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How to Start a Business: The Complete Guide to Starting a Business

Learning how to start a business is a lot like learning a new language:

At first, everything feels foreign and new.

After a while, though, you start to get the hang of it. It starts to be comprehensible.

The only problem?

When that starts to become comprehensible to you depends entirely on your own work ethic.

You could get there sooner, learning the right steps to take in advance and being smart about each next stage and decision that can move your business forward.

Or, you could get there later, making costly mistakes that cause you to be set back.

Or, worse, cause the business to go under for good.

Business isn’t a race. It’s a marathon, and the better you are at collecting information, considering your options and validating your actions the better results you’ll get. 

To that end, this guide is intended to help you get the information you need to start your business the smart way.

We’ll cover:

  1. Step 1: Do market research
  2. Step 2: Write your business plan
  3. Step 3: Choose your business’s structure
  4. Step 4: Register your business
  5. Step 5: Obtain business documents
  6. Step 6: Get small business funding
  7. Step 7: Open a business bank account
  8. Step 8: Create your marketing plan

Let’s start with step 1, the most important step to take before starting your business. 

Step 1: Do market research

Before officially starting your business, it’s important to understand something we touched on a moment ago:

Validation is key to business success. 

Many business owners make the mistake of thinking they can simply act on a business idea and it will work out.

But there are a few things you need to consider first before you should jump.

That includes:

  1. What problem does my product/service solve? 
  2. Are people looking for a solution to the problem?
  3. Would they pay for my solution? And how much

Another point to consider is whether to do the same thing better or strike out and do something new.

There are valid arguments both ways, but ultimately, you have to choose either to:

  1. Do what other businesses have done before, but different
  2. OR do something entirely different (typically by identifying a need that doesn’t yet offer a solution)

The difference might seem inconsequential right now, but it could make a big difference later as you work to gain traction for your product or service.

Doing something proven to work, just a bit differently, requires less skill and knowledge of business and marketing in general. 

Launching a business with a totally unique product or service has a sharper potential growth curve, with a much higher risk and chance of failure. 

Step 2: Write your business plan

A business plan can be 1-page or ten pages, it mostly depends on how extensive you want it to be (and why you’re crafting it).

A business plan is important because it helps establish a gameplan for your business.

  • What kind of product or service do you offer? 
  • Who is your target customer? 
  • You competitors?
  • What is your financial strategy?
  • And your marketing strategy? 
  • Also, what is your unique selling proposition (USP)?

These are all questions you should have an answer to before you officially “open your doors” because they determine your success. 

Not creating a thorough business plan is one of the single greatest mistakes of a large percentage of business owners. 

And, sure, you can just figure it out along the way.

The problem is, that’s a costly mindset that will bite you eventually.

Instead, take some time to craft a good business plan so that those critical details are made clear before pulling the trigger and investing your time and money.

To learn more about crafting an effective business plan, read: How to Write a Business Plan: A Step-by-Step Guide.

Step 3: Choose your business’s structure

Choosing a business structure is one of the more technical steps you’ll need to take in starting up your business.

However, it’s vitally important that you do the proper amount of research here.

That’s because the business structure you choose can affect things like your:

  • Business tax strategy
  • Structure
  • Operating costs
  • Liability protection
  • And more

Pick the wrong business structure and you could end up costing yourself a good chunk of change, or worse. 

There are 5 basic types of business entities in the U.S.:

1. Sole proprietorship

The most basic business structure, a sole proprietorship is what most business owners start as.

That’s because it’s designed for a sole employee (you) operating the business in its entirety, the way most businesses start out.

It’s important to mention that you have no liability protection as a sole proprietor, which may or may not be important for your industry and product or service.

If that’s the case, you’ll probably want to consider starting out as an LLC.

2. Partnership

A partnership is very similar to a sole proprietorship, except the business has more than one owner.

Those owners don’t necessarily need to have equal responsibility or ownership, but you’re likely a partnership if you’re starting your business with a partner.

A partnership also offers no liability protection. 

3. C-Corporation

A C-corp is what most people think of when they hear the word “corporation”.

When a C-corp is taxed, it gets hit twice: once at the corp level and another at the individual level.

However, it does have its benefits, particularly for very large companies, such as making it easier to generate investment capital. 

4. C-Corporation

A popular business structure for larger businesses, an S-corp is a “pass-through entity”, meaning it bypasses taxation at the corporate level.

Unlike C-corps, where you’re taxed twice, with S-corps you’re only taxed once, at the individual (owner) level. 

This has made S-corps a popular structure for many larger businesses where the owner still wants to maintain control of its taxation. 

5. Limited Liability Corporation (LLC)

An LLC combines aspects of the corporation, namely the liability and some of the tax savings, with the flexibility of a sole proprietorship.

With an LLC you get, as it says, limited liability protection. It’s not quite what you get as a full corporation, but depending on your type of business, it might be all you need.

Along with a sole proprietorship, this has quickly become one of the most popular “starter” structures available for new business owners.

That’s because it’s typically best to start as this or a sole proprietor and then shift to a full corporation later as your business grows (something an LLC makes even easier than a sole proprietorship). 

Step 4: Register your business

Once you’ve decided what your business structure will be, it’s time to register your business

That involves a couple of different steps:

1. Register your business name

If you’re opening either a sole proprietorship or partnership, and you won’t be using your legal name, you’ll need to register a DBA, or “doing business as”.

The best way to do that is to contact your local state center or use an online filing service, in which case you’ll typically have to wait about 30 days for everything to be completed. 

2. Get a tax ID

The SSN of businesses, a tax ID or EIN (employer identification number) is an important form of identification that most business entities need.

The only exception is a sole proprietorship or LLC without any employees, which don’t require a tax ID so long as you’re the only member of the company. 

3. Register local taxes

This final step isn’t required for everyone, but in most states, you’ll need to register your business for taxation due to things like unemployment insurance and workers’ compensation. 

In some states, additional steps are required on top of this. 

Because every state is different, it’s important to find out what requirements you’re responsible for. 

To that end, use this guide from the USA.gov to find out what your state-specific requirements are. 

Step 5: Obtain business documents

Once you’ve submitted all your business registration requests, it’s waiting time!

Jokes aside, you don’t have to wait around and do nothing during this time.

In fact, you still have work to do. Namely, documents to submit.

For the most part this really just comes down to getting a business license.

1. Get a business license

Why do you need a business license

In short, a business license is like a driver’s license, just without the test. You need one to operate a business– simple as it gets.

Keep in mind that, depending on your region/state and type of business/offerings (such as if you offer food and/or alcohol), you might also need additional licenses to operate. 

Check with your local state offices (found easily by typing “[state] business license filing” into Google), to be sure what’s required of you.

2. Obtain patents and similar documents

Also make sure at this point to take care of any patents, trademarks, or copyrights you need to apply for.

While this doesn’t apply to everyone, if it does apply to you, it’s important to start on the process now.

Reason being: it can take months or even years to get final approval (which is why you see “patent pending” or “registered trademark” so often).

Step 6: Get small business funding 

How much does it cost to start a business? 

Every business is different, from a startup with billion-dollar dreams to a sole proprietor just looking to build a business that gets them freedom.

But all small businesses need funding.

How much it costs for you to start up your business could be anywhere from a few hundred to tens of thousands of dollars. It all depends on what you need to get started. 

Funding is an essential ingredient of business success and a step that keeps many businesses from ever getting off the ground. 

Whether it’s marketing, business registration, to payroll, you need to have the cash flow to run a business.

The challenge, in the beginning, is getting the money you need to launch before you have that cash flow. 

There are a few ways you can go about it, depending on your available resources:

1. Borrow from friends and family

The first and simplest (and oldest) way to go about it is to just borrow from friends and family. 

If you’re lucky enough to have a relative that believes in you and your business idea and wants to fund it, you could go that route.

2. Use credit cards

Another common option, you could tap into your available credit to fund your business.

This is particularly effective if you don’t need much to get started.

Some types of businesses online nowadays only require the cost of a website, some marketing tools, and maybe a bit of initial funding for ads to get started (if that).

However, if you need a large sum of cash, you could be running a huge risk by inadvertently affecting your credit. 

3. Venture capital

The go-to option for Silicon Valley startups, venture capital involves obtaining cash from an investor.

This can be time-consuming but offers a huge potential payoff, so if you’re in need of a large quantity of cash and you don’t mind answering to investors, this is a good way to go.

4. Use a personal loan 

If you have good credit and can get a personal loan, you could also apply for one use that to start your business up as well. 

This is a decent option if, again, you don’t need much funding but your needs are greater than what you could get out of your credit cards or from friends and family. 

The only thing to watch out for is the effect it could have on your personal credit if things go south.

Then you won’t only have to pay back the loan, but your personal credit could get shot in the process. 

5. Get a startup business loan

Another option is to get a startup business loan, a loan designed for new businesses that need funding to start their business. 

If you don’t like the idea of getting a personal loan, or you need more funding than you could get personally, this is another potential option to consider. 

Step 7: Open a business bank account

An often-overlooked step in the early stages of any business, a business bank account is an essential element of any well-run business in terms of basic financial organization.

That’s because many businesses start out as sole proprietors. As they grow, they might become an LLC but continue to operate like they’re an individual.

That’s a big mistake as it starts to muddy your personal and business financials, which isn’t just bad accounting but can get you in trouble with the IRS. 

That’s because you don’t just want your finances separate, you’re required by law to do so. 

Choosing a business checking account is important for other reasons as well.

After all, it’s where your cash flow will pass in and out of. You want to know that you’ve chosen a bank, and an account, that provides you with what you need to operate smoothly.

Consider:

  • Which bank you’re choosing (if you’re happy with your bank, going with a business checking option of theirs might be most convenient, but still shop around)
  • Account features
  • Number of physical locations and ATMs
  • Digital banking and app ease of use
  • And other factors 

For more on choosing a business checking account, read our guide: Top 7 Best Small Business Checking Accounts.

Step 8: Create your marketing plan

The eighth and final step, this is something that many business owners are unaware of when they first get started.

It’s easy to get excited about registering your business, choosing a name, and building your first website.

However, once all that is done, it’s time to get to work. 

That’s when marketing comes in.

If you don’t have any customers, you’re out of business.

And how do you get customers? Marketing.

So, what should include in your marketing plan and what do you need to craft it?

Here’s a quick rundown:

1. Where are your customers?

You need to know where your customers are located, whether that means where they physically hang out or what websites they visit in the digital world. 

Knowing this allows you to collect vital information you can use to market to them later.

2. What kind of challenges do your customers face?

Like this information.

Knowing your customer’s main challenges as they relate to your product and the problem it fixes will tell you how to angle your marketing in a way that your customers will respond to. 

3. What are your most effective marketing channels?

This is something that you might require a little testing first to find out.

However, it’s essential as not every marketing channel will be equal in terms of your product (and what works for one company/product might not work for you).

Both before and as you market, you should be keeping an eye out on which marketing channels convert the best for you and your product.

Once you find that out, you can ease off of channels that aren’t converting well and double down on those that are.

4. Free vs. paid marketing

No form of marketing is free per se. 

However, while you always need to pay for the time it takes to create marketing material, some forms of marketing have additional costs to run the said advertisement. 

In the digital world, where marketing and advertising is now king, that typically comes down to content marketing vs. paid advertising. 

It’s important to consider how much money you’re willing to invest in marketing, but also how much of each of these types of marketing you’re investing in.

One important factor that could influence your decision is understanding the “return curve” on different forms of marketing.

With content marketing, which typically comes in the form of blogging, publishing videos on YouTube, and social media marketing, you’re investing manpower up front for a long-term result.

However, that result tends to have a much higher long-term ROI and offers a much more long-term return, one which once built requires a low time and monetary investment.

Paid advertising is fast– lightning-fast, in fact, about as fast as you can pay for and produce an ad that converts– but it’s also much more expensive and leaves you susceptible to the constantly changing guidelines of those advertising platforms (such as Facebook).

Another drawback to look out for with regards to paid advertising is that it’s easy to become dependent upon it. 

Why is that bad? Because, eventually, every ad stops working and you have to iterate. The problem is the next ad might not convert as well, which means your entire source of leads is depends on your ad conversion rate, instead of a consistent flow of leads through content marketing.

Again, though, content marketing takes time to build (6+ months, often 1-2 years before seeing decent results). So, keep that in mind. 

Start your business the smart way

Many business owners start their businesses without much more than an idea and figure it out along the way.

And while that can work out fine, it’s not the smartest way to go about it and could contribute to an early closure.

Instead, you’ve taken the time to learn what you need to get started right, which will give you the greatest chance of success.

So move forward knowing you’ve taken a step in the right direction and let your business grow.

As they say, the sky is the limit.

LegalZoom Review 2020: Pros, Cons, and Alternatives

Since 2001, LegalZoom has been the face of digital legal services.

From incorporation to setting up a trademark, LegalZoom has established itself as the forerunner in business and legal services for business owners everywhere.

But are they the best option in 2020?

Where do they excel? 

And what competitors exist?

These are questions we’ll help you answer throughout this guide.

Table of Contents

  1. Pricing 
  2. Pros and Cons
  3. Online reviews for LegalZoom
  4. Best LegalZoom Alternative
  5. Final Verdict

LegalZoom review: Should you use them for your legal and technical business needs?

Boasting a nearly 20-year history, LegalZoom has helped nearly 5 million customers throughout the U.S. establish a business or set up a patent, trademark, or other business service and make their dream a reality.

LegalZoom offers dozens of various business-related services, but most of their services fit neatly into one of three categories:

  1. Starting a business
  2. Creating an estate plan
  3. And protecting your work

Some of their other services include LegalZoom:

  • Business name change
  • Cohabitation reviews
  • Dissolutions
  • Estate planning
  • Trademark
  • Bankruptcy
  • Divorce
  • Building agreements
  • And LegalZoom living trusts

If you’re a small business who can’t afford a legal team, LegalZoom could be just what you need to take care of these vital business services without having to pay an arm and a leg. 

LegalZoom Pricing 

LegalZoom is generally considered more expensive than its competitors, but that isn’t the case for all of its competitors, most notably for its biggest competitor in Rocket Lawyer who is slightly more expensive across the board. 

Here’s a quick overview of LegalZoom’s pricing for its various services:

LegalZoom Review

Keep in mind that for every service, there are typically add-ons that can inflate the price if you choose to opt-in to them.

The most common of these add-on services is expedited processing for business formation, often costing an extra $100-200. 

Also, their Business Advisory Plan includes several different services in one for a flat monthly fee, including:

  • Consultations with an attorney
  • Discount on attorney fees for additional services
  • Contact with tax professionals 
  • Document review
  • Annual business evaluation

LegalZoom Pros and Cons

LegalZoom’s overall offering has many pros but also cons you should be aware of.

Read on to get the most complete view of the positives and negatives of LegalZoom:

Pro: Money-back guarantee

Despite having spotty online reviews, one of LegalZoom’s saving graces is their 60-day money-back guarantee.

If you’re not satisfied with your service, you can get a full refund within 60 days (or cancel your subscription any time if it’s a monthly service along with a prorated refund).

Pro: Affordable tax advice

While many of LegalZoom’s competitors offer legal advice, where LegalZoom has differentiated themselves is in also offering affordable tax advice.

Available with their Business Advisory Plan for just $31.25, it’s one of the most affordable tax advice services available online. Plus, considering the fact that it includes everything else you get in the plan, it’s an even better deal. 

Con: Inconsistent customer service

Likely the biggest and most commonly mentioned con of LegalZoom’s service, while some customers say they had a great customer service experience, others say they were downright ignored and the service they paid for unfulfilled.

Con: Costlier than most competitors

LegalZoom is known for being more expensive than most of their competitors. Their pricing for most services is anywhere from $20-30 more expensive, not including upsells which LegalZoom is known for pushing to the point of annoyance on the part of customers. 

Online reviews for LegalZoom

We touched on their reviews earlier, but it’s worth highlighting this point as it’s the one big blight in terms of LegalZoom’s service as a whole.

LegalZoom has many happy customers, but when you look at their reviews online, it’s anything but happy.

This is LegalZoom’s rating on Consumer Affairs:

LegalZoom Review

And on the Better Business Bureau

LegalZoom Review

Keeping in mind that the BBB’s online ratings often include many negative reviews (after all, you’re typically motivated to leave a review most when you have a negative experience), that’s still not ideal and should be taken into consideration when choosing whether to go with LegalZoom or a similar service.

What is the most common complaint within these reviews?

In our research, the most oft-mentioned complaint was that the customer purchased a business establishment service, such as a DBA set up, and correspondence was dropped mid-process without the customer being able to get a hold of anyone in customer service. 

Whether that’s a question of negligence or an overtaxed customer service team is impossible to know, but it is important to know that it’s a common complaint nonetheless.

Best LegalZoom Alternative: Rocket Lawyer

While many happy customers report being satisfied with LegalZoom’s services, many other negative reviews exist to counterbalance that.

If you’re unsure about whether you want to use LegalZoom, there are many great alternatives. 

One such alternative that stands above the rest as a worth competitor is Rocket Lawyer, which offers a comparable set of services and boasts great online reviews both with the BBB and Consumer Affairs (4 stars average, as opposed to LegalZoom’s 2 ½).

What services does Rocket Lawyer offer?

Rocket Lawyer’s services are virtually identical to LegalZoom’s.

According to their website, they offer:

LegalZoom Review

From starting a business to planning your estate and protecting your business ideas, Rocket Lawyer offers many of the same services as LegalZoom.

However, they’re also known for being a bit more expensive. 

Rocket Lawyer vs. LegalZoom: Who is cheaper?

So, who is more affordable?

LegalZoom tends to be a bit cheaper for most services than Rocket Lawyer. For example, their basic LLC filing service is $90 while LegalZoom is $80 ($79.99). 

Not a big difference, but it is still worth noting that most of their services cost $10-30 more than LegalZoom. 

However, what Rocket Lawyer does have that LegalZoom doesn’t is a monthly subscription service for those with recurring or frequent legal needs.

If you need regular access to attorney advice or something similar, or regularly need to make use of various services that include corporation filing or registered agent services, you can pay $39.00 for Rocket Lawyer’s monthly subscription and get most services for free (with a few at a steep discount). 

LegalZoom does have a similar service in their Business Advisory Plan for $31.25, though that only includes year-round legal help from an attorney and not the legal forms, incorporation filing, and other services that Rocket Lawyer’s service offers which could save you hundreds of dollars or more depending on how often you need to make use of such services.

Alternatively, LegalZoom’s service offers tax advice. So, if that’s more of what you’re in need of, their plan is likely the better option.

Check out Rocket Lawyer.

LegalZoom review: Are they good?

If you’re in need of legal and tax advice, LegalZoom is likely the way to go, especially with their Business Advisory Plan. 

However, if you’re in need of one-time or other recurring business services such as legal advice by itself, registered agent services, or frequent incorporations, there are better options out there.

No matter which you choose, take the time to consider your options and what is most important to you.

Frequently asked questions

Why is LegalZoom so expensive?


While LegalZoom is more expensive than some business formation services, it’s cheaper than others. However, it’s price sits on the high end, so check around for pricing on comparable services before committing to anything first. 

Is LegalZoom trustworthy?


LegalZoom has received mixed reviews for its services online. Some say they received top-notch customer service, others say their payment was taken then communication went dark.

We can’t rightfully suggest one way or another whether you should use LegalZoom or not, whether you’re starting a business, planning your estate, or setting up a trademark or similar protection. 

However, we hope this guide helps you make an informed decision about whether LegalZoom is a good choice for the business services you need. 

Small Business Relief: A Guide to New COVID-Related Financial Assistance Resources for SMBs (Updated for April 2020)

COVID-19 Small business relief

We’re living in an unprecedented time.

Due to the strain of mass lockdowns across the U.S. as a result of the COVID-19 pandemic, businesses are squeezed harder than ever just to get by.

And the reality is, without help, many won’t be able to.

Fortunately, Washington understands this. 

That’s why, in part due to the recently passed Coronavirus Aid, Relief, and Economic Security Act (or CARES), which designated $350 billion to help small businesses, new programs have been created which are designed to help small business owners make ends meet in this unprecedented financial crisis. 

At Excel, we wanted to do our part to help small businesses– and the country as a whole– recover. 

That’s why we’ve put together this guide, which not only breaks down those new financial resources but also details a few other lesser-known resources you may not have heard about. 

Notice: Available funds have been temporarily extinguished for both the Paycheck Protection Program and EIDL. 

According to the SBA.gov:

“SBA is unable to accept new applications at this time for the Paycheck Protection Program or the Economic Injury Disaster Loan (EIDL)-COVID-19 related assistance program (including EIDL Advances) based on available appropriations funding.”

Read on to find out more about additional relief options available to your business and learn more about the PPP and EIDL federal programs so that you’re ready if and when additional funds become available. 

COVID-19 Small business relief

Part 1: New Financial Assistance Resources for SMBs (Updated for April 2020)

First, let’s talk about the most important of those resources: the two major and newly available financial assistance resources created as a direct result of the COVID-19 crisis.

COVID-19 SMALL BUSINESS RELIEF

The Paycheck Protection Program

Created in conjunction with the CARE Act, the Paycheck Protection Program is one of the largest small business relief bills ever passed by congress.

The program is designed to encourage employers to retain their payroll during the crisis to help support the U.S. workforce and businesses in the process.

While the program is technically a loan, the terms of the loan state that if you retain all employees on payroll for a total of 8 weeks, and that money is used only for expenses related to payroll, mortgage interest, rent, and/or utilities, the loan will be forgiven in its entirety

Can I apply?

If your business has been affected by the coronavirus, you’re likely eligible.

Small business owners will be able to apply through the SBA or approved lenders starting April 3rd and the application period will run until June 30th, 2020. 

These businesses qualify to apply for the Paycheck Protection Program according to the SBA:

  • Any small business concern that meets SBA’s size standards 
  • Any business, 501(c)(3) non-profit, 501(c)(19) veterans organization, or Tribal business concern (sec. 31(b)(2)(C) of the Small Business Act with the greater of 500 employees or which meets the SBA industry size standard if more than 500
  • Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location
  • As well as sole proprietors, independent contractors, and self-employed persons.

Will my loan really be forgiven?

According to the CARE Act, the loan will be 100% forgiven and you will owe nothing provided you use the funds for payroll costs, rent, mortgage interest, and/or utilities. 

According to the Act, 75% or more of the funds must have been used for payroll (and those employees must have been retained or quickly rehired) for it to be fully forgiven. 

That means only 25% of the amount forgiven can be used for non-payroll expenses, including:

  •  Benefits
  • Mortgage interest
  • Rent
  • Utilities
  • Or other debt

Also, if payroll drops, the amount of the loan forgiven will lower as well (though no specified percentages are yet available).

And keep in mind that the forgiveness won’t go into effect until the end of the 8-week period of unemployment following the receipt of your loan. 

Lastly, keep in mind that no collateral or personal guarantee will be required to be approved for the program and no fees will be charged by the lender or the federal government. 

How much can I borrow?

With the Paycheck Protection Act, loans can be up to 2.5x the business owner’s typical monthly payroll costs (not exceeding $10 million).

To calculate your average payroll costs to get an idea of how much you could receive, use this equation:

COVID-19 Small business relief

Read the U.S. Chamber of Commerce’s Coronavirus Emergency Loans Small Business Guide and Checklist for more information on the Paycheck Protection Program. 

COVID-19 SMALL BUSINESS RELIEF

EIDL Emergency Advance

A second opportunity for financial relief for small businesses exists in the SBA’s Economic Injury Disaster Loan (or EIDL).

With the EIDL, business owners can receive up to $2 million, with $10,000 of economic relief in the form of an advance that does not have to be repaid, provided you can show you’re experiencing financial difficulty as a result of the current crisis. 

Can I apply?

Any business with less than 500 employees that operates within the 50 states or Washington D.C. qualifies to apply for an EIDL. 

Sole proprietors, self-employed persons, and independent contractors qualify to apply as well.

To apply for an Economic Injury Disaster Loan advance with the SBA, click here

Part 2: Additional SBA resources

In addition to the Paycheck Protection Act and the EIDL, other strictly SBA-related resources exist to help offer relief to small business owners.

Here are two such programs:

SBA Express Bridge Loans

The SBA’s Express Bridge Loan program offers $25,000 to business owners who already have a relationship with an approved SBA Express Lender.

These loans can either be used as standalone term loans or as bridge loans while applying for an EIDL. 

If your business is in an urgent need of cash, an Express Bridge Loan could be just what you need to make payroll while you wait for the programs mentioned in the previous sections to come through. 

Keep in mind that an SBA Express Bridge Loan will have to be repaid. However, if you use it as a bridge loan until you’re approved for an EIDL, that can be used in part to forgive a portion of your Express Bridge Loan (up to the amount you were approved for). 

SBA Debt relief

In an effort to further help small businesses during the crisis, the SBA has temporarily amended the policy of its other loan products.

That includes a few points, according to the SBA’s official debt relief page:

  • “The SBA will automatically pay the principal, interest, and fees of current 7(a), 504, and microloans for a period of six months.
  • The SBA will also automatically pay the principal, interest, and fees of new 7(a), 504, and microloans issued prior to September 27, 2020.”
  • Also: “For current SBA Serviced Disaster (Home and Business) Loans: If your disaster loan was in “regular servicing” status on March 1, 2020, the SBA is providing automatic deferments through December 31, 2020.”

In addition to this, all new traditional SBA loans issued will offer the same incentives as usual but with deferred payments

For more information, read up on the SBA’s debt relief efforts here

Part 3: Additional relief resources for small businesses

In addition to the relief programs we’ve mentioned so far, several businesses and banks have stepped up to do their part to offer help to small business owners.

Here’s a list of all COVID-related relief resources we’ve located so far, a list we’ll keep updated as more become available:

We’ll get through this together

If there’s one thing the coronavirus pandemic has proven, it’s our resilience– together. 

No one knows when the pandemic will end, but one thing is for certain: we’ll get through this together.

So let’s come together and each of us do our part to help rebuild in the wake of our collective hardship. 

Guide to USDA Business Loans

USDA Business Loans

If your business exists outside major cities in rural American, you know the disadvantages that come with the territory.

It’s hard to get supplies and shipments, harder to meet with clients and customers, and not really possible to entertain them as guests when the need arrives. 

Plus, there’s the problem of inadequate access to certain basic resources like printing services, a local post office robust enough to offer all the shipping supplies you’ll need, not to mention a reliable Internet connection in many cases. 

The USDA understands the unique challenges that face rural-based businesses, so they sought to help out by doing what they can. Hence, USDA business loans were born.

USDA Business Loans

What are USDA business loans?

Referred to as the USDA Business and Industry (or B&I) program, the USDA offers a business loan program to small businesses located in rural areas. 

The purpose of the program is to both support small businesses and create jobs in rural communities. 

Similar to the SBA’s business loan programs, the U.S. Department of Agriculture themselves don’t offer the loan but rather guarantee a portion of the loan for lenders, who can then pass on the savings to you. 

What can you use a USDA business loan for?

USDA business loans have a variety of uses, including:

  • Working capital
  • Inventory purchases
  • Equipment and supply purchases
  • Debt refinancing 
  • Updates, repairs, and general development
  • Agricultural production of various kinds
  • And real estate development

USDA business loans can be used for pretty much anything so long as it’s tied to the growth of the company in some way.

And they’re also available to nonprofit organizations, making them a great funding option for rural nonprofits of all kinds. 

How do I qualify for a USDA business loan?

Qualifying for a USDA B&I loan can be a bit tricky, as they have pretty extensive qualification requirements. 

However, that’s mainly to make sure that the program is going towards helping the businesses that it’s designed to help. 

To qualify for a USDA B&I loan, you’ll first need to be located in a rural area. According to the USDA.gov website, you qualify under this section if:

  • Your business is located in a rural area “outside of a city or town with a population of fewer than 50,000 people.”
  • Your headquarters is based in a larger city “as long as the project is located in an eligible rural area.”
  • You must be located in the U.S.
  • And projects can be funded “in rural and urban areas under the Local and Regional Food System Initiative.” The USDA suggests checking the eligible addresses for Business Programs here.

Next, you’ll also need to be one of the below types of businesses:

  • For-profit
  • Nonprofits
  • Cooperative
  • Federally-recognized tribe, or
  • Public body

However, keep in mind that these types of businesses are ineligible:

  • Church-based organizations
  • Lending institutions
  • Insurance companies
  • Charitable organizations
  • Gambling establishments
  • Fraternal organizations
  • Raceways
  • And golf courses

Finally, you need to meet these additional requirements:

  • Must be a U.S. citizen (or permanent resident): If it’s a business, 51% or more of the business must be owned by U.S. citizens or permanent residents.
  • 680+ Personal credit score: For businesses, this includes a history of on-time payments and no negative marks such as bankruptcies and judgments.
  • Collateral necessary
  • Personal/Corporate guarantees
  • Some types of insurance in certain cases
  • Complete a feasibility study
  • Business must be in good standing

Is my business in good standing?

In terms of USDA business loans, that last one includes a few things.

First, you must have enough cash flow to show that you have the ability to pay back the loan. 

Second, your business must have a positive ‘tangible balance sheet equity position’ either of 10% if you’re an established business or 20% if you’re new. 

What does that mean? 

Tangible balance sheet equity is: 

Your balance sheet – Intangible assets = Tangible balance sheet equity

*Intangible assets include things like amortization of a loan, client and customer lists, and patents, trademarks, and copyrights. 

Also, keep in mind that the lender you choose to work with may have additional qualification requirements on top of the USDA’s factors. 

Be sure to check with your lender to find out what their additional qualification requirements are.

USDA business loans terms & rates

While the lender you work with will specify your exact loan details, the USDA has certain universal guidelines in place for all USDA B&I loans no matter who offers them:

Here’s a breakdown of all USDA loan amounts, terms, and rates: 

USDA business loan amounts

There is no hard maximum on USDA business loans, which can reach above $10 million dollars. However, the typical range is between several hundred thousand to a few million.

How much you’re approved for is based partially on what you’ll be using the loan for, what the USDA calls the “loan-to-value” ratio. 

Depending on what your loan-to-value ratio is, you’ll need to make a down payment to cover the remaining amount of the value of the loan. 

For example: 

USDA Business Loans

So, if you’re looking to purchase or rent several large pieces of construction equipment for a building project totaling $250,000, the USDA loan would cover $175,000 while you’d need to make a down payment of $75,000.

Now, let’s talk about USDA loan terms. 

USDA business loan terms 

Similar to USDA loan amounts, their terms depend on what you’re using the loan for as well. 

For example:

USDA Business Loans

Keep in mind that if you’re using the loan for several different uses in one– for example, a real estate development project where you’re purchasing land, equipment, and hiring workers– your loan will be blended based on the various different purposes, essentially taking on the form of several separate smaller loans.

USDA business loan interest rates

Lastly, USDA interest rates are competitive, often being similar to SBA loans at between 6-9%. 

However, keep in mind that your interest rate is set by your lender, so make sure to check that you’re getting a competitive rate before signing any agreement.

In addition to this, your interest rate can be fixed, variable, or a combination of both. 

In addition to interest, there are a few USDA loan-specific fees, including:

  • Guarantee fee: 3% of the guaranteed loan amount
  • Renewal fee: 0.5% annually (from the outstanding principal)

Keep in mind that, similar to your interest rate, this doesn’t include any potential lender fees that might be in your agreement, so make sure to check before finalizing anything. 

How do I apply for a USDA business loan? 

Does a USDA B&I loan sound like a good fit for you?

If you believe you qualify for a USDA business loan, you simply need to find a lender who offers USDA loans.

Remember, the USDA doesn’t offer business loans directly, but through other lenders who they’ve approved to offer their loan program.

How does it work? 

Your lender will take the information and submit your application to the USDA for pre-approval. A USDA rep will then meet with you and your lender to determine eligibility.

Once it’s been pre-approved, that’s when you’ll be able to submit a full application to the USDA.

How long does approval take?

According to the USDA.gov website, approval takes anywhere from 30-60 days from the date you submitted your official application, with funding taking 30-90 days. 

What do I need to apply for a USDA business loan?

To apply for a USDA loan, you’ll need financial documents, which may include:

  • Personal + business credit report
  • Bank statements
  • Balance sheet
  • Profit & loss statement
  • Cash flow projections up to 2 years
  • Business plan
  • Resumes of all business owners

Keep in mind that additional documents may be requested based on your specific situation. 

However, in general, it’s best to get everything together that you have in advance just in case, so the approval process isn’t slowed down. 

Frequently Asked Questions

How much can you get approved for with USDA business loans? 

There is no hard maximum on USDA business loans, though they typically don’t go any higher than $10 million. How much you can get approved for depends on several qualifying factors, so you’ll need to submit an application to see what you’re approved for. 

Does the USDA do small business loans?

The USDA offers small business loans through its USDA Business and Industry program, a loan program that backs loans for rural-based businesses and business projects to help grow small businesses and develop jobs in rural areas. 

Bridge Loan: Is It a Useful Funding Option for Your Business?

BRIDGE LOAN

What is bridge funding?

A bridge loan– sometimes referred to as a swing loan, bridging loan, or gap financing– can be defined as:

A short-term, temporary funding solution that helps “bridge the gap” until a longer-term funding method can be secured by the borrowing party. 

A bridge loan has several unique applications, especially in terms of real estate where a bridge loan can allow you to purchase a new property before selling your current one. 

For that reason, bridge loans are often secured using an existing property. 

Table of contents

  1. How do bridge loans work?
  2. Real estate bridge loans
  3. Pros and cons of bridge loans
  4. Is a bridge loan for you?
  5. Frequently asked questions

EXCEL - BRIDGE LOANS

How do bridge loans work? 

Bridge loans work differently depending on the reason why they’re being used. 

However, in terms of real estate– the most common use of bridge loans– they work like this:

  • The borrower decides they want/need to purchase a new property before selling their current one
  • They apply and are approved for a bridge loan
  • They then use the equity in their home as collateral for the down payment on the new home loan
  • They begin paying back the bridge loan

Keep in mind that it’s possible you’ll need to begin paying back the bridge loan before the old property has sold.

That can put added pressure on you as you’ve just taken up a new mortgage (depending on whether that new mortgage is more or less expensive than the old one). 

Bridge loan vs. Traditional loan

Often, approval for a bridge loan works a bit differently than a traditional loan. 

How are they different? Here are the main ways a bridge loan tends to be different from a traditional bank loan:

  • They often have faster approval time and funding speed
  • They also typically have higher interest rates
  • Terms tend to be shorter than traditional loans, from a few months to one year in most cases
  • Approval factors tend to be different than traditional loans as well, with lower FICO requirements and debt-to-income ratio guidelines. 

Real estate bridge loans

As we talked about earlier, bridge loans are common in real estate as they serve as an effective way to close what can be an awkward gap between waiting for a property to sell and buying the next.

With a real estate bridge loan, the property owner can move forward with purchasing that new loan without having to wait for the old property to sell, giving them added flexibility especially if they think the property may take a while to sell. 

How does it work exactly? Real state bridge loans combine the two mortgages together, with the loan itself covering 80% of the combined value of both properties. 

However, it’s important to know that real estate bridge loans often have stricter credit and debt-to-income ratio requirements for approval.

Pros and cons of bridge loans

While bridge loans have several unique qualities, there are also disadvantages that make them great for some in certain situations and not in others.

Here are the pros and cons of bridge loans:

Pro: Flexibility to bridge the gap between important purchases

The primary benefit of bridge loans, the flexibility you gain by being able to bridge the gap between a sale or more secure funding for a large property or equipment purchase isn’t a small thing at all. 

Pro: Might skip payments

Depending on various circumstances, by using a bridge loan to purchase a new property before your old one sells, you can often skip several mortgage payments in the process.

While this might sound like a small plus, considering that could be all or most of the time you need to get the sale, that can often be the perfect reprieve to manage the challenge of handling both mortgages while waiting for that old property to sell. 

Con: High interest rates

Bridge loans typically have higher interest rates than home equity loans, typically about 2% higher than the average 30-year fixed-rate mortgage, making them more expensive in the short term. 

Con: Handling two mortgages at once can be stressful

While a bridge loan rolls both mortgages up into one, you’re still handling the two simultaneously, which can create added stress while you’re looking for a buyer for the old property. 

Is a bridge loan for you?

Whether a bridge loan is the funding tool you need depends on what you need funding for and your timeline.

If you’re looking to make a new real estate purchase and you’re on a short timeline, or it will take time to sell, a bridge loan might be a good option.

If you need to make a large equipment purchase now but securing the funding will take time, a bridge loan could be exactly what you need to get that critical piece of large-scale equipment in place now so that you don’t skip a beat. 

However, it’s also important to know that many other funding options are available to you, so take the time to consider your options and make the choice that best fits your needs. 

Frequently Asked Questions

What does a bridge loan cost?

In most cases, bridge loan interest rates range from 8-10%, with closing costs from 1.5-3% depending on your creditworthiness, debt-to-income ratio, and other qualifying factors. 

How can a bridge loan help my business?

A bridge loan is useful if you’re in need of making a fast purchase for something like real estate, especially when the market is up and your window to take action is small. 

Contract Financing: How You Can Use It to Finance Your Business

CONTRACT FINANCING

What is contract financing?

As anyone in a business such as construction knows, getting a big contract can be a big step forward for your business.

Then you realize you need to pay for it. 

If you’ve ever found yourself in that or a similar situation, where you’ve got a big job to pay for but you won’t get paid until you reach the first milestone, or worse once the entire job is completed, then contract financing was designed for you.

Contract financing uses open contracts you have as collateral to approve you for funding. Those contracts also then determine the amount of funding you’re approved for. 

It’s similar to invoice factoring in that the advance is based on your customer’s creditworthiness, not yours. 

That’s because your lender is going to have to collect the amount from your customer, so they want to make sure they can be counted on to pay the contract. 

How contract financing works

We’ve covered the 30,000-foot view, but how exactly does contract financing work?

First, if you snag that big job and the customer wants confirmation that you can fund it (to ensure there are no delays), but you don’t have the cash, you can go straight to a lender and receive a letter of intent to fund which you can show them. 

Once you’ve signed up and been approved for contract financing with a lender, you receive a lump sum based on the size of the contract, often somewhere around 90% of the invoice itself, with the remaining 10% (minus fees) being released once the invoice is paid. 

Often, with such large jobs being split into milestones, these payouts happen for each milestone invoice.

For example, let’s say you sign a contract for a $200,000 construction deal with 4 milestones, each $50,000. 

Each $50,000 invoice would be sent to the financing company. First, they’d pay out 90% of that invoice, $45,000, immediately. Then, assuming the invoice is Net 30, once the finance company receives the invoice amount 30 days later, they send you the remaining 10% minus fees. 

This would then go on for each of the other 3 invoices until the job is complete. 

Now, let’s talk a bit about how fees work with contract financing.

Contract financing fees and rates

Factor fees, the fee typically associated with contract financing, typically range between 1.5 – 2.5%.

Using our example, if each invoice is $50,000 and your factor fee is 2%, you’d pay $1,000 in fees. So, for the total $200,000 job you’d pay $4,000 in factor fees.

Also, keep in mind that an additional fee might be charged in the event that your client doesn’t pay on time.

CONTRACT FINANCING

What businesses use contract financing?

If contract financing sounds like a useful funding method, but you’re not sure if it’s a fit for your business, use these points to help you decide.

Contract financing is a good fit for your business if:

  • You have poor credit and likely wouldn’t be approved for a traditional bank loan
  • Your customer does have good credit
  • You have a signed open contract with a clear schedule of milestones mapped out
  • Your business has a good financial track record and history showing you can get the job done in the allotted time. 

What kind of businesses does this make contract financing a good fit for? In particular, real estate development and other construction businesses are a good fit. Also, security, hardware/servers, and other various installation-oriented businesses are a good fit as well. 

How is contract financing different than invoice factoring?

If you’ve heard about invoice financing (also known as invoice factoring) before you might be wondering what the difference is between the two.

They have their similarities. However, where they differ primarily is this: 

  • Invoice factoring: Uses open invoices / your accounts receivable.
  • Contract financing: Uses open contracts for work that has not yet been completed. 

In general, a financing company that offers contract funding is far harder to find than invoice factoring. 

That’s because if the business does not fulfill its contract, the lender is not going to get paid, making this a risky investment for the financing company.

What do lenders look for when qualifying you for contract financing?

If contract financing sounds like it might be a good fit for you, you might be thinking about what the qualification requirements are.

Typically, lenders look at these elements to determine whether to approve your business for financing a contract: 

  • Your customer’s credit: They’re the ones paying the invoice, so they need to know that your customer is reliable. 
  • Your company: Do you have the resources necessary to complete the project and within the estimated block of time? The financing company will have their experts review your business’s profile to make sure. 
  • How long you’ve been in business
  • Financial documents: The financing company might consider your customer’s credit a primary qualifying factor, but that doesn’t mean they won’t also look at your financial health.

Keep in mind that these are all basic factors. Your financing company may consider other factors in their qualification methods. 

The best thing you can do to prepare is to review your own financial documents and make sure you’ve cleaned things up as much as possible.

Double-check the contract and make sure you estimated the time to completion correctly and that you have everything you need to complete the job.

Where do you get contract financing?

As contract financing isn’t technically a loan, it isn’t offered by banks. 

Instead, alternative lenders may offer contract financing (though not all do, for the reason we talked about earlier).

Before you apply for contract financing, make sure that it’s the right fit for you. 

Many alternative lending options now exist for businesses of all sizes and needs, from short-term lump sums of cash to business lines of credit you can tap into any time you need capital to pay for a contract. 

Get the funds your business needs– fast– with Excel Capital

We know how difficult obtaining a bank loan can be.

If you have bad credit, not enough credit, or a blemish on your credit report that could keep you from being approved for a loan, let us take a look and assess your business financial health.

Our system offers a more complete view of your business and allows us to approve you based on more than your credit alone (often even with bad credit).

Click here to apply and find out what your options are: Apply Now

5 Ways to Automate Your Business to Save You Time and Money

5 Ways to Automate Your Business

As you begin to scale your business, the sheer number of things that need to get done can seem overwhelming.

And while you don’t have to do everything yourself, even with a great team behind you, it can still become too much for you to handle.

That’s where smart automation comes in.

By automating your business in certain ways, you can take either repetitive or once difficult tasks or responsibilities and simplify everything so that it’s far easier to manage, often reducing the amount of work they take to complete on a consistent basis. Not to mention helping you combat competition. 

Is automation all about technology?

Keep in mind that automation doesn’t only have to do with tech-related improvements you can make.

In the list, below, we will mention some amazing additions or adjustments you can make related to modern tech that can be used as a tool for helping automate parts of your business.

However, there’s also a lot you can do that simply has to do with how you manage your team and work on a day-to-day basis.

Here are 5 ways to automate your business and get more done in less time and with less hassle. 

5 Ways to automate your business that will save you time and money

1. Streamline task management 

One of the easiest things you can do right off the bat is to streamline your task management and other similar systems such as communication.

Software like Slack can help centralize communication, reducing regurgitation so that everyone can get key messages from the same place (preferably, a second or third time after hearing about it in the meeting). 

Ways to automate your business

And software like Asana can help organize your task management, doing things like: 

  • Creating a visual board to track the progress of tasks
  • Managing a calendar to chart the schedule of content, product updates, and anything else, and
  • Giving employees a centralized place to manage their current tasks via their inbox. 
Ways to automate your business

Plus, in a surprise twist (well, maybe not so much considering modern software), Slack and Asana integrate with one another, allowing the two to works seamlessly. 

In addition to this, you can organize appointments with something like Doodle, almost fully automating the process of scheduling out meetings throughout your week. 

Ways to automate your business

And if you set up Google Calendar integration, those appointments get dropped straight into your calendar where you can view everything in one place. 

The amount of time and hassle you can cut down on just by using these few tools is immense, especially if you find yourself in several meetings a day or have a newly budding team that’s still communicating primarily through email or strictly verbally. 

2. Set clear policies and systems for your internal team– then outsource for expertise

When it comes to automation, systems are your friend. 

You don’t want to bog your team down with protocol, but by setting up clear policies and systems for your internal team to operate under, you take out a lot of the guesswork from their day-to-day work. 

Why is this so big? It not only saves you time by reducing the number of occasions where an employee has to get your attention to ask you how to handle a situation, it keeps them from losing their own flow throughout the day by you not being a bottleneck. 

The make these procedures ideal for your team, remain open to their input throughout the journey of establishing and testing these different systems out. Hear what they have to say and make adjustments to help them and you work better as a whole. 

Next, once you’ve done that, save time and maximize your results by outsourcing for expertise to freelancers and agencies on sites like Upwork

Your team is ideal for everyday work. However, when you need to run a big marketing campaign or something similar, it can be better to hire an outside expert as they’re likely better in their specific field than anyone on the team (of which employees tend to be more generalists) and are motivated to do a good job compared to a regular employee. 

3. Use AI and machine learning systems

Still somewhat vague and confusing terms, AI and machine learning, as they pertain to business, are quickly becoming invaluable for a number of reasons. 

In fact, you may already be utilizing some form of machine learning or AI without even realizing it. 

One major example is Google Cloud or Microsoft Azure, both being machine learning and automation platforms which are being updated regularly with new tools that give you the ability to do things like: 

  • Turn data into the optimal ad spend campaign
  • Or to optimize pricing based on customer behavior
Ways to automate your business

With AI and machine learning, you can take data your business already has and use it to maximize what you’re already doing, maximizing results and making everything more efficient. 

4. Document everything

You know how they always say we shouldn’t forget our history, lest we repeat the same mistakes? The same can be said for your business.

By documenting everything, including what you did for a particular project or campaign, how much you spent and how, timeframes, results, and anything else important, you have something you can look back on to inform future decisions.

What does this have to do with automation? 

Decision-making is a critical part of any business, and it only becomes more important the larger the business becomes. 

Documenting everything in this way means you spend less time in decision-making later when the time comes to pull the trigger on a new project because you can use your historical data to inform the new decisions related to that project, essentially semi-automating your decision making. 

5. Create a lead generation system

The various collective tools of digital marketing, from ESPs like Mailchimp and ConvertKit to Facebook Ads,  have given businesses the ability to create a lead generation system like nothing that has ever been seen before. 

Where before businesses had to run advertising campaigns in newspapers, or billboards, and T.V. commercials that hopefully led to new leads, now it’s very different.

Now, you can create a campaign that is almost fully automated, from the sharing of new content to the running of ads, collecting emails, and email marketing.

Huge sections of modern marketing can be semi-automated, freeing you up for more specific marketing efforts as well as to optimize those campaigns over time (something that machine learning can help automate as well).

Look for ways to automate your business– the right way

Automation can never be 100%. After all, we’re not quite ready for robots to take over. 

However, many of the processes within your business can be automated, saving you huge chunks of time and money, including:

  • Decision making
  • Marketing campaign optimization
  • Marketing campaign execution
  • Communication
  • Task management
  • And even just daily internal goings-on

So, use these tips to help bring the power of automation to your business and watch how it helps you free up more time and energy for other things that deserve your attention, allowing your business to grow that much faster.

High-Risk Business Loans: Are They For You?

HIGH-RISK BUSINESS LOANS

What is a high-risk business loan?

High-risk business loans are small business loans offered to business owners with bad or inadequate (not enough) credit or considered to be operating in a high risk industry. 

Approval for traditional loans is based mostly on credit– often in the 720+ range– which in the past meant that if you didn’t have good credit, you were out of luck. 

With high-risk business loans, though, you can be approved for a loan on bad credit, often at a higher interest rate. Hence, the term ‘high-risk’ refers to the risk the lender takes on when approving a high-risk loan, not the borrower. 

HIGH-RISK BUSINESS LOANS

What do lenders consider high risk?

So, what exactly is high risk?

We’ve touched on credit so far, but exactly what credit score is considered high risk? And what other factors make you high risk?

Factor 1: Credit score below 600

If your credit score is around 600 or lower, you’re considered high risk. Keep in mind that this includes several other credit factors as well, including:

  • Too little credit history
  • Marks on your credit report, including judgments, liens, and bankruptcy

Factor 2: In business less than 2 years

Virtually all banks require you to have been in business for at least 2 years to approve you for any kind of business loan. 

In fact, most require you to have been in business for 5 years

This is the simplest and most straightforward factor and it comes down to one thing: the lender wants to see that you’re an established business that will be here tomorrow, so to speak. 

Factor 3: You’re in a high-risk industry

Certain industries are considered more high risk compared to others. This could be because of regular volatility, seasonality, they way they’re paid, or because they’re taboo.

High-risk industries include:

  • Auto sales
  • Construction
  • Trucking
  • Cannabis
  • Strip clubs
  • Gun shops

Keep in mind that this is a short list, there are many more industries that your lender may consider high-risk. 

If you have one or more of these factors, the best thing you can do is to review your business reports, such as profit and loss, as well as your credit report and try to clean things up as much as possible. 

Factor 4: You’re not showing profit

A final but equally important factor is showing profit or loss. If your business doesn’t show profit, or is operating at a net loss, lenders will be very wary of working with you.

The basic idea is this: if you’re not showing profit, how will you have the extra cash to pay off your loan? Lenders want to see a consistent history of net profit to ensure they’ll be able to recoup their investment. 

How can lenders approve high-risk businesses? 

A common question asked by business owners looking for and applying for a high-risk loan is: how can I be approved in the first place if my business is considered to the lender?

Lenders are in the business of lending money, but if they don’t get that money back, they’re out of business. So, why would they approve you if you’re considered high-risk? What’s the catch?

In the past, banks approved businesses based almost entirely on credit. If you didn’t have amazing credit, you were out of luck.

In some cases, loans have been offered at lower amounts and with higher interest rates in exchange for lower credit requirements. This is where the term “high-risk loan” originated. 

Yet, the restrictions placed on these loans have often been unfavorable for business owners in need of substantial capital to grow their business.

However, now there are many alternative lenders who will approve you for a loan that is comparable to a traditional bank loan in terms of approval amounts. 

And it comes down to the fact that they take more than credit into consideration when factoring their approval.

What other factors are those? Your business’s overall financial health, including:

By taking all of these factors into consideration, alternative lenders are able to qualify you more effectively than simply taking your credit score and report into consideration. 

What about collateral? How do alternative lenders secure loans?

Most alternative loans don’t require the typical “hard” collateral you’re used to, such as property, vehicles, or cash. 

Instead, they secure the loan with your business revenue, in some cases purchasing a portion of your future business sales as a form of soft collateral.

This is beneficial because if, in the unfortunate case, you’re forced to close down your business, you won’t be on the hook to pay that amount back. 

So, there’s no risk of losing your personal property or cash savings if your business goes under. 

High-risk and alternative business loans options

If a traditional bank loan is out of your grasp, there are a few options you have in terms of obtaining financing.

Over the past decade, many alternative options have arisen to fill the hole left by banks with increasingly more rigged qualification requirements (even though the average credit score has gone down). 

Here are a few of your options:

Peer-to-peer lending

Lending through peers is about as old as money, but modern peer-to-peer lending takes that to another level. 

With P2P lending, you can apply for funding on a platform such as Prosper or Upstart and get a sum of capital which is comprised of a collection of smaller investors who believe your business is worth investing in.

Credit union

Credit unions have long been good alternatives to traditional bank loans because they tend to offer competitive rates and member discounts.

The only negative is you’ll need a local credit union and you’ll likely have to become a member of that credit union to apply for a loan.

Alternative lending

Alternative lending comprises many different options such as business lines of credit and unsecured business loans.

Alternative lenders such as Excel Capital offer these options to business owners who aren’t in a position to be approved for a traditional bank loan due to bad credit or no collateral and need an alternative to get the capital they need to grow their business.

Get the funds your business needs– fast– with Excel Capital

We know how difficult obtaining a bank loan can be.

If you have bad credit, not enough credit, or a blemish on your credit report that could keep you from being approved for a loan, let us take a look and assess your business financial health.

Our system offers a more complete view of your business and allows us to approve you based on more than your credit alone (often even with bad credit).

Click here to apply and find out what your options are: Apply Now

How to Get Started with Google My Business: A Guide for Small Business Owners

EXCELCAPITAL - GOOGLE MY BUSINESS GUIDE

What is Google My Business?

Google My Business is Google’s official tool that allows you to add your business to local Google search and Google maps listings.

Chances are, you’ve run across one such listing searching for something you’ve needed before.

Like this:

GOOGLE MY BUSINESS - 12 copy 2

Through Google My Business, you can update your business hours, add your menu, photos and video of your location and products, and post status updates that offer useful information to those looking up your business on Google.

Below, we’re going to show you everything you need to know about setting up your Google My Business listing.

Table of Contents

  1. What does Google My Business cost?
  2. Create a Google My Business account
  3. Verify your business
  4. Update your GMB listing
  5. Frequently asked questions

What does Google My Business cost?

First, let’s get an important and extremely common question out of the way: 

“GMB sounds great, but how much does it cost?” 

Good news: Google My Business is 100% free for business owners to create and update their business information to show in both Google search listings and maps. 

With that out of the way, let’s talk about how to create a GMB account. 

Create a Google My Business account

Creating a GMB account is pretty easy and straightforward. 

First, log into the Google account you’d like your business connected to. Then, head to the GMB home page at Google.com/business and click the “Manage now button:

GOOGLE MY BUSINESS - 1

Next, either enter your business name in the search box to pull up your listing if it already exists or click ‘Add you business to Google’:

GOOGLE MY BUSINESS - 2

(Google may have automatically created your listing if your business has been around for a while, in which case you’d use the search bar.)

If you clicked “Add your business to Google”, you’ll be prompted to enter your business name:

GMB - BUSINESS NAME

Then, choose which category your business best fits into. It’s important that this is accurate because it will affect what kinds of listings your business shows up in:

GMB - CATEGORY

If you’d like to add a location/address your customers can visit, click “Yes”. If you’re a private business that doesn’t allow walk-ins, click “No”:

GMB - PUBLIC OR PRIVATE

Next, enter your business address if you chose to enter a location:

GMB - ADDRESS

Then, if your business offers some kind of service outside of its actual physical location (such as food deliveries), notate it:

GMB - DELIVER

Lastly, for your business information, enter your phone number and website URL:

GMB - PHONE AND URL

Finally, click “Finish” to complete your listing:

GMB - FINISH LISTING

Verify your business

The final step is to verify your business in some way. 

There are several ways to do this, but the most common is by having a postcard sent to your business that has a unique code which you’ll then enter into your GMB account:

GMB - VERIFY BUSINESS

Other verification options that are available in select locations and for select businesses include:

GMB - WAYS TO VERIFY

  • By phone
  • By email
  • Instant verification
  • And bulk verification (for businesses with 10+ locations)

To learn more, check out Google’s official information page on verifying your business with Google My Business here

If you don’t want or can’t verify your business right now, clicking the tiny dropdown arrow at the bottom right within “More options” will expand a “Skip” button you can press to skip verification for now. 

How to verify by mail

If you’re using the most common method for verifying your Google My Business listing, use these steps:

  1. Enter your contact name
  2. Click the “Mail” button on the “Choose a way to verify” screen
  3. Check the mail for your postcard (Should arrive within 14 days, according to Google documentation)

Once you receive your postcard, follow these steps to enter the verification code:

  1. Log back into GMB
  2. Click “Verify location” from the GMB menu
  3. In the field, enter the 5-digit code you received
  4. Click “Submit”

If for whatever reason you believe you did not receive your postcard, you can request another by clicking here

Update your GMB listing

Now that your listing is complete, it’s time to make it look amazing. 

Once you’re logged into your Google My Business dashboard, click “Info” on the main menu:

GMB - UPDATE LISTING

From this screen, you can click the edit button to update all the information that shows up on your listing:

GMB - EDIT LISTING

Once you’re done, your listing should look something like this:

GMB - LISTING EXAMPLE

Here are a few common areas you should update first:

  • Basic business information: Such as online ordering platform, reservations options, and phone number
  • Photos: Listings with photos get more clicks and requests, so make sure to upload as many photos you have of both the location, the food, and the menu. This includes your cover, which is the most important photo of your business as it shows here in your search listing:
GMB - GOOGLE PHOTOS

Keep in mind that anyone can click “Suggest an edit” on your listing, so you’ll need to check back periodically to make sure your information is correct.

Google photo guidelines

Google has very specific suggestions in terms of what photos you should include of your business in your profile.

Here’s a quick summary:

  • Exterior: Pictures of the outside of your business during different times. 
  • Interior: Pictures of the interior of your business from different angles and at different times. 
  • Product / Food and drink: Show off all your products! If you’re a restaurant, make sure you photograph your most popular menu items. 
  • Employees: You should include shots of your employees at work, a shot of your staff/management, and any other image that displays your unique work culture. 
  • Common areas / Rooms: Pictures of where your customers will visit within your business.

*Note: for every one of the above categories with the exception of products (1 image / product), Google recommends you include 3 images. 

Get your small business seen with Google My Business

Google My Business is easy to set up and offers huge potential returns, with your business instantly showing up in local searches by customers who are looking for exactly what you’re offering.

There’s some optimization to be done, and you need to check your listing regularly to make sure your information is correct. 

However, to say it’s worth it would be an understatement. If you have a local business, you need to have (and optimize) a Google My Business listing. 

Frequently asked questions

What is the difference between Google My Business and Google Places?


Google Places was used for the same purpose as Google My Business up until 2014, when it was officially retired and later replaced by Google My Business. 

Google My Business is the only tool you need if you’re trying to get your business to show up in Google search and maps listings. 

How do I access my Google My Business account?


The easiest way to access your GMB account once it’s created is through the Google My Business app.

Download the Google My Business app here: iOS and Android

Why download the app? Aside from easy access to your GMB account, the app gives you the ability to: 

– Post status updates
– Access search metrics, and
– Update your business’s contact information and business hours among other details 

You can’t do everything through the GMB app, but it’s a useful tool that will suffice in most cases.

Merchant Cash Advance: The 2020 Guide

EXCELCAP_ MERCHANT CASH ADVANCE

What is a merchant cash advance?

As opposed to a traditional 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 credit and/or debit card sales in exchange for a fee.

In addition to this, a MCA is generally much faster than a traditional loan, 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.

MERCHANT CASH ADVANCE

How a merchant cash advance works

An MCA is an advance on future credit card sales. Therefore, it’s best for businesses who function mostly off credit and debit card sales.

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 for those days 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.

Click here to apply for a merchant cash advance and find out what your options are: Apply Now


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:

MERCHANT CASH ADVANCE 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 credit card sales, so he’s approved for the $20,000 advance 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 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


Pros and cons of business merchant cash advances

Here are the primary benefits, and drawbacks, of a split funding:

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.

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.

Con: 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

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:

  1. The primary qualification factor
  2. The main factor which decides how much you can be approved for, and
  3. 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

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

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.


Business line of credit

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.

Learn more about business lines of credit here.


Get the funds your business needs– fast– with a merchant cash advance

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.