Published By Janet Gershen-Siegel at September 11, 2018
Written by Janet Gershen-Siegel
Don’t worry! There are several online lenders but only some of them will provide funding if you have a low average business bank balance. Qualifications including annual revenue and time in business requirements can vary. Personal credit score requirements can as well. The best online lenders if you have a low average business bank balance are out there and they can save your company.
Here are the details.
We researched online lenders and asked about their programs, rates, terms, and features. We gave them every opportunity to add to and enhance our research. Only QuarterSpot sent a confirmation of our research. Rates can rise and fall; this is normal when it comes to financing. We suggest you investigate all of the online lenders that interest you to confirm our numbers before requesting funding.
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.
Rapid Advance offers standard, select, and preferred loans. For standard loans: $5,000 – $1 million available. Terms: 4 to 12 months.
Your company must have annual revenue of $120,000 or more. You must have a personal FICO Score of 580 or better. Minimum time in business: 2 years. 1.16 to 1.30 factor rate.
For select loans: $15,000 – $1 million available. Terms: 6 to 15 months. You must have annual revenue of $240,000 or more. Must have personal FICO Score of 620 or better. Minimum time in business: 3 years. 1.12 to 1.31 factor rate.
For preferred loans with Rapid Advance: $15,000 – $200,000. Terms: 9 to 18 months. You must have annual revenue of $240,000 or more. Must have personal FICO Score of 660 or better.
Minimum time in business: 6 years. You must have minimum bank balance of $10,000 or more. Borrowers must have at least 10 deposits from 5 different sources every month. 1.11 to 1.25 factor rate.
Advantages are a few choices for loan types. Maximum amounts available are high. Disadvantages are minimum bank balance requirements are fairly high. Annual revenue requirements are also high.
Fortunately, there are numerous alternatives. And the best one of all is building business credit! Business credit is an asset which can help your small business in years to come.
Given that small business credit is separate from consumer, it helps to secure an entrepreneur’s personal assets, in the event of litigation 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 buying power.
Another benefit is that even start-ups 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.
Individual credit scores depend on payments but also various other components like credit usage percentages. But for corporate credit, the scores truly just hinge on whether a company pays its invoices promptly.
Building business credit is a process, and it does not occur automatically. A corporation must actively work to establish business credit. Nevertheless, it can be done readily and quickly, and it is much more efficient than developing individual credit scores. Merchants are a big part of this process.
Accomplishing the steps out of sequence will cause repetitive rejections. No one can start at the top with small business 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 corporation must be trustworthy to lenders and vendors. Therefore, a company will need a professional-looking website and email address, with site hosting from a vendor like GoDaddy. In addition business phone and fax numbers should have a listing on 411.com.
At the same time the company telephone number should be toll-free (800 exchange or the like).
A small business will also need a bank account dedicated strictly to it, and it has to have all of the licenses necessary for operating. These licenses all have to be in the precise, appropriate name of the company, with the same corporate address and phone numbers. Keep in mind that this means not just state licenses, but possibly also city licenses.
Visit the IRS website and obtain an EIN for the business. They’re free. Select a business entity like corporation, LLC, etc. A company can start off as a sole proprietor but will most likely wish to switch to a type of corporation or partnership to decrease risk and optimize tax benefits.
A business entity will matter when it involves tax obligations and liability in case of a lawsuit. A sole proprietorship means the entrepreneur is it when it comes to liability and tax obligations. Nobody else is responsible.
If you operate a company as a sole proprietor at least file for a DBA (‘doing business as’) status. If you do not, then your personal name is the same as the small business name. Because of this, you can find yourself being directly responsible for all corporate financial obligations.
Additionally, per the IRS, using this structure there is a 1 in 7 probability of an IRS audit. There is a 1 in 50 probability for corporations! Steer clear of confusion and considerably reduce the odds of an IRS audit simultaneously.
Start at the D&B website and obtain a free DUNS number. A DUNS number is how D&B gets a small business in their system, to generate 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 web sites for the 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. By doing so, Experian and Equifax will have something to report on.
First you should establish trade lines that report. This is also known as 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 obtaining revolving store and cash credit.
These sorts of accounts have the tendency to be for the things bought all the time, like coffee, shipping boxes, outdoor work wear, ink and toner, and office furniture.
But to start with, what is trade credit? These trade lines are credit issuers who will give you initial credit when you have none now. Terms are frequently Net 30, instead of revolving.
Therefore, if you get approval for $1,000 in vendor credit and use all of it, you 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 in full within 60 days. In contrast to with revolving accounts, you have a set time when you have to pay back what you borrowed or the credit you used.
To start your business credit profile the right way, you need to get approval for vendor accounts that report to the business credit reporting bureaus. Once 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 in the same way true starter credit can. These are merchants that will grant an approval with nominal effort. You also need 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 once to these vendors, and you may need to buy some items you don’t need to have, to prove you are reliable and will pay promptly. Consider donating nonessential things to charitable organizations.
Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, move onto revolving store credit. These are service providers such as Office Depot and Staples. These companies are likelier to have supplies you need.
Use the corporation’s EIN on these credit applications.
Are there 8 to 10 accounts reporting? Then move onto fleet credit. These are service providers like BP and Conoco. Use this credit to purchase, repair, and take care of vehicles. Make sure to apply using the business’s EIN.
Have you been responsibly handling the credit you’ve up to this point? Then move to cash credit. These are service providers such as Visa and MasterCard. Keep your SSN off these applications; use your EIN instead.
Know what is happening with your credit. Make certain it is being reported and attend to 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 details if there are mistakes or the details is incomplete.
So, what’s all this monitoring for? It’s to dispute any errors in your records. Errors in your credit report(s) can be fixed. But the CRAs typically want you to dispute in a particular way.
Disputing credit report inaccuracies usually means you mail a paper letter with duplicates of any proof of payment with it. These are documents like receipts and cancelled checks. Never mail the original copies. Always mail copies and retain the original copies.
Disputing credit report mistakes also means you specifically itemize any charges you dispute. Make your dispute letter as crystal clear as possible. Be specific about the concerns with your report. Use certified mail so that you will have proof that you mailed in your dispute.
Always use credit sensibly! Never borrow beyond what you can pay off. Monitor balances and deadlines for payments. Paying off on schedule and completely will do more to boost business credit scores than pretty much anything else.
Establishing corporate credit pays. Excellent business credit scores help a small business get loans. Your loan provider knows the company can pay its financial obligations. They recognize the company is bona fide. The business’s EIN connects to high scores, and loan providers won’t feel the need to require a personal guarantee.
And you won’t be confined to just a few online lenders!
Getting funding with fairly low average business bank balance is not easy. Here are some pros and cons.
The lowest average business bank balance required is $10,000 in the bank at Rapid Advance and $20,000 on average at QuarterSpot. The most you can borrow is $1 million with a Rapid Advance select loan. The lowest required FICO score is 550, at QuarterSpot.
Note: there are several online lenders which do not have this specific requirement. A borrower with a low average business bank balance would probably do better to deliberately seek out a lender which does not have such a requirement.
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. Today, we want to hear from our audience! Share your voice with us about your experiences with online lenders.