?
The key to this piece of the business fundability puzzle is to monitor your reports frequently.
First, there is the obvious. Both your personal and business tax returns need to be in order. Not only that, but you need to be paying your taxes, both business and personal.
It is best to have an accounting professional prepare regular financial statements for your business. Having an accountant’s name on financial statements lends credence to the legitimacy of your business. If you can’t afford this monthly or quarterly, at least have professional statements prepared annually. Then, they are ready whenever you need to apply for a loan.
Often tax returns for the previous three years will suffice. Get a tax professional to prepare them. This is the bare minimum you will need. Other information lenders may ask for include check stubs and bank statements, among other things.
There are several other agencies that hold information related to your personal finances that you need to know about. Everyone knows about FICO. Your personal FICO score needs to be as strong as possible. It really can affect business fundability and almost all traditional lenders will look at personal credit in addition to business credit.
In addition to FICO reporting personal credit, you have ChexSystems. In the simplest terms, this keeps up with bad check activity and makes a difference when it comes to your bank score. If you have too many bad checks, you will not be able to open a bank account. That will cause serious fundability issues.
For this point, everything comes into play. Have you ever been convicted of a crime? Do you have a bankruptcy or short sell on your record? How about liens or UCC filings? All of this can and will play into the fundability of your business.
Your personal credit score from Experian, Equifax, and Transunion all make a difference. You have to have your personal credit in order because it will definitely affect the fundability of your business. If it isn’t great right now, get to work on it. The number one way to get a strong personal credit score or improve a weak one is to make payments consistently on time.
Also, make sure you monitor your personal credit regularly to ensure mistakes are corrected and that there are no fraudulent accounts being reported.
Often this part isn’t even considered by those looking for the best business loans. For example, consider the timing of your application. Is your business currently fundable? If not, do some work first to increase fundability.
Then, are your business name, business address, and ownership status all verifiable. Lenders will check into it. Also, make sure you choose the right lending product for your business and your needs. Do you need a traditional loan or a line of credit? Would a working capital loan or expansion loan work best for your needs? Choosing the right product to apply for can make all the difference.
How do you get the best business loans? You need to know how to find the best business loans for your specific business needs. Make sure your fundability is as strong as possible. Pay bills on time, work on building business credit, and make sure to dot all your i’s and cross all your t’s. Do these things, and most all business loans will be yours for the taking.