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How to Get a Home Based Business Loan: 5 Options

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Home based business loans guide with a laptop, construction plans and hard hat in a home office.

Funding for a Home-Based Business

Getting the funding you need for a home-based business can be challenging. Home based business loans can help eligible businesses cover equipment, inventory, payroll and other operating costs without a separate commercial office. Approval depends on the business, the financing product and the provider’s requirements.

Starting a home-based business means sorting out licenses, taxes and day-to-day operations. Finding business capital to start, grow or expand is another step. If you are wondering how to get a loan for a home-based business, understanding what funders look for is a useful place to start.

Many small companies start at home. It is where owners build their customer base and lay the foundation for the business. Money can be tight during those early years.

Aside from getting clients, one of the biggest challenges for business owners is finding financing. Some funders apply stricter requirements to home-based businesses, especially when operating history or collateral is limited. There are still several financing options to consider.

Home-based business funding can take several forms, from equipment financing to a revolving line of credit.

This guide covers five funding options, why approval can be harder and what to prepare before you apply.

Explore funding for your home-based business with Excel Capital: Apply Now

Home-Based Businesses After COVID: A More Common Way to Work

Home-based businesses were common long before the pandemic. The SBA Office of Advocacy’s 2020 Small Business FAQ reports that about 50% of all U.S. businesses were home-based including businesses without employees. That figure comes from older survey data, so it describes the pre-pandemic picture.

Since COVID-19, working from home has become a regular part of business life. Consultants, online sellers and service businesses can manage clients, payments and teams from a home office. For many owners, there is little reason to take on a separate office lease.

U.S. Census Bureau data on working from home illustrate the broader change: 13.8% of U.S. workers usually worked from home in 2023, compared with 5.7% in 2019. These are workforce figures, rather than a count of businesses or loans, but they help explain why working from home feels much more familiar today.

Working from home can cut rent, commuting and office costs, leaving more money for equipment, marketing and staff. Even with lower overhead, you may still need working capital when bills come due before customers pay.

Why Many Businesses Operate From Home, Especially Contractors

Construction is a good example. A general contractor, roofer, electrician or remodeler may handle estimates, scheduling and bookkeeping from a home office while crews work at customer job sites. Paying for a separate office may add little value when customers rarely visit it.

A contractor can run the office from home while owning tools and equipment, using a storage yard, employing a crew and working on signed projects. The address alone tells a funder very little about the size or stability of that business. Our guide to construction business loans explains financing needs such as materials, payroll and equipment while waiting for project payments.

The same logic applies to mobile service providers, online retailers, bookkeepers and creative agencies: the work may take place at clients’ properties, online or across a remote team. A funder needs to understand how that business operates and earns revenue.

Still deciding what to launch? Explore our home-based business ideas for options that fit your skills and experience.

Why Can It Be Harder for a Home-Based Business to Get Funding?

Perceived flight risk and business continuity

A funder wants to know that your business will still be operating when payments come due. Without a commercial lease, storefront or fixed business location, some funders may worry that it would be easier to shut down, move or become difficult to contact. This perceived “flight risk” can make them more cautious about an application.

A commercial lease is only one sign of commitment. Years in business, repeat customers, signed contracts, consistent deposits and an address the funder can verify can also show that you have an established business. Closing or moving a business does not, by itself, cancel its debts, contracts or applicable personal guarantees.

Fewer fixtures and other assets available as collateral

Some home-based businesses have few or no business-owned fixtures compared with a shop, restaurant or commercial workshop. Fixtures are goods that attach to real property so closely that applicable law treats them as part of that property. A laptop, portable tool or movable desk is generally equipment or furniture, rather than a fixture.

Fixtures can be part of the collateral securing business financing. Depending on the security agreement and applicable law, other collateral may include equipment, inventory and accounts receivable. A UCC filing gives public notice of a claimed security interest; filing alone does not create collateral or make low-value assets more valuable. If there are few assets a funder could recover after a default, qualifying for financing that relies on collateral may be harder.

The UCC’s rules for security interests in fixtures include special priority rules, and a creditor may need a fixture filing. The actual collateral depends on the agreement, the borrower’s rights in the assets and state law. A business address at home does not automatically put the house or the owner’s household fixtures under a business UCC lien.

Harder-to-verify revenue and repayment capacity

If personal and business transactions run through the same account, it can be hard to tell how much the business earns. Incomplete records or dependence on one customer can raise more questions. Clear bank statements, current financial reports and a practical repayment plan help the funder understand what is happening in your business.

What helps: Explain why working from home fits your industry, where the work actually happens, and how the business earns steady revenue. Support that explanation with licenses, insurance, customer contracts, invoices, bank statements and an accurate list of business assets and existing liens.

How to Fund a Home-Based Business: 5 Financing Options

When comparing home based business loans, start with what you need to finance. Equipment purchases, day-to-day expenses and gaps between customer payments may call for different products.

Five home-based business funding options: equipment financing, merchant cash advance, short-term loan, unsecured business loans and business line of credit.

1. Equipment Financing

Equipment financing helps business owners purchase eligible equipment needed to run the business.

The loan amount is dependent upon the type and cost of equipment needed. Repayment terms depend on the provider, the equipment’s expected useful life and whether it is used or new. The equipment itself commonly serves as collateral.

2. Split Funding / Merchant Cash Advance

Split funding is a form of merchant cash advance that works on a “pay as you earn” model.

Providers generally structure a merchant cash advance as a purchase of future receivables rather than a loan. In a card-split arrangement, an agreed percentage of your business’ credit and debit card sales goes toward the purchased amount.

On days with higher card sales, the provider collects a larger remittance. When card sales drop, you remit less. Other revenue-based advances collect through ACH debits and may include reconciliation provisions. Review the total cost, collection method, adjustment rights and any guarantees in the agreement.

3. Short-term Loan

Short-term business loans help owners cover immediate expenses and manage cash flow gaps.

Some providers require less paperwork than a traditional bank loan, and you can use the funds for a range of business purposes. Permitted uses depend on the agreement.

Common uses of short-term business loans are inventory purchases, new hires and employee training, equipment repairs, and filling gaps between accounts payable and receivable. A shorter repayment schedule can mean larger payments and higher costs. Repayment may be daily, weekly or monthly, depending on the lender and agreement.

Traditional term loans also have a fixed repayment term, but the interest rate may be fixed or variable. Payments are often monthly. Whether payments build business credit depends on the lender’s reporting, and any prepayment penalty depends on the agreement.

4. Unsecured Business Loans

Unsecured business loans can help home-based owners who do not have specific assets to pledge as collateral. Lenders review factors such as revenue, cash flow, credit and operating history. Product terms vary, and some providers may still require a personal guarantee or blanket lien on business assets.

Depending on the agreement, you can use the funds for inventory, payroll, marketing, equipment or other business expenses. Compare the total cost and payment schedule with the cash your business expects to collect.

Some lenders collect repayments through ACH, which means automatic debits from your business bank account. ACH describes the payment method. Your agreement determines whether payments fall daily, weekly or monthly.

Credit score, revenue, time in business and collateral requirements vary by provider. Some products accept borrowers with challenged credit or do not require a specific asset pledge, but a personal guarantee or a lien on business assets may still apply. Review the agreement before accepting an offer.

5. Business Line of Credit

A business line of credit, also known as a “LOC,” gives business owners access to a credit limit they can draw on as needed. On a revolving line, repaid principal generally becomes available again, subject to the agreement. Lenders generally charge interest on the amount you draw and may also charge fees.

There are two types of Business Lines of Credit:

1. Unsecured Business Line of Credit

Unsecured business lines of credit do not require you to pledge specific assets as collateral, though product descriptions vary. Check whether the lender requires a blanket business lien or personal guarantee.

This can be appealing to home-based business owners with limited fixed assets. Credit requirements vary, and lenders may also review revenue, cash flow and time in business.

In addition, they tend to be smaller with higher interest rates.

2. Secured Business Line of Credit

A secured business line of credit requires business owners to put up assets as collateral in order to obtain the loan.

Depending on the lender, collateral may include inventory, accounts receivable, equipment or other assets. If you default, the lender may enforce its rights against the pledged collateral under the agreement and applicable law.

Both secured and unsecured business lines of credit will require your business to be in good standing.

Lenders typically prefer to work with businesses that are well-established and in good financial standing, thus demonstrating the ability to pay back the loan. Your lender may request financial documents to assess your ability to repay.

Explore a business line of credit for your home-based business with Excel Capital: Apply Now

Can a Home-Based Business Get an SBA Loan or Microloan?

A home-based business may be eligible for SBA-backed financing if it meets the program’s and lender’s requirements. The SBA’s 7(a) eligibility guidance emphasizes an eligible operating business, creditworthiness and reasonable assurance of repayment. A home address alone does not establish eligibility. See our SBA loan guide for an overview.

For smaller needs, including some startups, the SBA Microloan program provides loans of up to $50,000 through approved nonprofit intermediaries. Each intermediary makes its own credit decisions and sets terms. This can be worth exploring if your home-based business does not yet have the operating history needed for other financing.

How to Apply for Home Based Business Loans

One of the benefits that come with alternative lending is a fast application and approval process.

Applications for home based business loans vary by provider. Some alternative lenders offer streamlined applications, but funding speed and paperwork depend on the product and completeness of your application.

Your lender reviews the initial paperwork and may ask for additional documents before making a funding decision.

Prepare these common business documents before you apply:

  • One-page application
  • Voided check (for your business account)
  • Copies of identification for all owners
  • Proof of ownership: Most recently filed tax return, corporate bylaws or LLC articles of organization
  • Proof of EIN, such as an IRS EIN confirmation letter; see our Form SS-4 and EIN documentation guide
  • Recent business bank statements (the number of months varies by provider)
  • Aging AR report if you invoice customers on net-30 to net-90 terms

Your lender may not need every document on this list. Having current records ready can help you answer questions quickly and avoid delays.

Help the funder verify your home-based business

Also be ready to explain where you perform your work and provide current licenses, insurance, proof of your operating address and customer contracts or invoices. Contractors can include a project backlog and payment schedule. Keep personal and business finances separate, disclose existing financing and liens, and prepare a current profit and loss statement. If customers pay after you complete a job, an accounts receivable aging report can help explain the gap between billed revenue and collected cash.

Home-Based Business Funding with Excel Capital

When comparing funding for a home-based business, look at the total cost, payment schedule and any collateral or personal guarantee requirements.

At Excel Capital, we help business owners explore financing options based on their revenue, operating history and funding needs.

The application process is quick. If approved, some products may fund in as little as 24 to 48 hours after required documentation and verification are complete; timing and availability vary.

Click below to start your application:

Start your application for home-based business funding: Get Started

Construction Business Loans: Get the Funding Your Business Needs Today

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CONSTRUCTION BUSINESS LOANS FEATURED IMAGE

Construction Business Loans: Everything You Need to Know

As a  general contractor, you know that obtaining construction business loans is important to running a construction business and operating in a fluid fashion.

Full payment for a project does not typically come until at least 90 days after the project start date, but construction costs don’t wait around,  which makes construction loans a necessity to function.

When a new job is taken on you receive a small down payment upfront as well as progress payments or tiered payments as the job hits certain milestones. This delayed payment structure makes obtaining construction business loans crucial to maintain positive cash flow. 

Because of this structure, contractors need to come out of pocket for many expenses such as: 

  • Payroll
  • Material Costs
  • Insurance
  • Equipment 

Contractors know that obtaining funding is the solution. But what do you do when you can’t be approved– or can’t wait– for a traditional bank loan? 

Why Take Out a Small Business Loan Instead of Going to Your Local Bank or Traditional Lender?

 

construction business loan quote

 

It’s all about timing.

Most banks and traditional lenders (such as SBA loans) take way too long on loan approvals. And even if you try to avoid the timing issue by planning when you need it, many contractors that apply for construction financing with their local bank find that they can’t be approved without collateral.

Banks use traditional underwriting practices, which places the commercial construction industry in a high-risk bracket. That means you’ll need to have something to put down to secure the loan otherwise you’re not likely to be approved.

However, this needlessly puts you at additional risk on each and every job. Not to mention, puts you under extra stress that you don’t need. 

Alternative lending offers a way around these strict requirements and gives business owners a path forward.

At excel we’ve worked with hundreds of construction business owners to offer unsecured loan options that give you the funding you need while affording the flexibility to get approved without having to put down hefty collateral.

Short application, get approved in as little as 24-48 hours: Apply Now

Types of Construction Loans: Alternative Loan Options

So, what are your options for construction loans?

Well, you’ve got a lot. And it all comes down to what you need the funds for and what type of loan fits your business and the types of construction projects you take on.

As mentioned above, no matter what you need funding for, there are several working capital loan options available. However, some construction loan options are designed for specific needs while others are more general.

Let’s break each down individually to give you a better idea of which might be a good fit for you:

 

 

1. Equipment Financing

Equipment financing is used to help you purchase whatever equipment your business needs to run smoothly.

The loan amount is dependent upon the type of equipment the borrower needs, as the repayment term is usually as long as the expected life of the piece of equipment.

2. Invoice Factoring

Invoice factoring is used for short-term cash flow issues, especially when your business doesn’t qualify for a traditional bank loan or any other alternative solution. That’s because it depends less on your credit score and more on other business factors such as your accounts receivable.

The lender will factor your business’ customer’s invoices to match your working capital needs.

This type of program is rarely used for contractors since progress payments cannot be factored. Factoring companies only use invoices for work complete. In the construction business, it typically happens this way.

3. Unsecured Business Loans

Unsecured business loans were designed for business owners to enjoy the benefits of a merchant cash advance who do not accept credit cards at there business. Most contractors do not receive credit card payments – and even if they do its typically a very small percentage of the annual gross sales.

This works as a purchase of future sale at a discount that is converted into a set payment. This payment is remitted via ACH usually daily, weekly or monthly. 

This allows you as the borrower to get construction loans without any collateral, just your sales. It also requires a lower credit score compared to traditional lending for the same reason.

4. Merchant Cash Advance

For those of you who accept credit cards at your business, split funding, or a merchant cash advance, is a construction business loan based on a purchase of your future credit card sales at a discount.

Payments are collected at a set percentage of your credit card sales, which is nice because that means when business is down– so are your payments. And when there is no business– no percentage.

For that reason, this method really helps during a particularly volatile market or rough patch in your construction business.

It also doesn’t have a stringent a credit score requirement due to factoring in your credit card sales more than anything else. 

5. Term Loans

Our fourth construction business loan option, term loans have a set repayment schedule and interest rate and mature between 1 to 10 years depending on the term of the loan. Most commonly being short-term loans which offer a quick lump sum of cash with a short repayment date. 

However, keep in mind that a short-term loan, or any other term loan, requires financial statements as well as 2 years of business history and one filed tax return.

6. Business Lines of Credit

A business line of credit is a rotating line of credit which you can dip into whenever the business needs it most.

Similar to a credit card, so long as you pay off your balance you can continue to use that line of credit continuously. Interest is then only paid off the amount that is used.

7. Asset-based Lending

Lastly, with asset-based lending, the assets of a business, such as inventory, accounts receivable, and other balance-sheet assets are used as collateral.

Plus, because this financing type is secured with collateral, interest rates tend to be low and credit score requirements are lower as well. Having applicable collateral also makes an asset-based loan easier to obtain.

Complete our short application and get approved fast:Apply Now

How to Get a Construction Loan: How Do Construction Loans Work?

 

how to get a construction business loan

 

Ultimately, it’s up to you to do your research and find out what your best small business loan options are.

It’s your business and no one is going to look out for it like you will, so take the necessary steps to educate yourself and then take action to obtain the funding your business needs, whether that’s to keep things afloat or to take things to a whole new level.

Whatever the case, don’t let a lack of funding hold your business back from realizing it’s potential.

To apply for a construction business loan with Excel Capital, only four things are required:

  1. Four months of recent business bank statements
  2. Four months of business credit card processing statements
  3. A one-page application
  4. And just a few minutes to get started

We’ve made the process of getting a small business loan simple and straightforward so you can get back to what is most important– running your business.

Once everything is received, you can be presented with an approval, your loan terms, and funded in as little as one business day– that’s right, just 24 hours.

Get the funding your contracting business needs by completing our short, 2-minute application.

Excel Capital Helps Contractor Marty Secure a Loan: A Case Study

While the construction business is one of the oldest, most flourishing, and most competitive industries around, there comes a time when many of its business owners need access to working capital.

The cost of equipment, materials, payroll, and slow turn-around rates trump the cash flow coming in, and many construction company owners find themselves weighed down by bills and overhead costs.

Since the great recession of 2008, a traditional bank loan is no longer the go-to solution when it comes to acquiring capital.

That old-school way of doing things sometimes ends in heartbreak due to waiting weeks just to receive an answer. That’s where the alternative financing industry comes into play.

With financing solutions such as the ever-popular merchant cash advance, ACH loan, asset based loans, equipment financing, and more, access to working capital is easier than ever.

Funding Needed Fast

Recently, Marty, a construction company owner from Georgia reached out to the Excel Capital team.

Marty was in a crunch. He needed funds– and he needed them fast.

With a handful of projects on his plate, along with receivables due on a large ongoing project not being paid on schedule, Marty asked us for working capital to be used towards the purchase of materials, equipment, licensing, and payroll.  

Marty’s workers and office employees needed to be paid and materials needed to be purchased. So, waiting for payouts was not an option.

In order to get things back on track, as well as to generate new growth, Marty asked our sales rep, Jordan for help in securing an ACH loan. A short term funding product, an ACH loan is paid on a daily or weekly basis by direct ACH debits.

Marty had close to $200,000 tied up in projects which wouldn’t come in for at least thirty days, plus roughly $150,000 in retainage for completed contracts. However, that was going to be payed out over six months.

He also had both a $2 million and a $1.5 million contract on the table respectively (both carrying a 20% gross profit), but those were not set in stone.

Marty’s company had no time to wait with other projects lined up and needing to be completed soon. However, they couldn’t be completed unless he had the means to hire more workers and purchase new machines to keep up with the timelines in place.

Marty Joins Forces with Excel Capital

To the Average Joe, these type of accounts receivable amounts seem amazing, but in the construction business, we know this revenue doesn’t always reflect the tangible finances.

Most, if not all, of the money is put back into the company to complete ongoing projects.

Whether Marty could wait until his own payday or not– he needed working capital now.

After supplying us with bank statements, a business lease, his driver’s license, and a few other minimal stipulations, we were able to get Marty $80,000 in working capital in a matter of only two days!

The daily repayment amount was only $400, an ACH automatically debited (so Marty wouldn’t have to worry about making any large monthly payments, he could focus on his projects at hand) which would happen over the course of 12 months.

It was as simple as that! No hassles or phone calls from banks, just fast funding, easy communication, and transparent terms. And, most importantly, peace of mind.

Get a General or Commercial Construction Loan with Excel Capital

At Excel Capital, we know that getting the funding you need is critical to completing bigger and bigger jobs and keeping your business going.

Reach out to the Excel team to find out if you qualify for a construction loan as well as to discover your options.

Apply for a construction business loan from Excel Capital: Get Started

3 Reasons Why Applications For Business Loan Get Declined

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3 Reasons Why Business Loan Applications Get Declined By Traditional Lenders and Alternative Financing Solutions

Almost all business owners apply for some sort of financing to grow their company at one point or another. When it comes to applying for for this financing through a traditional bank or lender, the process can be a tough one, and many business owners walk away with a big fat decline. While this may be disheartening, there are many reasons why business loan applications get declined and lenders are so strict, and there are still other options out there. Let’s take a look at the three main reasons why business loan applications get declined by traditional banks and lenders, and then take a look at the great alternatives that are available!

Why Traditional Lenders Decline Business Loan Applications:

  • Low Cash Flow: If a traditional lender decides to give your business a loan, they will want to see the ability to make payments back on the loan amount in addition to covering all other business expenses. Unfortunately, tough times do occur where businesses don’t generate enough revenue at certain times of the year – maybe they are a seasonal business. Some business owners, such as contractors, aren’t paid until jobs are completed or they must pay inventory suppliers upfront before they get paid. Tight margins typically do not sit well with traditional lenders and you could get your business loan declined.
  • Poor Credit, Bad Credit, or No Credit: Like NorthShore Advisory Inc. Credit Expert Tracy Becker told us in our exclusive interview, “in today’s fast-paced business world, more partners, lenders, and potential accounts need to make quick decisions as to which suppliers, borrowers, and partners they want to work with; decision-makers use a variety of business credit scores, indexes, and reports to discard unqualified candidates from being considered for a partnership or a loan.” A business’ credit score is a major factor when a traditional lender considers approving them for financing. Poor credit, bad credit, or simply no credit can almost always guarantee a decline. To learn more about how businesses can improve their credit score, visit: NorthShore Advisory credit services
  • No Collateral: Traditional banks and lenders almost always require some sort of collateral to secure a loan. Collateral can come in the form of a vehicle, personal or business property, equipment, and/or other assets. If a business owner defaults on the loan, this collateral will then be seized for nonpayment. Unfortunately, many business owners (especially young business owners or startups) do not have collateral to put up when it comes to acquiring a loan, or the lender may not deem anything the business owner has as anything of value.

Your Business Loan Application Got Declined By A Traditional Lender – What Are The Alternatives?

Despite the fact that traditional lenders can take weeks to process your loan application and also require a lot of paperwork, there are alternative financing solutions available if you got your business loan declined. Unlike big banks, alternative lenders typically only require you to submit a simple, one-page application, 4 months of recent bank statements, and 4 months of recent credit card processing statements in order to get an offer and approval in a matter of days! Let’s take a closer look at the alternative funding solutions available to your business so even if your business loan was declined your options are open!

Merchant Cash Advance: Short-term financing transactions that are collected through a set percentage of your visa and MasterCard sales that are accepted at your place of business. Probably the most common term used in the industry. These do not have a set repayment schedule and are based on the volume of your business’s credit card processing sales. These are usually only guaranteed by the future sales of your business.

ACH Advance: A form of a merchant cash advance that is repaid on a daily basis by direct ACH debits rather than a merchant account.   These are still a purchase of receivables and the amount debited via ach are determined by the amount of credit card processing sales that are batched out the previous day.

ACH Loan Products: These are a bit different than cash advances as they are considered loans and may have personal guarantees. They have a fixed repayment schedule that is paid either daily, weekly or monthly. These products are catered to industries that do not accept credit cards and need a fixed payment.

Accounts Receivables Financing: This is one of the oldest forms of funding in history. This is used mainly when a business is due some sort of capital for work complete and is billed on a net 30, 60 or 90. for example, ABC Trucking delivered goods for xyz logistics but only receives payment from xyz logistics in 60 days. ABC can then factor the money due from XYZ at discount to receive the capital due in 60 days today.

Invoice Factoring: The purchase of accounts receivable for immediate cash.

Equipment Financing: A type of loan or extension of credit to a business, with the purpose of helping the business acquire new equipment. Equipment Financing Extends only the capital needed to purchase a specific piece of equipment and is most commonly written as a lease.

Business Lines of Credit: A rotating loan that gives business owners access to a fixed amount of money, which they can use day-to-day according to their need for cash. Interest is only paid on the amount of the advance actually used.

Start-Up Funding/Loan: A type of loan that provides a new business/company with sufficient upfront capital to get off the ground.

Asset Based Loans: A business loan secured by collateral.

SBA LOANs 504 Loans: The US Small Business Administration 504 Loan or Certified Development Company program is designed to provide financing for the purchase of fixed assets, which usually means real estate, buildings and machinery, at below market rates.

Term Loans: A loan that is backed by a bank for an exact amount that has a specified repayment timetable and  interest rate that are adjusted accordingly. Terms mature between 1 and 10 years.

It’s pretty clear to see why an alternative lender may be the way to go when it comes to applying for financing for your business. No complicated application process, no lengthy paperwork and documents, and an approval in as little as 3 business days! For more information on alternative financing solutions and what Excel Capital Management can offer your business, visit: https://www.excelcapmanagement.com/funding/

The Excel Interview With deBanked’s, Sean Murray

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Debanked

Merchant Cash Advance industry veteran, founder of deBanked, Sean Murray has been an influential part in funding over $100 million to small businesses through sales and underwriting efforts. As a Senior Account Executive at Bizfi (part of the Merchant Cash and Capital family), he grew one of the largest residual portfolios in the history of the company and become a well-respected expert in the industry. After his time at Bizfi, Murray founded Raharney Capital, providing advertising and consulting within the alternative lending industry, and also deBanked – the most popular magazine and resource in the industry where Murray also serves as the Editor-in-Chief. Excel Capital Management recently sat down with Mr. Murray to explore his vast knowledge of the Merchant Cash Advance and alternative finance industry and discuss the future of the business.

deBanked sean murray

Excel: Tell us a little more about your background and what made you get into the alternative finance industry.

Sean: I got into this industry almost immediately after college. That was 10 years ago. A friend of mine told me there was an opportunity to work at a fun financial startup. The job description entailed evaluating small businesses for working capital, ones that had mainly been declined already for a bank loan. Given that I double-majored in Accounting and Finance, I was definitely intrigued and took the job.


Excel: You’ve been in this niche industry for quite some time. Over the years, how have you seen the industry change and grow?

Sean: In the beginning, the worst part for the small business owners I spoke to was that approval terms were tied entirely to their average monthly credit card processing volume. That meant if cash sales were 90% of their business, we couldn’t consider that, even if that cash was showing up in their bank statements and being declared on their tax return. Over time, funding providers became more creative and flexible. They found ways to better service clients without making it impossibly hard to qualify.

Excel: Did you ever expect the industry to become as popular and as competitive as it is?

Sean: Yes and no. Given that I started before the Great Recession, there was already a big need for non-bank alternatives. The industry already existed and was growing. It wasn’t a byproduct of an economic downturn, it just became more visible during one. People think that when the economy fully heals, that banks will start lending again and the non-bank alternatives will disappear. The truth is that banks never serviced this segment of small businesses. It was and remains to be too expensive, risky, and time consuming for them to underwrite a $20,000 business loan. Sure, they’ll issue you a business credit card, but that’s based on your personal credit, is personally guaranteed, and more often than not the limit is too low. So no, I am not surprised that the industry has become so popular but I am surprised the product mix available to business owners has diversified as much as it has. It’s truly incredible.

sean murray interview
Excel: In the latest issue of your publication, deBanked, you provide a few predictions on the future of the industry. You specifically mention the fact that it is an election year and touch base on the current state of the stock market. Can you elaborate on these topics and how they relate to the industry?  Also, speaking of the election, Democratic candidate Bernie Sanders has stated that he will impose nationwide interest rate caps that would, in the long run, hurt marketplace lenders. What are your thoughts on this?

Sean: I think what I was trying to say was that a new President sets the regulatory and legislative “tone.” This year we have a colorful group of candidates, many of whom have big ideas on how to grow the economy. Bernie Sanders in particular has made some pretty controversial statements, one being that he is in favor of a 15% federal interest rate cap on consumer loans. I think many people when they hear that, assume that would mean that a lender that normally offered a borrower a 28% interest rate loan would instead offer a 15% interest rate loan to comply with the cap. That’s not what would happen at all. Instead the lender would just decline the application. In effect, a huge portion of the population would not be able to get a loan from anywhere, not even non-bank alternatives. You know the saying, “it takes money to make money?” That goes hand in hand  with the “rich get richer while the poor get poorer.” Borrowing can be used as leverage to grow and in essence become richer. It takes money to make money. If you’re locked out from borrowing, supposedly for your own good, how do you become richer if your risk profile makes it legally impossible to take money and make money? That’s obviously a larger debate but it all feeds back into the upcoming election and who will be running the country. What will their economic views be? And will that “tone” positively or negatively affect small businesses? Nobody likes the uncertainty in the meantime.

As for the stock market, the connections are easy. Declining stocks increases the allure of investing on peer-to-peer platforms where the returns are perceived as both steady and rather lucrative. It can be hard to stomach a 10% loss in your investment portfolio in a matter of weeks like the stock market did in the beginning of this year. Investors, even small retail investors are going to consider alternatives like this industry. A declining stock market also chips away at wealth and this can affect consumer buying behavior which would impact small businesses. It’s all related at the end of the day.

Excel: Along the same lines, what are your the thoughts on the alternative finance industry being regulated? Do you see this happening anytime soon? If so, how will these regulations affect business?

Sean: I think regulation, if any, will focus on disclosure and transparency. If this is indeed where it goes, I just hope the outcome is intelligent, well thought out and logical. It’s early days right now though so it’s hard to speculate. In business-to-business transactions such as the kind your company engages in, I’m a big believer in the invisible hand. It’s commercial finance, not consumer finance. Some of these businesses might be really small, but we’re still for the most part talking about corporations entering into contracts with other corporations. I think regulations should focus on consumer lending, where there is a much lower presumption of sophistication.

Excel: Moving forward, what impact do you believe the collaboration between OnDeck and Chase will have on the industry as whole?

Sean: From what I know about the partnership and from what I know about banks, I believe Chase is probably using this as an opportunity to fast track their online loan underwriting process while they figure out a longer term technological strategy. You have to remember, it’s not uncommon for banks to be using really old systems. I believe some are still using or have just moved away from Windows XP recently. That’s a 15 year old operating system. Between that, constant bank mergers where the acquired banks are using completely different systems, regulations, and the sheer size from a human resources perspective, all make it nearly impossible to catch up, let alone implement a modern underwriting platform that measures 10,000 data points with connections through all sorts of APIs. The easy solution for now is to use a company that can reliably provide that capability and I think it’s great that OnDeck’s platform instills a level of confidence that a famous bank like Chase would attach their brand to. I think OnDeck and others will score more of these partnerships and there is potentially a play for one to be ultimately acquired by a bank just for the technology.

Excel: As this industry continues to grow and more people are entering the market, what is one piece of advice you can share about the do’s and dont’s of our marketplace?

Sean: Do be responsible and act with integrity at all times. Don’t think you are too small or insignificant to make a difference. If you only help fund one small business and they hire new people as a result, there’s a chain reaction that occurs that affects the entire local economy. It’s a beautiful thing to play a role in that.

Unsecured Business Loans: Requirements & Options

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UNSECURED BUSINESS LOANS FEATURED IMAGE

Unsecured Business Funding: At a Glance

Looking for capital? An unsecured business loan may be just what you need. 

When it comes to acquiring a business loan from a traditional bank, many business owners find themselves in a sticky situation due to:

  • Heavy approval requirements, and
  • Long time frames to obtain that funding

Unsecured business funding was created to help overcome these common issues with traditional business loans and make quick, small business funding possible.

Read on to learn more about your unsecured business loan options as well as everything there is to know about how they work, how to qualify, and which options are best for you. 

Apply for an unsecured business loan from Excel Capital

Excel Capital provides business funding directly and arranges funding through partners. Approval, funding speed, personal guarantees and any collateral requirements depend on the product, provider and written agreement.

Complete our online application and see how much you can be approved for: Apply Now

Four Business Financing Options: Loans and Receivables-Based Funding

 

 

The four options below include loans, a line of credit and receivables-based funding. They have different costs, obligations and legal structures; they are not all unsecured loans.

Available products and terms vary by transaction. Your written offer should identify the funding provider, product type, total cost and repayment or remittance obligations.

Compare these four business financing options:

1. Split Funding (AKA Merchant Cash Advance)

 

 

Complete our short application to apply for a merchant cash advance: Get Started

 

In split funding, often used with a merchant cash advance, the provider receives an agreed percentage of business receipts under the funding agreement. A purchase of future receivables differs from a loan.

The specifics of the split or percentage held back of your Visa, Master Card, or other credit card processor volume is based on the contract that is agreed upon prior to getting funded.

That agreement is generally underwritten based on your credit card processing volume coupled with your gross monthly revenue deposited into your business bank account.

The methods below describe ways to collect an agreed share of receipts. The collection method and any reconciliation process depend on the particular agreement.

Click below to learn about each type of merchant cash advance:

1. Merchant Cash Advance: A Direct Split with Your Credit Card Process Provider

This is the most seamless type of merchant cash advance.

In a merchant cash advance, you utilize one of our friendly credit card processors to divert the agreed-upon percentage to us and applied to the outstanding balance whilst you receive the remainder of the credit card processing sales directly in your existing bank account like you normally did before receiving the business funding.

With an agreed card-sales split, the processor sends the contracted percentage to the funding provider and the remainder to the business. Processing and deposit timing depend on the processor and agreement.

The beauty of a direct split is that it gives a funding option to business owners who have a high amount of NSF’s (non-sufficient funds) or overdrafts or have a very volatile sales cycle.

2. Lockbox Funding: A Separate Account with Automatic ACH

This method is utilized when a business does not use one of our friendly credit processors and does not want to switch their existing merchant processing provider to facilitate the funding.

A lockbox is good because many merchant processors have early termination fee’s and this avoids paying them to get split funding. How a lockbox works is a bit more complex than a direct split on your credit card processor. We set up a lockbox account also known as a bridge account or you. This bridge account is an actual bank account where you receive online login credentials and a bank letter.

This account is solely used for splitting your credit batches between the funding institution and your business account. Once a batch is received into that account it is designed to automatically ACH the specified percentage to the corresponding accounts.

Due to the process associated with this type of funding, there is typically a 24–48-hour delay in the time it takes the money from your batch to hit your business bank account.

In order to set up a lockbox you need to follow these 3 steps:

  • Sign the lockbox form provided on the funding agreement authorizing the lockbox account
  • Receive the bank letter created upon receipt of the lockbox form.
  • Call your credit card provider and tell them you want to switch where your credit card processing activity is being deposited.

Usually, they can do this over the phone, online or will ask you to complete and sign a bank change form and have it return to them via email or fax which will require you to attach the copy of the bank letter to the executed bank change form.

This can take up to 48 hours depending on your credit card processor.

3. Variable ACH: A Manual Repayment Method

This method is used to collect payments when a business owner does not work with a “friendly” merchant processor and does not want to incur the 24–48-hour delay in deposits. The way this works is pretty straightforward.

With a variable ACH arrangement, the provider may review processing records and collect an agreed percentage from the business bank account. Reporting access, collection permissions and default provisions must be set out in the agreement.

When a deal is in underwriting it will be determined if this option is available based on a formula that is heavily weighted on the average ledger balance in the bank account. Unlike direct split, if a business has many overdrafts in the account they will be declined for a variable ACH but can still get approved for a direct split or lockbox method.

What’s Needed to Qualify for Split Funding?

  • You must accept credit cards with a minimum of $5,000 per month in credit card sales.
  • You must be in business for at least 3 months
  • You must be a US citizen or have Visa

What Paperwork is Needed to Qualify for Revenue Based Factoring?

  • A signed and complete application
  • Four months of recent business credit card processing statements
  • Four months of recent bank statements

Split funding describes a collection method. A merchant cash advance structured as a purchase of future receivables is different from an unsecured loan; review the agreement to understand what is being offered.

 

2. Revenue Based Factoring

 

 

Complete our short application to explore revenue-based funding options:Get Started

This type of funding was created through the need for unsecured loans and other funding products for businesses that do not accept credit cards.

Funding collected by ACH may be structured as a loan or a purchase of future receipts. ACH describes a payment method, not the legal type of financing.

The way this type of funding is structured is more based on overall revenue or cash flow. According to the contracts most institutions purchase a set percentage of all your future sales which you as a business owner then sell at a discount.

The agreement sets out the purchased receivables, the amount to be remitted and the collection schedule. These terms differ from the principal, interest and repayment term of a conventional loan.

Some receivables-purchase agreements provide a reconciliation process to adjust collections to actual receipts. Any adjustment depends on the agreement and its procedures; do not assume payments decrease automatically.

Approval and funding times depend on underwriting, complete documentation and bank processing. Review the specific agreement, including any reconciliation provisions, before accepting funding.

A receivables-based agreement may include a security interest, lien or guarantee. A lien on receivables is a form of security, so these arrangements should not automatically be described as unsecured loans.

Lien priority and any subordination depend on the agreements, filings and applicable law. Do not assume a receivables-based provider will be the last creditor paid.

What’s Needed to Qualify for Revenue Based Factoring?

  • Revenue and bank activity requirements vary by program; credit card acceptance is not a universal requirement.
  • You must be in business for at least 3 months
  • You must be a US citizen or have Visa
  • A signed and complete application
  • Credit card processing statements, if applicable and requested
  • Four months of recent bank statements

What Paperwork is Needed to Qualify for Revenue Based Factoring?

  • A signed and complete application
  • Credit card processing statements, if applicable and requested
  • Four months of recent bank statements
  • Financial statements may be required from time to time.

3. Unsecured Business Line of Credit

 

 

Complete our short application to apply for an unsecured business line of credit:Get Started

A business line of credit lets you borrow up to an approved limit, repay and draw again, subject to the agreement. Some lines are unsecured; others are secured by receivables or other assets.

A line of credit is a credit facility with borrowing and repayment obligations. Unlike a lump-sum term loan, it generally allows multiple draws within the approved limit, subject to availability and the agreement.

Providers may consider revenue, cash flow, credit history and other financial information when setting a credit limit. A line secured by invoices or receivables should not be described as unsecured.

To assess eligibility, the provider reviews an application and supporting financial records. Approval timing and documentation requirements vary by product and provider.

What’s Needed To Qualify for Unsecured Lines of Credit?

  • You must have a business bank account
  • You must be a US citizen
  • Generally, you must maintain an average ledger balance of $1,000 in your business bank account
  • 50k + in Yearly Revenue
  • 1+ years in business
  • Can not be a non profit
  • Credit requirements vary by provider and product
  • Can not have more than 3 Negative days a month in your bank account

What Paperwork is Needed to Qualify for Revenue Based Factoring?

  • A signed and complete application
  • Six months of recent business credit card processing statements (if you accept them at your business)
  • Six months of recent bank statements
  • Financial statements may be required from time to time.

4. Short Term Loans

 

 

Complete our short application to apply for a short-term loan: Get Started

These types of unsecured small business loans are created to help business owners fill immediate, short-term needs or cash flow issues. This type of funding is structured as a loan with predetermined payment schedules and amounts. With this type of funding its very important to review the contract as the language varies from institution to institution.

An unsecured loan may still require a personal guarantee. Guarantees can be limited or broad and may create personal liability; their scope is defined by the agreement, not simply by whether fraud occurs.

Review all guarantee, security and default provisions before signing. The word unsecured does not, by itself, eliminate personal liability or the provider’s legal remedies.

What’s Needed to Qualify for a Short Term Business Loan?

  • Completed Application
  • 4 months of most recent bank statements
  • 4 months of most recent processing statements
  • Minimum of 2 months in business
  • Minimum of $7,500 in monthly revenue
  • Funding over $75,000 may require additional documentation

What Paperwork is Needed to Qualify for a Short Term Business Loan?

  • Most recent business tax return
  • P&L
  • Balance Sheet

This type of loan doesn’t require a lot of paperwork, funds quickly, and can be used for almost any business purpose. Short-term loans are perfect for purchasing inventory, filling gaps between accounts payable and receivable, as well as any emergency repair or maintenance expenses that may pop up. These loan products generally have repayment terms of 3 to 24 months.

This overview includes loans, lines of credit and receivables-based funding. Availability and terms differ by product and provider; review the written offer to understand which type you are considering.

Why Unsecured Business Funding?

Banks and nonbank providers may offer secured or unsecured financing. Eligibility depends on the product and underwriting, including factors such as credit history, time in business and cash flow.

The problem? Most business owners (over 70% in our experience) under 2 years in business show a loss due to startup costs and investments.

Not to mention, your business needs to have great to excellent credit.

This can be problematic for new businesses who have yet to establish themselves (and even seasoned business owners during difficult times).

Many business owners have one or more of the below issues:

  • They haven’t been in business long enough
  • No collateral to offer
  • Low credit scores

So, what do you do? That’s where unsecured business loans can be invaluable.

How Do Unsecured Business Loans Work?

 

 

Unsecured business loan amounts typically range anywhere from $10,000 to $2,000,000 depending on the cash flow of the business being underwritten.

An unsecured loan does not require pledged collateral, but it may require a personal guarantee. Other financing described on this page may include security interests or liens and should be assessed separately.

The amount of the loan is dependent upon your:

  • Business’ credit score
  • Average monthly bank balance, and
  • Annual revenue

Funding amounts and terms depend on underwriting, existing obligations and the specific program. Recent revenue may be a factor, but it does not by itself establish an approved amount or repayment term.

Keep in mind that if a cash amount is not approved, you as a business owner may instead be offered a line of (unsecured) credit.

Secured financing is backed by specified collateral, which may include business assets or receivables. A personal guarantee is a separate obligation and may be required even for an unsecured loan.

Closing a business or losing revenue does not automatically cancel a loan or guarantee. For a receivables purchase, obligations depend on the agreement and applicable law; there is no blanket exemption from payment.

Default can lead to fees, collection activity, legal action or enforcement of a guarantee or security interest, where permitted by the agreement and applicable law.

Excel Capital may be the funding provider or may arrange funding with a partner, depending on the transaction. Your agreement identifies the provider and the obligations that apply.

If you anticipate difficulty meeting an obligation, contact Excel and the provider identified in your agreement promptly to discuss available options. Any accommodation requires agreement and is not guaranteed.

Unsecured Business Loans: Pros and Cons

So far, we’ve touched on some of the benefits of unsecured business loans. Now, let’s cover both the pros and cons of this powerful financing vehicle. 

No financing option fits every business. The points below focus on unsecured loans; receivables purchases and secured facilities can have different benefits, costs and obligations.

Here are the pros and cons of unsecured business loans. 

Pro: Funding is fast and simple

The approval process for traditional bank loans is notoriously long and difficult. When all is said and done, it can take well over a month from start of application to finally get an approval, and longer still to get funded. 

Some providers offer a fast application process, but approval and funding depend on underwriting, complete documentation and bank processing.

A decision or deposit within 24 or 48 hours is not guaranteed. Confirm the expected timeline with the provider handling your application.

Pro: Loan amounts are large

Secured business loans amounts are typically tied to the collateral you use to secure the loan. That means you’ll rarely receive a loan for greater than the value of the asset. 

With unsecured business loans, that’s not necessarily the case. You can be approved for much more than you would have been approved for with a traditional bank loan in some cases. 

Pro: No hard collateral

An unsecured loan can allow borrowing without pledging specific assets as collateral. This does not mean that all bank loans require collateral or that unsecured borrowing is free of personal liability.

A personal guarantee may still be required. If an agreement grants a security interest in future receipts or other business assets, that is a separate security provision to review carefully.

Business closure does not automatically release the business or a guarantor from its obligations. The agreement and applicable law determine the consequences.

Con: Higher interest rates

There are several pros to unsecured business loans, and they can be used for virtually any business purpose. However, like all business funding vehicles, they have their downsides as well.

With unsecured business loans, that really comes down to their higher interest rates.

Lenders need some sort of way to ensure they can get their loan back. To that end, they use things like collateral, personal guarantees, and interest. 

Because unsecured business loans don’t have collateral, lenders need another way to make sure they can at least make their loan amount back.

 

Unsecured Business Loan Rates and Payment Terms

Unsecured business loans rates are distinctly different when compared to traditional bank loans.

Borrowing without pledged collateral can be useful, but a personal guarantee may still be required. Compare the obligations and total cost of each offer.

Loan terms and payment schedules vary by program and provider. Confirm the repayment term, payment frequency and total repayment in the written offer.

Unsecured business loan rates and costs depend on the product, provider and underwriting. Options may be available for applicants with bad credit, but approval is not guaranteed. Compare written offers, including fees, total repayment and APR where provided.

How to Qualify for an Unsecured Business Loan

 

 

Some bank programs have demanding credit and operating-history requirements. Other programs use different criteria, so eligibility should be assessed for the specific product.

However, if you find yourself in that boat, an unsecured business loan may just be the perfect solution to your funding needs.

According to the Mission Asset Fund, business loans are declined most often due to “having no credit history or a low credit score.”

Providers may consider credit history alongside cash flow, revenue and other factors. Their underwriting criteria differ by product.

Rather than dwelling on factors that truthfully have little to do with the state of your business now, we like to focus on the present by looking at the business’ current conditions.

Credit requirements vary by product and funding provider. There is no single minimum score that applies to every option available through Excel Capital, and meeting a score threshold does not guarantee approval.

For direct funding, Excel evaluates the application under the applicable program’s criteria. When funding is arranged through a partner, that provider applies its own underwriting requirements.

Revenue and time in business are common screening factors. The examples below are not universal approval requirements; confirm the current criteria for the specific program with Excel or the funding provider.

  1. Records showing at least $10,000 of monthly gross revenue
  2. Proof that you’ve been in business for at least six months
 

Get an Unsecured Business Loan from Excel Capital

A whopping 82 percent of small businesses fail from running out of cash. Is your business in danger of running out of cash flow?

Until recently with the introduction of unsecured business finance, obtaining unsecured business loans was a long, cumbersome process that required trails of paperwork and inconvenienced your day-to-day business operations.

So, we decided to fix that by creating an expedited process to allow small business owners to get through the application process as quickly as possible so you can get back to focusing on what matters– your business.

With Excel Capital, getting the cash your business needs to maintain growth– or simply get through a rough season– has never been easier.

Once you apply, Excel or the relevant funding partner will review the application and supporting documents. Approval and deposit timing vary; a decision or funding within 24 hours is not guaranteed.

Imagine what a surge of cash could do for your business, from providing the funds you need to purchase much-needed equipment to paying off past-due vendors, and virtually anything else in between.

Complete our online application and see how much you can be approved for: Apply Now

Frequently Asked Questions (FAQ)

What can you use an unsecured business loan for?

An unsecured business loan can be used for a variety of purposes, from paying for payroll, emergency expenses, supplies to prep for a seasonal surge, and more. 

Do banks provide unsecured business loans?

Banks and nonbank providers can offer unsecured business financing. Credit requirements, personal guarantees and other conditions vary by institution and product.

What happens if you default on an unsecured business loan?

If you default on your loan, a late payment fee may be charged and your interest rate may increase, depending on your agreement. 

Unsecured does not mean that all assets are protected from collection. A provider may pursue legal remedies or enforce a personal guarantee, subject to the agreement and applicable law.

For secured financing, pledged collateral may also be at risk after default. Review the guarantee, security and default provisions before accepting any offer.

What is the interest rate on an unsecured business loan?

Unsecured loans may carry higher rates than comparable secured financing, but actual pricing depends on the provider, product and applicant.

There is no single rate or term that applies to all applicants. Request a current written offer showing the rate, fees, total repayment and payment schedule. A factor rate used for some receivables purchases is not an interest rate or APR.

Can I get a business loan without a personal guarantee?

Some financing programs do not require a personal guarantee; others do. An unsecured loan can still require one. Check the written offer and agreement for the guarantee’s scope before signing.

Can I qualify for a business loan?

Approval depends on the product’s underwriting criteria and the provider’s review. Being in good standing or meeting a credit-score threshold does not guarantee funding.

Applicants with weaker credit may have options through Excel’s direct funding or partner providers, depending on the program and their financial circumstances. Every application remains subject to review.

What credit score is needed for an unsecured business loan?

Minimum credit scores differ by provider and program. Banks and nonbank providers may also assess revenue, cash flow, business history and existing obligations.

Confirm the current credit requirements for the specific product you are applying for. Meeting a minimum score does not, by itself, establish eligibility or guarantee approval.

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