Published By Janet Gershen-Siegel at December 13th, 2018
There are several online money lenders but only some of them will provide a loan if your business has low average monthly sales. Qualifications including annual revenue and time in business requirements can vary. Personal credit score requirements can as well. Here are the details.
We researched all of these lenders and asked about their programs, rates, terms, and features.
We gave them all every opportunity to add to and enhance our research. Rates can rise and fall; this is normal when it comes to financing.
Only QuarterSpot confirmed our research. We suggest you investigate every online lender which interests you to confirm our numbers before requesting funding.
Balboa Capital loans up to $250,000. Get 3 – 24 month terms. No collateral needed. Cash provided in days.
There is a time in business requirement of at least one year. Another requirement is $300,000 or more in annual revenue. Balboa Capital asks for your personal credit score.
Balboa Capital also provides business cash advances. And they will advance $5,000 to $250,000. Get 3 – 18 month terms.
No collateral needed. There is a time in business requirement of at least one year. Another requirement is $10,000 or more in monthly credit card and debit card deposits.
One advantage is the size of their business cash advances and how you don’t need collateral to get such an advance. A very big disadvantage is that their fees are not listed on their website. Decide whether this apparent lack of transparency is an issue for you.
Credibly is an emerging Fintech platform. Credibly can provide $5,000 to up to $250,000 in small business funding; this is for working capital or for small business expansion.
You must in business for at least 6 months. You must have at least $15,000 in monthly revenue. Credibly will want to read and review your company’s most recent 3 months’ worth of bank statements.
There is a 2.5% origination fee. Rates start at 9.99% and go up to 30.00%. Funding is within 48 hours.
Credibly will pull your personal credit and hence his will impact your personal credit score. Credibly also wants a personal guarantee. They also want you to provide collateral for funding. Credibly is going to place a lien on your business if you cannot.
Advantages include a short time in business requirement. Disadvantage/wild card is that the company is fairly new (since 2010). Plus Credibly is in Fintech, an umbrella term which includes blockchain and crypto currencies.
Hence their model could change radically in short order as this technology continues to improve.
Quarter Spot offers short term loans. $5,000 – $150,000 is available. Terms: 9 – 18 months. Quarter Spot will only do a soft credit check when you apply. QuarterSpot confirmed this information.
Your company must have annual revenue of $200,000 or more. You have to have a personal FICO Score of 550 or better. There is no fee to apply.
Minimal time in business: 12 months. You must have a minimum average bank balance of $20,000. You must also show a minimum of $16,000 in monthly sales.
Borrower must own at least 50% of the business. Rates are 25% – 40%.
Advantages are that the personal FICO score requirement is relatively low. Minimum average bank balance requirement is also fairly low. Disadvantages are this is not for sole proprietors AT ALL. Maximum rates are very high.
Getting funding with fairly low average monthly sales is not easy. Here are some pros and cons.
The highest loan amounts are $250,000 from either Balboa or Credibly. Credibly seems to have the lowest rates and also the shortest time in business requirement: 6 months. QuarterSpot’s main advantage is it requires only a minimum personal FICO score of 550.
Companies with low average monthly sales may do better to wait and see if they can increase their sales before applying for funding.
Many online lenders have an annual revenues requirement instead, so being in business for at least a year will start to show those sorts of numbers to potential lenders.
For initial short term funding, particularly if a company does not need a lot of money, a microlender might be a better option.
What’s the alternative? Why, it’s business credit building, of course!
Company credit is credit in a company’s name. It doesn’t link to an entrepreneur’s consumer credit, not even when the owner is a sole proprietor and the sole employee of the corporation. So a business owner’s business and consumer credit scores can be very different.
Because company credit is separate from consumer, it helps to safeguard an entrepreneur’s personal assets, in the event of a lawsuit or business bankruptcy. Also, with two separate credit scores, a small business owner can get two different cards from the same vendor.
This effectively doubles purchasing power.
Another benefit is that even startup businesses can do this. Heading to a bank for a business loan can be a formula for frustration. But building company credit, when done right, is a plan for success.
Personal credit scores are dependent on payments but also various other factors like credit usage percentages. But for business credit, the scores really merely hinge on whether a company pays its bills promptly.
Establishing small business credit is a process, and it does not happen without effort. A corporation has to proactively work to develop company credit. However, it can be done readily and quickly, and it is much faster than building personal credit scores.
Merchants are a big component of this process.
Doing the steps out of order will cause repetitive denials. Nobody can start at the top with corporate credit. For example, you can’t start with store or cash credit from your bank. If you do you’ll get a rejection 100% of the time.
A company must be trustworthy to credit issuers and vendors. Hence, a company will need a professional-looking web site and email address, with website hosting bought from a merchant like GoDaddy. Plus business telephone and fax numbers need to have a listing on 411.com.
Also the company telephone number should be toll-free (800 exchange or the equivalent).
A business will also need a bank account dedicated purely to it, and it must have every one of the licenses necessary for operating. These licenses all must be in the specific, appropriate name of the corporation, with the same business address and telephone numbers.
Bear in mind that this means not just state licenses, but potentially also city licenses.
Dealing with the IRS
Visit the Internal Revenue Service web site and get an EIN for the small business. They’re totally free. Choose a business entity like corporation, LLC, etc.
A business can start off as a sole proprietor but will more than likely wish to change to a sort of corporation or partnership to lessen risk and take full advantage of tax benefits.
A business entity will matter when it concerns tax obligations and liability in case of a lawsuit. A sole proprietorship means the owner is it when it comes to liability and tax obligations. Nobody else is responsible.
If you are a sole proprietor at the very least file be sure to for a DBA. If you do not, then your personal name is the same as the business name. Hence, you can find yourself being directly accountable for all corporate financial obligations.
Additionally, according to the Internal Revenue Service, by having this arrangement there is a 1 in 7 probability of an IRS audit. There is a 1 in 50 chance for corporations!
Steer clear of confusion and substantially reduce the odds of an Internal Revenue Service audit at the same time.
Starting the Business Credit Reporting Process
Start at the D&B web site and obtain a cost-free DUNS number. A DUNS number is how D&B gets a small business in their system, to produce a PAYDEX score. If there is no DUNS number, then there is no record and no PAYDEX score.
Once in D&B’s system, search Equifax and Experian’s sites for the small business. You can do this at https://www.creditsuite.com/reports/. If there is a record with them, check it for accuracy and completeness.
If there are no records with them, go to the next step in the process. In this way, Experian and Equifax will have activity to report on.
Vendor Credit Tier
Start with the vendor credit tier. First you must build trade lines that report. This is also called vendor accounts. Then you’ll have an established credit profile, and you’ll get a business credit score.
And with an established business credit profile and score you can start acquiring credit under the retail and cash credit tiers.
These varieties of accounts often tend to be for the things bought all the time, like coffee, shipping boxes, outdoor work wear, ink and toner, and office furniture.
But first off, what is trade credit? These trade lines are credit issuers who will give you starter credit when you have none now. Terms are often Net 30, rather than revolving.
Therefore, if you get an approval for $1,000 in vendor credit and use all of it, you will need to pay that money back in a set term, like within 30 days on a Net 30 account.
Net 30 accounts must be paid in full within 30 days. 60 accounts have to be paid fully within 60 days. Compared to with revolving accounts, you have a set time when you must pay back what you borrowed or the credit you made use of.
To begin your business credit profile the right way, you ought to get approval for vendor accounts that report to the business credit reporting agencies. As soon as that’s done, you can then use the credit.
Then repay what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.
Not every vendor can help like true starter credit can. These are merchants that will grant an approval with marginal effort. You also want them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.
But you may need to apply more than one time to these vendors, and you may need to purchase some items you don’t need to have, to verify you are trustworthy and will pay timely. Consider donating unwanted things to charitable organizations.
Retail Credit Tier
Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs move to the retail credit tier. These are businesses like Office Depot and Staples. These companies are likelier to have supplies you need.
Use the corporation’s EIN on these credit applications.
Fleet Credit Tier
Are there 8 to 10 accounts reporting? Then move to the fleet credit tier. These are companies like BP and Conoco. Use this credit to buy fuel, and to fix and maintain vehicles. Make sure to apply using the corporation’s EIN.
Cash Credit Tier
Have you been sensibly handling the credit you’ve up to this point? Then progress to the ash credit tier. These are businesses like Visa and MasterCard. Keep your SSN off these applications; use your EIN instead.
These are service providers such as Walmart and Dell, and also Home Depot, BP, and Racetrac. These are typically MasterCard credit cards. For 14 trade accounts reporting, then these are doable.
Monitor Your Business Credit
Know what is happening with your credit. Make certain it is being reported and take care of any errors as soon as possible. Get in the practice of taking a look at credit reports and digging into the details, and not just the scores.
We can help you monitor business credit at Experian and D&B for 90% less than it would cost you at the CRAs. See: https://www.creditsuite.com/business-credit-monitoring. Update the data if there are errors or the relevant information is incomplete.
Fix Business Credit
So, what’s all this monitoring for? It’s to fix business credit inaccuracies in your records. Mistakes in your credit report(s) can be taken care of. But the CRAs often want you to dispute in a particular way.
Disputing credit report mistakes commonly means you send a paper letter with duplicates of any proof of payment with it. These are documents like receipts and cancelled checks. Never send the original copies. Always mail copies and keep the originals.
Disputing credit report mistakes also means you precisely spell out any charges you dispute. Make your dispute letter as clear as possible. Be specific about the issues with your report. Use certified mail so that you will have proof that you sent in your dispute.
Always use credit sensibly! Never borrow more than what you can pay off. Keep an eye on balances and deadlines for payments. Paying punctually and in full will do more to boost business credit scores than virtually anything else.
Building business credit pays off. Good business credit scores help a corporation get loans. Your loan provider knows the small business can pay its financial obligations. They know the small business is for real.
The business’s EIN attaches to high scores, and loan providers won’t feel the need to call for a personal guarantee.
Business credit is an asset which can help your corporation for many years to come. Learn more here and get started toward building corporate credit.
As with all funding sources, make sure to read the fine print carefully. Your own individual requirements and needs are most important when determining where to get business funding.