IRS Form 1120 is used by corporations to file their taxes. Specifically, to report their income, deductions, losses and gains, and credits.
If you’re any type of U.S. corporation, Form 1120 (or some version of it) is the official IRS form you’d use to report your taxes.
What is the difference between Form 1120 and 1120-S?
While Form 1120 is used by C corporations, Form 1120-S is specifically used by S corporations.
Before filing your taxes, make sure you have the correct version of Form 1120 for your corporation.
Who Needs to File IRS Form 1120?
All corporations (unless exempt under Section 501), are required to file their tax returns using Form 1120.
LLCs, however, don’t generally use Form 1120.
Multi-member LLCs are typically treated as partnerships and must file Form 1065.
Single-owner LLCs aren’t treated as a separate entity and report their income and deductions on their owner’s tax return.
How to File IRS Form 1120: Step-by-Step Instructions
Form 1120 is one of the more complex IRS forms given it’s designed for corporate taxes.
However, there’s a good chance that much of it doesn’t apply to your business, so don’t be overwhelmed.
It’s highly recommended to use a tax professional or at least software online to file your corporate taxes.
Not only to make sure that they’re accurate, but also just to get a little help (filling this out on your own can be time-consuming).
With that said, let’s break down each section step-by-step:
1. Fill in your personal information
Straightforward, fill in your basic information including name, address, EIN, date incorporated, etc:
2. Fill in your income
Next, fill in your income breakdown:
Make sure to add up the total on line 11 after adding all your information in.
3. List out your deductions
Next, list out all of your deduction totals:
Again here, add up the total amount on line 27 as well.
4. Credits and payments
Now, you’ll input all relevant credits or payments:
5. Sign and date
Finally, sign and date at the bottom:
Make sure to leave the section labeled, “Pair Preparer Use Only” blank as that is reserved only for when you pay a tax professional to prepare your tax return for you.
Check out our guide on small business tax tips for additional tax filing tips.
Do I Need to Fill Out Schedule (C, J, K, L, M-1, M-2)?
Form 1120 has several additional sections included, those being schedules:
C
J
K
L
M-1
And M-2
Here’s how to know if you need to fill out one or more of these IRS Schedules:
Schedule C
If you’re a solo business owner, there’s a chance you may have to fill out Schedule C.
Schedule C is designed for reporting earnings for individual business (usually sole proprietor) earnings.
If your corporation’s gross receipts (or total assets) are greater than $250,000 at the end of the tax year then you typically need to complete Schedule M-1 (and possibly M-2) when filing.
Giving money to Uncle Sam is overcomplicated, but obtaining capital shouldn’t be.
And yet, banks and traditional lenders tend to have incredibly long approval and funding times, complex application processes, and generally more headache than they’re worth.
At Excel Capital, we believe that it shouldn’t be so hard to obtain the capital your business needs to thrive.
We offer a variety of powerful business funding options, many which you can be approved on with low or no credit and fund in as little as 24-48 hours.
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IRS Form 9465 is used for requesting and implementing an installment agreement on tax payments.
Typically, Form 9465 is used when someone files their taxes but finds that they owe more than they can immediately pay.
In that case, you can file Form 9465 and begin making installment payments on your taxes due.
However, keep in mind that even if you have Form 9465 in place with the IRS, they’ll still charge you late penalties and interest on those payments.
Who Should (and Shouldn’t) File Form 9465?
If you’ve just filed your taxes and the amount you owe is more than you can pay, you should file Form 9465.
With that said, not everyone can file for an installment agreement with the IRS. There are several situations outlined by the IRS that will keep them from approving your request for an installment agreement.
Assuming don’t owe more than $10,000 in taxes, you as the taxpayer must meet these requirements to be automatically approved for an installment agreement:
Must have filed all necessary previous tax returns
You haven’t entered into a previous installment agreement within the past 5 years
You can pay the entirety of your back taxes within 3 years
What Are My Payment Plan Options?
According to the IRS, they offer two payment plans depending on your balance:
Long-term (i.e. an installment agreement): If you owe $50,000 or less in combined tax, penalties, and interest.
Short-term payment plan: If you owe less than $100,000 in combined tax, penalties, and interest.
You must fit one of these qualifications to set up a payment plan using Form 9465 with the IRS.
How to Fill Out Form 9465
Now, let’s talk about how to fill out Form 9465.
It’s a short form but has lots to potentially check off and fill in, so it can be a little intimidating.
Fortunately, it’s an easy form to complete and doesn’t take long.
You have two options for completing Form 9465 and requesting an installment agreement:
e-File online
By far the easiest and fastest way to complete Form 9465, most major tax preparation software such as TurboTax is authorized to complete Form 9465 for you.
Unless you have a preference for physically mailing it in, this should be the method you choose as it will get you a response faster.
Fill out and send through mail
Filling out and mailing Form 9465 is an option as well. Start by downloading and printing Form 9465 here: Form 9465.
Start by filling out your basic information:
Form 9465 is separated into just two major sections, but each has quite a bit of questions.
However, in Part I, the questions are for the most part easy and straightforward:
Once Part I is complete, it’s simply on to Part II to finish up the form:
Again, quite a few basic questions so not much difficulty:
Finally, don’t forget to sign and date it (located at the bottom of page one) and you’re all done!
If any section of Form 9465 is confusing, you can find out more information about how to fill out IRS Form 9465 directly from the IRS here:Instructions for Form 9465.
Can You File Form 9465 Electronically?
Yes, you can file Form 9465 electronically through most major tax software.
However, you can only file electronically if the amount you owe is less than $50,000.
You’ll need to create an ID.me account before logging into the platform, but once you’re in, simply follow the prompts and you can get everything done conveniently online:
How Much Will I Pay the IRS In Interest and Penalties?
When paying overdue taxes, interest and penalties typically cost:
Penalties: .5% per month, not exceeding 25% of unpaid taxes
Keep in mind that interest rates are subject to change, so the amount listed here may not be the current interest rate you’ll pay via your installment agreement.
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IRS Form 941, Employer’s Quarterly Federal Tax Return, is used by employers to report income and payroll tax withholdings, Social Security, and Medicare tax burden.
The complete list of items reported on Form 941 includes:
Employee wages, including tips and other compensation
Federal income tax withholdings (payroll)
Medicare tax withholdings (employee and employer shares)
Social Security benefits withholdings
Quarterly SS and Medicare tax adjustments for various reasons such as sick pay
While that is a lot of information, simply know that Form 941 will tell you what your overall payroll tax responsibility is for that quarter.
Who Needs to File IRS Form 941?
If you’re reading this, chances are you either already know you have to fill out Form 941 (in which case, feel free to skip to the next section) or you’re not sure yet.
So, let’s talk for a sec about who needs to fill out form 941.
Most businesses with employees must file Form 941 each quarter, with some exceptions typically in the form of the type of employee you employee:
Business that employ maids and nannies
Businesses that employee strictly farmworkers
And seasonal businesses are only required to file during quarters in which they weren’t operational (i.e. they had no employees)
Each state and business type is different, however, and the list of who does and doesn’t need to fill out Form 941 is beyond the scope of this guide.
How to File IRS Form 941: Step-by-Step Instructions
IRS Form 941 is relatively simple and straightforward.
We suggest filing Form 941 through a tax preparation software, which will semi-automate the process for you and cut down on time.
However, if you need to manually fill out Form 941, here are step-by-step instructions:
*Note:Keep in mind, Form 941 comes with a payment voucher, which you’ll use if you’re required to submit payment with Form 941.
1. Fill in your business information
First, start by filling out your basic business information at the top of the form:
Also, make sure to check off which quarter you’re reporting for to the right of that box here:
2. Complete Part 1: Wages and withholdings
Next, part one requires you to fill in an assortment of information related to wages and payroll tax for that quarter:
This is where you’ll note down your own numbers including SS payments, medicare withholdings, and payroll withholdings.
Keep in mind that line 5e is the total you get from adding 5a – 5d (SS wages and tips + Medicare wages and tips).
3. Complete Part 2: Deposit scheduling
The next section is quick and easy with straightforward instructions. You’ll simply note down at what frequency you deposit based on your payroll:
Note that if you’re a semi-weekly depositor, you’ll need to also fill out Schedule B of Form 941 and send it with Form 941.
4. Complete Part 3 + 4
Parts three and four are, fortunately, short and to the point.
First, you’ll fill out whichever of the two questions in part three apply to you (if none, you can leave the section blank):
Part four is only relevant if you’re working with a CPA or other tax preparation specialist and you’re authorizing them to speak on your behalf with regards to your business return and Form 941.
5. Sign and date
Finally, finish by signing and dating at the bottom:
The section below your signature will only be used if you paid a tax preparer or CPA to complete Form 941 on your behalf, in which case they would sign here.
What Is the Deadline for Filing Form 941?
IRS deadlines for filing Form 941 is typically one month after the final day of the reporting window.
That makes the reporting day for each quarter:
Q1 (Jan, Feb, Mar): April 30th
Q2 (Apr, May, June): July 31st
Q3 (July, Aug, Sept): Oct 31st
Q4 (Oct, Nov, Dec): Jan 31st
Keep in mind that you can obtain additional time if you’ve paid your employment tax deposits in full for that quarter. The IRS allows an additional 10 days to file, which would be added on top of the deadlines listed above.
Can You File Electronically?
Yes, Form 941 can be filed electronically or by mail.
If you’re required to, or simply prefer, physically mailing Form 941, that’s an option as well.
Here’s a chart that shows exactly what address you should send Form 941 depending on what state you’re located in:
Important: If you do not have a principal place of business in any state, or a legal residence, you’ll need to mail Form 941 to one of the addresses below.
For returns without payments included, send Form 941 to:
Internal Revenue Service
PO Box 409101
Ogden, UT 84409
For returns with payments included, send Form 941 to:
Internal Revenue Service
P.O. Box 932100
Louisville, KY 40293-2100
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That is, if you have the capital you need to grow and go where you know you can take it.
Banks and traditional funding institutions make obtaining a business loan nearly impossible. And, if you’re one of the lucky few, you’ll be waiting ages for approval and the deposit of funds.
With Excel Capital, we offer a variety of powerful business funding tools, many which you can be approved on with low or no credit and fund in as little as 24-48 hours.
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IRS Form W-7 is an official IRS form used to obtain an Individual Taxpayer Identification Number.
You typically need form W-7 for filing taxes with the IRS if you’re not a U.S. citizen and either don’t have, or aren’t eligible for, a social security number.
However, it can also be used for:
Obtaining a mortgage
Employment settlement disputes
Opening an interest-bearing checking account
Read on for a quick and easy guide to filling out Form W-7 and obtaining your ITIN.
Do I Need an ITIN?
If you’re not a U.S. citizen or if you can’t obtain a social security number for another reason you must have an ITIN to legally pay taxes on U.S. earnings.
You also may need an ITIN for other reasons, such as applying for an ITIN or opening an interest-bearing checking account.
Can I Fill Out Form W-7 Online?
The short answer is: No, in 2024 you can’t fill out Form W-7 or obtain an ITIN number online.
With that said, be on the lookout for services that claim they can get you an ITIN online.
They’re not helping you obtain an ITIN online but rather digitally obtaining your information when you submit their online form and then physically printing and mailing out your W-7 form for you.
These services can not get you your new ITIN number any faster than you can if you simply fill out the form, print, and mail it yourself (and for much less than what they charge).
How to Fill Out IRS Form W-7(Step-By-Step Instructions)
Unfortunately, the only way to submit Form W-7 and obtain an ITIN is by mail or in person.
However, it’s a simple one-page form that’s pretty self explanatory.
Just make sure to:
Fill out any and all relevant information, and
Do not leave any field blank. If a field doesn’t apply to you, write “NA” in the field instead of leaving it empty
Start by downloading the official PDF form here: Form W-7.
Then follow these steps:
1. Select your reason for submitting
First, start by selecting the reason that you’re submitting Form W-7:
Note that the instructions state that unless your reason is “a” or “h”, you must submit your federal tax return with Form W-7.
2. Enter your name and address
Next, you’ll fill in your name and one or two addresses.
The first is your current address. The second is your foreign address:
If you no longer have a current foreign address, the place where you resided before coming to the U.S., then you’ll simply fill in the country in which you resided.
3. Other information
Form W-7 has a whole section for additional information, at least some of which is relevant to you:
Make sure to fill in any and all information that is relevant to you.
Most importantly, notate what identification documents you submitted as well as previous or current countries of citizenship, foreign tax ID numbers, and Visa info (if you have one).
Also, if you’re requesting a new ITIN, fill out sections 6e and 6f.
4. Sign and date
Lastly, sign and date your form:
Make sure to sign the top section and ignore the second as that is only relevant if you visit an acceptance agent in person.
3 Ways to Submit Form W-7
While you can’t submit Form W-7 online, there are at least a few options for sending it out, two which allow you to handle it in-person (though the wait time for a response with your new ITIN still applies).
Those methods are:
1. Physical Mail
The first option is simply to mail it yourself.
One of the benefits of Form W-7 is that you can mail it along with your tax return, allowing you to knock out two birds with one stone (at least, if you had planned to physically mail your return).
In order for your form and return to be accepted, you’ll need to mail it along with proof identity, your tax return, and foreign status documents and send to this address:
Internal Revenue Service Austin Service Center ITIN Operation P.O. Box 149342 Austin, TX 78714-9342
Keep in mind that it can take up to 14 weeks to receive your documents back from the IRS, which means you’ll want to use options #2 or #3 if you’ll need them during that window of time.
2. In Person Option 1: Certifying Acceptance Agent
Again, this is also ideal for anyone who isn’t comfortable having to mail sensitive information.
There isn’t much difference between this and an Acceptance Agent, it’s more about what happens to be in your area. Both are viable in-person options.
How to Check the Status of Your W-7 Application
You can call the IRS directly at 1-800-829-1040 to check the status of your application seven weeks after submitting.
How Long Does It Take for the IRS to Process Form W-7
According to official IRS documentation here, the typical wait time to receive a response and obtain your ITIN is 7 weeks during normal periods and up to 11 weeks during peak season from January 15th – April 30th (i.e. tax season).
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IRS Form 4506-T is an official IRS form used to request a tax return transcript.
Typically, Form 4506-T is used when you need to provide your tax return information for the purposes of:
An IRS audit
Applying for a mortgage loan
Getting approved for a business loan
Or verifying information from the previous year when filing your next tax return
So, how do you get a copy? Here’s how:
How to Obtain Your Tax Transcript from the IRS
Fortunately, obtaining your tax transcript and related tax information is easier than ever.
While you can fill out Form 4506-T and wait for a response from the IRS, it’s no longer the fastest or easiest way.
Instead, you can create an IRS.gov tax account and log in within minutes.
Starting from IRS.gov, hover over the drop down menu under “File” and click “Get Your Tax Record”:
Next, in true IRS fashion, instead of sending you straight to the portal where you can get your tax information, it sends you to another page.
Click on “Online Account”:
And another, click on “Sign in to your Online Account”:
Lastly, click “ID.me – Create an account”:
You’ll have to submit official identification information, but by doing so you can get fast and convenient access to your official federal tax information.
This method is the fastest and most reliable, as it’s both quick as well as direct from the source. No other tool or service needs to be used to obtain your official tax information.
To get all relevant tax transcript records, via the portal you’ll want to request a “Record of Account” for the most comprehensive individual tax records.
Alternatively, you can send Form 4506-T to your local state IRS office or request a transcript by calling: 1-800-908-9946.
How to Fill Out IRS Form 4506-T (Step-By-Step Instructions)
Now, let’s go over how to fill out IRS Form 4506-T.
While it is a bit old-school to request your tax transcript through filling out a traditional Form 4506-T and sending it to the IRS, in some cases it may be your only option.
So, start by downloading the form via the IRS’s official Form 4506-T PDF link here then follow the below steps to fill it out:
Step 1: Line 1b: Enter your EIN / SSN / TIN
On line 1b, enter your EIN if you’re requesting access to a business return:
If it’s a personal tax return, enter either your SSN or TIN, whichever is applicable to you.
Step 2 (Line 3): Enter your address
One line 3, enter your complete current address, the address where you’d like to receive the copy of your transcript:
On line 4, enter your old address (the one you used to file your last return) if you’ve changed your address since your last filing.
Step 3: Sign and date
Lastly, make sure to sign and date Form 4506-T (same name as listed on line 1a):
Keep in mind that the date the IRS receives the form must be within 120 days of the date you write on the form when signing, otherwise they will reject it.
How Long Does It Take to Get Your Tax Transcript from the IRS?
According to official IRS documentation, the IRS takes 75 days to respond by mail with tax transcript documents.
However, fortunately the IRS now offers a way of obtaining your tax transcript and other information online. See the section above, “How to Obtain Your Tax Transcript from the IRS” to find out how.
Why Is My Lender Requesting Form 4506-T?
If you’re applying for a loan, in some cases, the lender may request Form 4506-T to obtain your tax information.
The purpose for this is to verify income, typically as a secondary income verification source.
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As opposed to a traditional small business loan where a lender provides funds in exchange for an interest-based repayment plan, a merchant cash advance (or MCA), sometimes called split funding, is a purchase of future debit and credit card sales in exchange for a fee.
An MCA is generally much faster than a traditional loan as well, with the ability to be approved and have your account funded in as little as 24 hours in some cases.
And you can use split funding for virtually anything, including:
Inventory purchases
Equipment upgrades
Hiring and training
Payroll
Taxes
For those who need capital fast, who don’t have great credit, or don’t have any applicable collateral that could be placed down to secure a traditional loan, an MCA may be the perfect funding solution.
As small business financing alternatives go, split funding is one of the most convenient when it comes to repayment, especially if you have strong cash flow.
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How a Merchant Cash Advance Works
An MCA is an advance against future sales. Therefore, it’s best for businesses who function mostly off credit and debit card sales and have strong cash flow.
What is convenient about split funding is the advance is repaid, typically via an ACH or automatic withdrawal, based on a percentage of those daily sales. The amount which is automatically paid towards the loan is typically called the “holdback” amount.
That means if you have a dip in regular sales, the amount taken out on those days to repay the advance will also be reduced, making it easier to pay back the advance when business is down.
The most unique aspect of an MCA is that it doesn’t use a typical APR interest fee but rather what is typically called a factor rate.
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What Is a Factor Rate?
The factor rate, which takes the place of interest as the primary fee associated with MCA’s, typically ranges from anywhere between 1.14 and 1.48.
By multiplying your loan amount by the factor rate, you’ll have a rough estimate of the total amount you’re expected to pay once you’re done repaying your MCA.
For example, if you get an advance of $25,000, and your factor rate is 1.3, you’ll pay $32,500 before paying off the advance.
The factor rate associated with split funding is generally considered to be steep compared to the interest on something such as an unsecured business loan.
However, it trades increased fees (in some but not all cases, and depending on the lender) for hyper-convenience, speed, and reduced credit requirements.
Example of a Merchant Cash Advance
Let’s take a closer look at how an MCA works with an example:
Jerrett, the owner of a local cafe, needs $20,000 for the purchase of new high-grade barista equipment and a few additional hires to meet a recent increase to traffic at his location.
Jerrett doesn’t have much business credit history, only having been in business at his location for about a year. So, he can’t depend on a bank loan to get him out of his pinch.
Instead, he decides to apply for a merchant cash advance. Because he has the necessary business credit card sales, so he’s approved for the $20,000 advance amount and is off to the races. He gets all the equipment he needs and gets some help around the cafe. Business is booming.
Now that the advance has been issued, he can begin paying it back with a percentage of his regular credit card sales.
If his factor rate is 1.25, on $20,000 he’ll be paying back a total of $25,000. The repayment period on an MCA is typically between 3 and 12 months, all depending on how high your regular credit card sales are.
However, because the repayment period is based on the volume of credit card sales, it doesn’t affect how much you pay. Instead, your regular holdback amount is based on a set percentage decided by the lender.
Let’s say your holdback percentage is 10%. If you average $20,000 in monthly credit card sales, you’d pay about $65 a day ($2,000 total over a month) on average based on that day’s sales towards the advance and have it paid back in full within about 10 months.
The exact method which is used to repay an MCA varies, so in the next section, we’ll quickly cover each of them.
Ways to Set Up a Merchant Cash Advance
There are 3 ways that repayment on a merchant cash advance can be set up. Here’s a rundown on the 3 methods:
1. Direct split
With this method, the lender uses one of several trusted credit card processors to place a “split” on your credit card sales (hence why it’s sometimes referred to as split funding), directing the percentage notated in your agreement from your credit card sales.
Each time you batch out, that percentage is automatically removed behind the scenes and you receive your deposit in exactly the same way as you usually would with zero delays.
2. Lockbox
If you’d prefer to not change your payment processor, or your merchant processor has early termination fees you’d prefer to avoid, this may be a more preferable method.
With lockbox funding, instead of switching merchant accounts a lockbox account, also known as a bridge account, is set up to split your credit and debit batches.
A lockbox account is a typical business bank account which you’re given credentials to, however, with your lockbox account, each time a batch is settled the account automatically “splits” the amount by sending the designated repayment percentage via ACH to the corresponding account and deposits the rest of your amount into the account for your use.
The only drawback with this method vs. a direct split through a credit card processor is that there is typically a 24-48-hour delay in the typical amount of time it takes for you to receive your deposit after batching.
To set up a lockbox account, you’ll be asked to sign the lockbox form given by your MCA provider. Once your bank letter arrives in the mail for the lockbox account, the only thing left to do is call your card provider to have your deposits redirected to the lockbox account (which typically takes up to 48 hours).
3. Variable ACH
The final way to set up an MCA is as a variable ACH.
This is ideal when your merchant processor isn’t already one of the provider’s friendly accounts (i.e. a direct split won’t work) and you as the business owner don’t want to deal with the 24-48-hour delay between when your batches are settled and when the MCA holdback percentage is removed (as in a lockbox account).
A variable ACH requires your MCA provider’s collections department to have access to your merchant processor’s login portal. Your provider will log in to your processor’s portal each to check your batch amount and then issue an ACH transfer for the holdback amount.
This method of repayment requires that your provider always has access to your merchant processor portal, otherwise the account is considered to be in default.
It’s generally harder to be approved for a variable ACH as, unlike when using split funding or a lockbox account, variable ACH approval is dependent largely upon your average ledger balance.
In other words, while you can be approved for both split funding and the lockbox method with a high number of non-sufficient funds (NSF’s) or overdrafts, with a variable ACH your average balance must be high to ensure that the full holdback amount can be collected regularly.
Click here to apply for a merchant cash advance and find out what your options are:Apply Now
Merchant Cash Advances: Pros and Cons
As a merchant cash advance is a unique small business financing solution, it has a unique collection of pros and cons which are important to review before deciding if it’s the ideal solution for your needs.
Here are the primary benefits, and drawbacks, of a merchant cash advance:
Merchant Cash Advance Pros:
Get funds fast: An MCA is a good idea if you need cash fast as you can have the funds within your account within 1-2 business days. As opposed to a traditional loan, this makes an MCA lightning fast.
No collateral: They don’t require traditional collateral, instead using your future credit card sales as a kind of “soft” collateral. That means you don’t have to risk losing something valuable such as your property or important equipment in the case of defaulting on the loan.
Good credit not required: Depending on the lender, fair or even bad credit is acceptable for an MCA. This makes it an invaluable funding solution for business owners who don’t have the credit to be approved for any kind of business loan.
Repayment terms fluctuate with business: If business is down, your payment goes down with it. This makes split funding one of the most flexible and convenient small business funding solutions available.
Merchant Cash Advance Cons:
The factor rate can be high
An MCA offers several significant benefits. However, every funding solution has both pros and cons, and a merchant cash advance is no exception.
However, while many funding solutions have several different drawbacks, an MCA really only has one, though it can be a big one.
The factor rate on split funding can be very high, as low as an equivalent 15% interest in some cases, but as high as triple digits in others depending on various factors.
For that reason, it’s important to know what the terms are of your advance going in, how much you’re paying and are able to pay, and whether it’s worth it for you.
It may be the perfect vehicle to get you out of a tough spot, help you buy new equipment that can drive sales, or help you hire the seasonal assistance you need to make full use of a busy season. Whatever the case, weigh the cost and benefits to decide if an MCA or another funding vehicle is the ideal fit for you.
Who Is a Merchant Cash Advance Best For?
Still wondering if a merchant cash advance is the right funding solution for you and your business.
Consider these factors when deciding whether an MCA is a good fit. It’s ideal for those who:
Accept credit card sales: If you accept credit and/or debit card sales, split funding may offer a more convenient repayment plan than a traditional loan.
Need a fast funding solution: If your funding needs are an emergency, an MCA is one of the best.
Don’t have great credit or enough credit history: Split funding doesn’t require great or even good credit, making it accessible to many who otherwise wouldn’t be able to qualify for a traditional business loan.
Don’t have available collateral to offer: Similarly, if you don’t have collateral to offer for a traditional bank loan, you won’t be able to qualify for a typical bank loan. However, an MCA doesn’t require typical hard collateral such as property or liquid cash.
How to Apply for a Merchant Cash Advance
Because a merchant cash advance doesn’t require good credit or a hard form of collateral, it’s generally easier to be approved for one vs. a typical loan which requires sufficient proof that you’ll be able to repay the debt.
However, there are still qualification requirements and an application process you should be aware of. The more you know, the more likely you’ll be to get approved and the better terms you’ll be able to get.
How to Qualify for a Merchant Cash Advance
The first and most basic eligibility requirement of an MCA is which has been mentioned already: a large portion of your revenue must come from credit card sales.
Additional qualification requirements include:
In business at least two months
$7,500 or more in monthly credit card sales
$10,000 or more in gross monthly sales
No open bankruptcies
Merchant cash advance: Good or bad credit vs. credit card sales volume: Which is more important?
We touched on an MCA’s credit card sales volume requirements in this and previous sections as well as its credit requirements.
However, if you’re already convinced an MCA is the ideal financing option for your business and you skipped to this section to see how to qualify, keep this in mind:
Credit is not the most important factor, your credit card sales volume is.
With a merchant cash advance, your credit card sales volume triples as:
The primary qualification factor
The main factor which decides how much you can be approved for, and
Your estimated future credit card sales volume serves as a kind of soft collateral that guarantees to a lender that they’ll be able to collect on the advance
All of this taken together makes your credit card sales volume by far the most important factor for approval.
How to Apply for a Merchant Cash Advance
If you’ve been operating in business for more than two months and meet the monthly sales requirements, acquiring a merchant cash advance is a simple matter of being approved.
To be approved for split funding, you’ll simply need to submit an application along with four months of bank and credit card processing statements.
However, in addition to this, you’ll want to gather several documents that may be requested after applying for approval.
A lender will review your credit card processing and bank statements to see that you fulfill the minimum monthly sales numbers. If you qualify, they’ll typically request additional documentation to finalize the approval.
Documents you’ll want to have in order to streamline approval include:
Driver’s license
Voided business check
Credit score
Business tax returns
Small Business Loans and Other Merchant Cash Advance Alternatives
As we’ve reviewed throughout this guide, a merchant cash advance has several notable benefits.
However, if the tradeoff isn’t to your liking, it’s worth considering an alternative funding method. No matter what it is you need to pay for, the options below are fast and allow approval without perfect credit.
Term loan
Short-term and medium-term loans are closest to a traditional bank loan in that you receive a lump sum in exchange for repayment with interest. The repayment term on short-term loans is typically between 3 months and 2 years and medium-term loans up 5 years.
With a business line of credit, you get access to a pool of funds which you can tap into whenever the need arises. And, provided you pay back what you borrow, you can then tap into that line of credit again.
A merchant cash advance is both a fast and convenient funding solution.
In addition to this, it’s an ideal source of extra capital for business owners who either don’t have stellar credit or any form of hard collateral to offer and therefore wouldn’t be approved for a bank loan.
Traditional bank financing takes months for approval. So, whether you need funding fast or need access to capital and don’t qualify for a traditional bank loan, an MCA is an effective source of additional capital worth considering.
Click here to apply for a merchant cash advance and find out what your options are:Apply Now
Frequently Asked Questions
Is a merchant cash advance a safe option?
Before signing a contract with an MCA provider, it’s important to first make sure that an MCA is the right funding method for you and your situation.
An MCA is based on your business’s regular flow of income, so if your business income is in a volatile period, a loan would likely be a better option for you.
However, if your business income is consistent, even growing, then an MCA may be a good option for you and your business.
What happens if you default on a merchant cash advance?
If you find yourself in a position where you can’t pay back your MCA, start by looking at your contract to see what options are available to you in default as it all depends on the advance, provider, and your particular situation.
MCAs are considered a purchase agreement, not a loan, so they’re not subject to the same usury laws as typical business loans. Depending on your provider, they’ll have various options and actions they may take if you breach your contract and go into default.
For example, your provider may sue for breach of contract, though defaulting doesn’t necessarily mean you breached your contract. For example, if you defaulted because your business closed down, that isn’t a breach of contract and there would be no recourse whatsoever.
If you’re having trouble paying your MCA, give your provider a call to ask what your options are for setting up a revised repayment plan and getting back to current.
Getting the funding you need for a home-based business can be challenging.
In addition to the challenges of starting a home-based business– applying for licenses, filing taxes– acquiring business capital to start, grow, or expand your business is a process all in itself. You may find you self asking your self how to get a loan for a home based business?
Many small companies usually start as home-based businesses. It is at this stage where the owner lays the foundation for their future business. It’s also the stage where owners face their biggest challenges.
Aside from getting clients, one of the biggest challenges for business owners is finding financing. Unfortunately, home-based businesses have few financing options. Many banks look down on this type of funding but we have some options for you.
That’s where home-based business loans comes in.
Fortunately, there are several programs available when it comes to home-based business financing, each with different advantages. Read on to find out more.
Obtain fast funding for your home-based business. Apply with Excel Capital: Apply Now
5 Home Based Business Loan Options
1. Equipment Financing
Equipment financing helps business owners purchase any type of equipment needed to run the business.
The loan amount is dependent upon the type of equipment needed, as the repayment term is usually as long as the expected life of the piece of equipment and if it is used or new.
2. Split Funding / Merchant Cash Advance
Split funding, also referred to as a merchant cash advance, works on a “pay as you earn” model.
It is important to know that Split Funding is not a loan. Instead, a flat percentage of your business’ credit and debit sales are automatically debited daily and put towards the repayment of your loan.
If your business does a large amount of sales one day, a larger payment is taken out to pay back the advance. If a small amount of sales is done that particular day, you pay less. There is no fixed payment amount or maturity date. This type of funding is available only to businesses that accept credit card payments.
3. Short-term Loan
Short-term loans are used as a way to fill an immediate financial needs and fix cash flow issues.
Most lenders that provide this type of loan do not require a lot of paperwork and they can be used for virtually any business purpose.
Common uses of short-term business loans are inventory purchases, new hires and employee training, equipment repairs, and filling gaps between accounts payable and receivable. This financing solution mean shorter having a shorter repayment schedule with higher costs. Short-term business loans are generally paid back via weekly ACH payments.
In contrast, traditional term loans are paid back within a fixed term and a set interest rate. While traditional term loans allow you to build business credit and have fixed monthly payments, they come with less flexible terms and rates and penalties may be charged if the loan is paid off early.
4. ACH Loan
ACH loans typically require personal guarantees, and have a fixed repayment schedule that is paid either daily, weekly or monthly. They are a popular funding solution for businesses that do not accept credit cards or want a set repayment schedule.
Whether you need the working capital obtained through an ACH Business Loan for inventory purchases, new hires, employee training, purchasing equipment, or almost anything else for your business, this funding solution can be extremely beneficial.
Unlike traditional business loans, funds from an ACH Business Loan disburse in as little as three business days after being approved for funding.
Additionally, this funding product does not require a minimum credit score to qualify, which means many up and coming businesses or businesses experiencing a rough financial period. Having collateral is not necessary to qualify, so business owners who have poor credit or lack business history can still apply for this great funding solution.
5. Business Line of Credit
A business line of credit is a rotating loan, also known as a “LOC,” that gives business owners access to a fixed amount of money, which they can use day-to-day according to their need for cash. Interest is only paid on the amount of the advance actually used.
As a result, this tends to be a more popular type of business credit line to business owners. However, they are much more risky for the lender, therefore your credit score must be excellent.
In addition, they tend to be smaller with higher interest rates.
2. Secured Business Line of Credit
A secured business line of credit requires business owners to put up assets as collateral in order to obtain the loan.
While lenders do not typically require business owners to pledge assets like property, they will require the collateral in the form of inventory, accounts receivables, and more. Consequently, if you are unable to pay back the loan, your lender will seize your collateral in order to pay the balance.
Both secured and unsecured business lines of credit will require your business to be in good standing.
Lenders typically prefer to work with businesses that are well-established and in good financial standing, thus proving to the ability to pay back the loan. Depending on the lender, various financial documents will be requested to support this.
Get the capital your home-based business needs. Apply for an unsecured business line of credit with Excel Capital: Apply Now
How to Get a Home-Based Business Loan: What Do you Need to Get Approved?
One of the benefits that come with alternative lending is a fast application and approval process.
Business owners don’t need to fill out or submit mounds of paperwork, or have to wait months to receive an approval or decline. Once a business has been approved, they can be funded in a little as a week.
The initial documentation is typically enough to get funding, but there are instances when additional documentation may be requested depending on the lender.
The following is the standard business documentation you should have prepared when starting the application process:
One-page application
Voided check (for your business account)
Copies of identification for all owners
Proof of ownership – Last filed Tax return , By laws for corporation or Articles of Organization for and LLC
Proof of EIN – If you do not have a tax return most funders can use a EIN letter or SS4 Letter along with proof of ownership
Three months of bank statements
Aging AR report if your in an industry where you have billing net 30-90
While not everything may be requested, the more the better here. Getting your documentation ready ahead of time will also speed up the time to fund, allowing you to get the capital you need ASAP.
Acquire a Home-Based Business Loan with Excel Capital
Finding funding for a home based business can be tough.
However, at Excel Capital, we strive to make obtaining funding easier and more convenient for small business owners in need of capital.
The application process is quick and, if approved, you could obtain funding in as little as 24-48 hours.
Click below to start your application:
Apply in minutes, get fast funding for your home-based business: Get Started
Finding the best small business checking account that fits your needs may seem like a small step.
However, given how often you’ll use it, it’s a critical step in establishing a smooth financial system within your business.
Which bank you choose is important for more than just that, however.
Depending on which bank you pick, you may end up going to them for a business line of credit, loan, or other financial product.
Your business checking account can have a big impact on several aspects of your business, including everything from ATM Conveniences to your monthly transaction limit and customer service experience.
For that reason, below we’ve reviewed the top small business checking account options for 2024 to find the best of the best– so you don’t have to.
The 7 Best Small Business Checking Accounts of 2024
Our 7 best small business checking accounts for 2024 are:
Chase – Great introductory bonuses (change over time) and low account fees.
Capital One – Unlimited transactions, low monthly fees
Bank of America – Frequent introductory bonuses, lots of physical locations
U.S. Bank – Good for new small businesses just getting started
Wells Fargo – Good customer service, account upgrade flexibility
Navy Federal – Low monthly fees, great for military
BBVA Compass – Low monthly fees, large extended ATM network
All of the below small business checking accounts have the same core features, but there are notable differences between each depending on what you’re looking for.
To discern the best business checking accounts, we looked at all of these features to not only find what we consider the best options but also include a useful variety of accounts that are stronger in some features rather than others.
Methodology: How We Decided on the Top Business Bank Account Candidates
To decide which small business checking accounts were the best, we took into account a variety of factors to make the most fair and informed decision possible.
Factors we considered when evaluating the best business checking accounts were:
Fees and fee structure
Availability of ATMs and physical banking locations
Introductory bonuses
Account change/upgrade flexibility
Special or additional account features (various, those which aren’t considered common)
While each factor was taken into account, some were weighed more heavily than others (fees and fee structure being at the top, for instance).
Having said that, here are our 7 best small business checking accounts of 2024.
1. Chase
As one of the largest banks in the United States if you already bank with Chase the simple fact of convenience could be a big reason to consider working with them.
However, aside from that it turns out that Chase is one of, if not the best, all-around option for a business checking account.
Pros
Large banking network: More than 5,000 branches and 16,000+ ATMs.
Just $25 to open an account
$0 in fees with just $500 monthly deposits or a daily balance of $1,500
$200 introductory bonus (not always available)
Cons
100 transaction limit means larger businesses or those with a high transaction quantity won’t be a good fit.
Most Chase branches exist in larger markets such as major cities, so while their network is big you might still want to check your local neighborhood if live in a smaller market.
Why choose Chase?
If you have a low number of monthly transactions (<100), Chase’s low fees and large banking network is perfect for you.
To open a small business checking account with Chase, click here.
2. Capital One
Known mostly as a credit provider, Capital One is also the largest of the mostly “digital banking” options currently available, although it does have branches in some locations.
Capital One offers the best fee structure of all major business checking accounts available.
Pros
Large ATM network: Nearly 40,000 ATMs nationwide means you have access to one of the largest ATM networks available.
Capital One’s Spark Business Checking account offers an introductory offer of $250 for maintaining an average balance of $25,000 or $1,000 for maintaining an average balance of $100,000, both over a 6-month period.
No monthly fee if you maintain a balance of $2,000
No transaction fees
Unlimited monthly transactions
Cons
Not many branches: Capital One banking has just ~700 branches, so the chance of having a local branch is very slim.
Only 2,000 of those 40,000 ATMs allow deposits. This means that, combined with their low branch count, it may be difficult or impossible for you to make easy cash deposits.
Why choose Capital One?
If you hate bank fees and cash deposits or branch visits aren’t high on your list of importance, Capital One is a great choice.
To open a small business checking account with Capital One, click here.
3. Bank of America
Like Chase, Bank of America is a common personal banking option, so it might be a good fit for you if you already bank with them.
Pros
Large banking network: More than 5,000 branches and 16,000 ATMs
More varied introductory offers: $350 for opening a Business Fundamentals account and meeting certain requirements, $100 bonus by depositing $1,000 within the first 60 days of opening a business checking account, $50 bonus for paying two different bills through bill pay, and an additional $200 if you’re approved for a BoA business credit card
Lots of ways to wave the monthly fee: 1) spending $250 towards new purchases with your debit card 2) maintaining an average monthly balance of $5,000, average daily balance of $3,000, or combined $15,000 average monthly balance between all your linked Bank of America accounts.
Cons
Higher fees
Harder to wave monthly fee
Why choose Bank of America?
The main reason to go with Bank of America is convenience as BofA doesn’t really offer anything unique compared with other business checking accounts.
However, being the largest network of branches in the U.S., if convenience is important to you it might be your best option.
To open a small business checking account with Bank of America, click here.
4. U.S. Bank
While smaller than both Chase and BofA, U.S. Bank still has a fairly large network and some bright points for business owners looking for a quality checking account.
Pros
Large banking network: Smaller than both Chase and BofA, U.S. Bank still boasts more than 3,000 branches and over 5,000 ATMs nationwide.
No monthly fees with U.S. Bank Silver business checking account
No cash deposit fee on the first $2,500 deposited each month
Virtually no ATM fees (even out of network)
Cons
Free accounts have their monthly activity restricted, so if you have a lot of transactions per month this probably isn’t the bank for you (or you’ll need to move up from the free Silver checking account).
Why choose U.S. Bank?
U.S. Bank rivals Capital One’s little to no fee structure, however, they also boast a large network of branches and ATMs which makes them the perfect combo if you have a local branch and/or ATM in your area.
Another one of the largest banks in the United States, like Chase and Bank of America, if you already bank with Wells Fargo that could be a big deciding factor.
Pros
Largest branch network: Wells Fargo has the largest number of physical branches in the nation at over 6,300 (and over 13,000 available ATMs).
Convenient upgrades and lots of great features and investment options for growing business owners
$14 monthly fee can easily be waived by qualifying for one of more than half a dozen factors
Cons
Not as competitive a fee structure as Chase and other business checking options
Why choose Wells Fargo
If you’re quickly growing and you want a bank who will make it easy to move up to a better account and qualify for more powerful features seamlessly, Wells Fargo is a great option.
Navy Federal is an ideal option for anyone connected with the U.S. Armed Forces, including:
Army
Navy
Marines
Air Force
Coast Guard
Immediate family of branch member, and
Veterans of all branches
If you qualify as any of the above, Navy Federal offers several perks which you can’t obtain from any other business checking option.
Pros
No monthly fee
No transaction fees
Unlimited transactions
Cons
You can only obtain a Navy Federal business checking account if you qualify as either a member of one of the above U.S. Armed Forces or are an immediate family member of a member.
Why choose Navy Federal?
Navy Federal is the ideal choice for Armed Forces members. If you’re a member, or you’re an immediate family member of a member, Navy Federal is very hard to beat.
BBVA’s unique business checking features make it stand out from other options on this list for several reasons, but it’s low number of physical branches could be a breaking point for some business owners.
Pros
No monthly fee
Free access to over 40,000 ATMs
Cons
Only 650 branches
Transaction fees are limited to just 2 transactions for free accounts
Why choose BBVA Compass?
If you’re lucky enough to have a BBVA Compass branch in your area (or don’t depend on having a physical branch), we consider them one of best business checking accounts because they have low (or no) monthly fees and access to a huge number of ATMs for free.
It’s important to know that all banks are not created equal and many are better in certain situations than others.
Whether you’re looking for a relationship to secure a business line of credit or a one-time small business loan, or simply a dependable business checking account with high-level convenience, each will likely have its unique niche.
Open a Business Line of Credit with Excel Capital
If you’re in need of small business funding, Excel is here to help.
Apply for a business line of credit with Excel Capital today to see what you could be approved for:
Open a business line of credit with Excel Capital today: Apply Now
This means you do not have to pay any company or service for access to your credit report.
If you haven’t already obtained a copy of one of your credit reports (no matter from which credit bureau), it’s suggested you have that as we go through the rest of this guide.
Having it on hand will allow you to make notes and mark it up with areas that need attention, whether that’s improvement, removal, or simply some research.
So, if you haven’t yet, head to AnnualCreditReport.com to get a free copy of your credit report.
How to Read Your Personal Credit Report
Your credit report is a collection of your financial data (such payment history, current debt) gathered by a credit bureau, typically one of the major bureaus in Experian, Equifax, or TransUnion.
Access to your credit report can be requested by you or anyone you authorize to run your credit for the purpose of using your credit score and/or report to help grade your financial eligibility.
The information on your credit report is separated into 4 major sections:
Personal information
Credit history
Credit inquiries
Public records
Personal information
This section includes basic information such as your name, address, and phone numbers:
Credit history
Credit history includes credit accounts, how much you owe (if anything), how long the account has been open (or closed), and whether you’ve ever been late on payments:
Credit inquiries
When you apply for credit, that company or lender will run a hard inquiry on your credit, which impacts your credit score immediately up to 1 year and lasts on your credit report for up to 2 years.
Those inquiries appear on your credit report in the proceeding section, typically just after your accounts:
Public records
Finally, public records includes all assorted items such as judgments, liens, bankruptcies, and foreclosures
Once you understand how your report is structured and what is included in each section, it’s much easier to read through your report.
However, there are some confusing terms that show up in credit reports you’ll want to know as well to make sure you understand everything that’s included in one of your credit reports.
A quick breakdown of all those confusing credit report terms
Here’s a quick breakdown of some of the most common terms that may appear on your credit report:
Collection account: When a debt can’t be collected, large companies tend to sell that debt off to a debt collector. That account will show up as a collection account.
Charge-off: You might notice that some of your credit accounts say “Charged-off”. This means the creditor has given up on trying to collect the debt and written that debt off as a loss on their taxes. That debt may or may not have then been sold to a debt collector, so check to see if that same debt shows up as another account under a different name.
Open account: An open account includes any financial responsibility to which you pay off each month, such as a cell phone or utility bill.
Revolving account: This includes revolving credit accounts to which typically a portion of the balance is paid each month such as credit cards.
For a list of additional terms and codes that may appear on your credit report, several credit bureaus and other financial institutions offer handy guides, such as Creditfirm.net.
How to Calculate Your Credit Score
Now that you understand how to read your personal credit report, let’s dive into your credit score.
Your credit score is a direct reflection of the state of your credit report.
If you learn what factors impact your credit score and how to read your credit report, you can put that knowledge together to vastly improve your credit. And you can do it often within a relatively short period of time.
*Getting 9002 or 9003 credit when running your credit score? Find out what it means and what you can do about it.
How you credit score is calculated
Credit agencies such as FICO and VantageScores take the data collected by the various bureaus to calculate your score.
After calculating the data, they produce a score somewhere between 300 and 850 based on various factors, one score for each major credit bureau.
It’s these agencies that calculate and produce your score, not the credit bureaus themselves. This is an important differentiation that’s critical to understand if you want to fully comprehend how your credit report and score work.
What factors impact your score?
So then, how is your credit score calculated?
There are 5 major items from your credit report that impact your score and these are the items you should be looking for when reviewing your credit report for possible improvements.
Below, we’ve organized those major factors in order of importance. The percentage (out of 100% total) indicates how important that particular factor is in calculating your score:
Payment history: 35%
Credit utilization: 30%
Credit history: 15%
Credit mix: 10%
New credit: 10%
Payment history: 35%
Easily the most important factor when it comes to calculating your credit score at 35% of your score, payment history accounts for just over ⅓ of your entire score’s calculation.
This includes the number of on-time payments, late payments, and when those payments were made.
Suffice it to say, try to never be late on a payment.
However, it’s also important to note that FICO and other agencies state a couple of late payments aren’t going to kill your score.
It’s much more of a collection of factors taken together than any one thing dominating the scoring calculation.
Credit utilization: 30%
The second of the two most important factors in calculating your credit score is credit utilization. Taken together, payment history and credit utilization account for 65% of your score
Credit utilization takes into consideration the amount you owe, particularly what percentage of your available credit you’ve borrowed from.
The less you’re borrowing from your available credit, the better your score.
For example, it’s generally advised to use no more than 20-30% of your available credit. If you have a $250 credit card, another $500 card, and a final card with a $1000 limit, your available credit is $1750.
However, you should shoot for spending just $350-525 of that amount (the less the better).
Credit history: 15%
Most notably, this takes into consideration the age of your credit accounts.
The longer your accounts have been open, the better your credit score will be. However, this also accounts for how long you’ve been actively using those accounts.
Ideally, you should have multiple accounts open for a long period of time all which you’re also actively using, even if it’s only a small portion of the available credit.
Credit mix: 10%
Credit mix accounts for just 10% of your score’s calculation and it has to do with the combination of credit accounts you have on your report.
This one is a bit vague, but it’s generally suggested that a good mix of revolving and installment accounts of different types is best.
The idea is that it indicates the borrower (you) can handle different types of credit, further increasing your credit score.
New credit: 10%
New credit is the final element and it accounts for another 10% of your score.
This includes two different things:
New inquiries
New credit accounts
First, soft inquiries don’t affect your credit. However, hard inquiries– such as when a car dealership or bank runs your credit for a loan– do impact your credit and stay on your credit report for up to 2 years.
Second, opening several new accounts within a small window of time can also impact your score, as it can suggest that you’re in financial trouble.
However, something else not often considered: opening new accounts lowers your average account age, which also impacts your credit history.
4 Best Tips for Improving Your Credit
Now that we’ve covered what to look for on your credit report to start building toward a better credit score, we’ll cover some of our best tips for improving your credit.
Here are tips for improving your credit:
1. Get credit monitoring
One of the single most important things you need to do if you’re serious about working on your credit is credit monitoring.
Credit monitoring, through sites such as Credit Karma, gives you a gateway into your credit activity.
It will tell you not only when something has positively or negatively impacted your score, it will tell you when new items are added to your credit report, and help you identify credit fraud swiftly.
2. Remove old, erroneous, and fraudulent items
If you haven’t been keeping an eye on your credit report all this time, chances are that one or more items have landed on it that can be removed.
This includes items that:
simply old and should have fallen off
Erroneous items such as credit accounts being listed twice, and
Fraudulent items you might never have noticed
Examples of items you might see and be able to remove from your credit report include a UCC filing or UCC lien, which often stay on your credit after they’ve expired and can easily be removed, tax liens, or judgments.
Sometimes, companies will run your credit without your authorization. If you notice an inquiry you know you did not permit, you can request to have it removed.
Another example is a credit account which you’ve paid off or has been charged off, both of which can often be removed in some cases.
3. Pay on time, no matter what
As we talked about earlier, your payment history accounts for ⅓ of your entire credit score.
That means making sure that you’re paying on time is one of the single most important things you can do to improve and maintain your credit score.
Don’t forget that if you’re having trouble paying something on time, you can call most companies and request an extension. Many industries offer up to 2 extensions a year (or more), which means you have flexibility if need-be.
4. Optimize your credit utilization
Similarly, credit utilization is nearly ⅓ of your entire score.
Many aren’t aware of the importance that credit utilization plays in terms of your credit score. And, if they are, many more aren’t aware of just how much of their credit they should be spending.
Most sources will suggest you keep your credit utilization below 30%. This is technically true. However, if you keep it to under 20%, the difference is significant and it requires just a little extra self-restraint.
Alternatively, you can look into whether you’re available for a credit limit increase from any of your credit cards.
Obtain the Funding Your Business Needs (Even without Great Credit) with Excel Capital
You credit is a gateway to some of life’s most important moments: your first (or next), a new home, or obtaining a business loan to get your business off the ground.
Now that you have your credit report in hand, you might be wondering what your options are.
If you’re working on improving your credit, don’t let that hold you back from obtaining the cash your business needs to move forward.
At Excel Capital, we’ve helped thousands of business owners find the perfect funding solution for them.
We know that every business owner is at a different stage and a lack of accessible capital (or good credit to get that capital) shouldn’t be the reason your business doesn’t succeed.
We’ll work with you to identify the perfect option to fit your business– and your goals– no matter where you are in your credit-building journey.
Click below to apply:
Get the capital your business needs. Apply with Excel Capital today: Apply Now
Private business loans don’t refer to a specific type of business loan.
Rather, it refers to any alternative business loan (i.e. a business loan offered by a lending institution other than a traditional bank) offered by a private lender.
Hence, the private in private business loans.
Private funding can include several different lending types, including:
Crowdfunding and peer-to-peer funding
Microfinancing
And most of all, alternative business loans
Private business loans specifically offer one unique advantage of traditional bank financing: an alternative source of business funding.
And that funding is often easier to obtain or offers alternative qualification requirements, that combined allow you to potentially obtain funding for your business when otherwise you wouldn’t.
What types of private business loans are there?
Private business loans encompass a whole suite of lending products.
Some are short-term, some medium, some long. Some offer a one-time lump sum, others a more continuous flow of capital based on your needs.
And still others are designed specifically for certain types of businesses, including those which invoice their customers.
The more you know about each loan type, the better you’ll be able to identify a funding vehicle that’s the best fit for accomplishing your business goals.
Here are the main types of private business loans:
Term loans
Term loans are primarily separated into 2 different loan types: short-term and medium-term.
Term loans is a blanket term which refers to virtually every type of private business loan, including:
A business line of credit is a unique lending vehicle that gives you access to a pool of credit that you can tap into whenever you need it.
When you’re approved for a business line of credit, you’re given a credit limit. All you have to do is make sure that you pay off your balance regularly and you’ll be able to continuously tap into it over time.
This makes a business line of credit especially great for seasonal businesses.
Financing is an umbrella that includes two main types of funding products: equipment financing and invoice financing:
Equipment financing
Equipment financing gives you the ability to get the funding you need to finance a vital piece of equipment when you don’t have the cash to get it on hand.
You’re able to fund the full cost of that piece of equipment with the equipment itself working as collateral as you pay it off at interest.
Invoice financing works similar to equipment financing in that you use one or more (often many) of your business’s invoices as collateral (instead of a piece of equipment) to obtain financing which you then pay off at a specified interest rate.
Invoice financing is useful as a way to bridge the gap when you have open invoices in your accounts receivable and need to maintain a steadier cash flow, something many businesses suffer from.
A merchant cash advance is a unique type of business financing in that it uses your daily credit card sales as a form of soft collateral that also determines your loan amount.
You get an amount based on your regular credit and debit card sales which you then pay off with interest by setting up an ACH auto debit straight from your credit card processor each time you batch out.
MCA’s are flexible in that because you’re paying the loan off at a percent of your credit card sales; when your sales dip so does your loan repayment amount go down.
Hard money lending is a type of asset-based lending, a type of financing secured by a tangible asset such as a car, property, or liquid asset such as cash savings.
Hard money lending specifically works as a short-term “bridge loan”, named so because it’s designed to help businesses bridge the gap on large projects where the project must be completed before getting paid.
Peer-to-peer lending (also referred to as P2P), is a form of crowdfunding which has become increasingly popular over the past few years.
With P2P, a group of people come together, typically on a P2P lending platform that facilitates the transaction, and offers a pool of funds to a borrower at interest.
Private business loans tend to work a bit differently than traditional bank loans.
That’s mostly a good thing. However, there are not only pros but also cons to this as well.
Before deciding how you’ll be funding your business capital needs, you should know what those pros and cons are to help you make an informed decision.
Pros of private business loans
The major overarching pros of private small business loans are:
Easier approval: Private lenders take into consideration the complete picture of your business’ health, not just your credit score. Because of this, you can often be approved for a loan or advance with bad or fair credit.
Faster funding: Private lenders typically pride themselves on their speed as they don’t have to move through the same hoops that clog the bank loan approval process. Most alternative lending options fund in 24-48 hours.
More options: Private lenders have a variety of funding options even beyond that which traditional banking institutions typically offer. For example, if you need funds but don’t have the money now to start paying off a loan but do have outstanding invoices, invoice factoring could offer you the chance at getting the funding you need when a traditional bank funding application might leave you without anything to show.
Within these points are many positive subpoints such as no hard collateral requirements, little or no credit requirement in many cases, and more convenient terms.
However, each lender is different. Make sure to take time to look at your options and go with the product, lender, and terms that make the most sense for your business and its goals.
Cons of private business loans
When it comes down to it, there really is just one primary con of private business loans: higher rates.
Not all private business loans have higher rates, but most do. That’s for one primary reason: most have different qualification requirements.
As we touched on a moment ago, private business loans have more flexible terms and qualification requirements. In particular, that means two things:
You don’t need great or even good credit to get a private loan.
Most business loans through private lenders don’t require hard collateral like bank loans do such as property, a vehicle, or cash savings.
Those are big positives. However, the flip side of that is many private loan products have higher APRs and shorter loan terms to make up for that increase in risk the lender takes on as a result.
It’s important to make sure and review any loan contract before signing to make sure that the numbers make sense for you and your business.
It’s easy for a high APR to become overwhelming. But many private lenders offer fair and competitive APRs, so do your homework before taking that final step.
Get the funds you need without the headache– and fast– with Excel Capital
At Excel Capital, we know how much work it takes to run a business.
You have enough to deal with, you don’t want to stack the often painful process of applying for a loan that is often the bank application process on top of that.
Plus, what if you don’t have the credit?
You work hard each day to grow your business, and sometimes, just to keep it afloat.
Times change, sometimes there’s growth, other times you’re fighting to survive.
In both cases, a little extra capital may be exactly what you need to keep things moving forward.
That’s why we’re here to help.
We believe that the traditional process of jumping through hoops to be approved for a bank loan and needing stellar credit just to get approved is unrealistic for modern businesses.
That’s why we’ve designed a collection of flexible business financing options that offer everything you need, whether you’re looking for:
A quick infusion of cash to pay the bills
A seasonal boost to prepare for your busy time
Or a large sum of capital in times of growth
Our application process is quick, simple, and easy.
Complete our online application and see how much you can be approved for:Apply Now
Frequently Asked Questions
How can I get a small business loan?
You can acquire a small business loan from several places, from a traditional bank to an alternative private lender or peer-to-peer lending institution.
In recent years, alternative private lenders have become popular as they’re not typically bogged down with the high credit requirements and slow application processes that are synonymous with applying for a business loan at a major bank.
What is the easiest business loan to get?
Easy is relative when it comes to business funding options, but getting a loan from a traditional bank is generally much harder than with an alternative lender as credit requirements are stringent, typically requiring 680-720 or higher just for initial approval. Alternative lenders, on the other hand, offer business financing solutions on fair and even bad credit, provided your business is in good standing.
Who can qualify for a small business loan?
Nowadays, anyone can qualify for a small business loan, provided your business is in good standing. Traditional banking institutions require 680-720+ credit while SBA loans require 620+. However, alternative lenders offer financing solutions in the fair to bad credit range.
How much money can you borrow for a small business loan?
