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How to Get a Home Based Business Loan: 5 Options

April 18, 2024April 17, 2024 by Excel Capital

HOME-BASED BUSINESS LOANS FEATURED IMAGE

Getting the funding you need for a home-based business can be challenging.

In addition to the challenges of starting a home-based business– applying for licenses, filing taxes– acquiring business capital to start, grow, or expand your business is a process all in itself. You may find you self asking your self how to get a loan for a home based business?

Many small companies usually start as home-based businesses. It is at this stage where the owner lays the foundation for their future business. It’s also the stage where owners face their biggest challenges.

Aside from getting clients, one of the biggest challenges for business owners is finding financing. Unfortunately, home-based businesses have few financing options. Many banks look down on this type of funding but we have some options for you.

That’s where home-based business loans comes in.

Fortunately, there are several programs available when it comes to home-based business financing, each with different advantages. Read on to find out more.

Obtain fast funding for your home-based business. Apply with Excel Capital: Apply Now

5 Home Based Business Loan Options

Home-based business loan options for small business owners.

1. Equipment Financing

Equipment financing helps business owners purchase any type of equipment needed to run the business.

The loan amount is dependent upon the type of equipment needed, as the repayment term is usually as long as the expected life of the piece of equipment and if it is used or new.

2. Split Funding / Merchant Cash Advance

Split funding, also referred to as a merchant cash advance, works on a “pay as you earn” model.

It is important to know that Split Funding is not a loan. Instead, a flat percentage of your business’ credit and debit sales are automatically debited daily and put towards the repayment of your loan.

If your business does a large amount of sales one day, a larger payment is taken out to pay back the advance. If a small amount of sales is done that particular day, you pay less. There is no fixed payment amount or maturity date. This type of funding is available only to businesses that accept credit card payments.

3. Short-term Loan

Short-term loans are used as a way to fill an immediate financial needs and fix cash flow issues.

Most lenders that provide this type of loan do not require a lot of paperwork and they can be used for virtually any business purpose.

Common uses of short-term business loans are inventory purchases, new hires and employee training, equipment repairs, and filling gaps between accounts payable and receivable. This financing solution mean shorter having a shorter repayment schedule with higher costs. Short-term business loans are generally paid back via weekly ACH payments.

In contrast, traditional term loans are paid back within a fixed term and a set interest rate. While traditional term loans allow you to build business credit and have fixed monthly payments, they come with less flexible terms and rates and penalties may be charged if the loan is paid off early.

4. ACH Loan

ACH loans typically require personal guarantees, and have a fixed repayment schedule that is paid either daily, weekly or monthly. They are a popular funding solution for businesses that do not accept credit cards or want a set repayment schedule.

Whether you need the working capital obtained through an ACH Business Loan for inventory purchases, new hires, employee training, purchasing equipment, or almost anything else for your business, this funding solution can be extremely beneficial.

Unlike traditional business loans, funds from an ACH Business Loan disburse in as little as three business days after being approved for funding.

Additionally, this funding product does not require a minimum credit score to qualify, which means many up and coming businesses or businesses experiencing a rough financial period. Having collateral is not necessary to qualify, so business owners who have poor credit or lack business history can still apply for this great funding solution.

5. Business Line of Credit

A business line of credit is a rotating loan, also known as a “LOC,” that gives business owners access to a fixed amount of money, which they can use day-to-day according to their need for cash. Interest is only paid on the amount of the advance actually used.

There are two types of Business Lines of Credit:

1. Unsecured Business Line of Credit

Unsecured business lines of credit do not require borrowers to pledge any assets as collateral.

As a result, this tends to be a more popular type of business credit line to business owners. However, they are much more risky for the lender, therefore your credit score must be excellent.

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

2. Secured Business Line of Credit

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

While lenders do not typically require business owners to pledge assets like property, they will require the collateral in the form of inventory, accounts receivables, and more. Consequently, if you are unable to pay back the loan, your lender will seize your collateral in order to pay the balance.

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

Lenders typically prefer to work with businesses that are well-established and in good financial standing, thus proving to the ability to pay back the loan. Depending on the lender, various financial documents will be requested to support this.

Get the capital your home-based business needs. Apply for an unsecured business line of credit with Excel Capital: Apply Now

How to Get a Home-Based Business Loan: What Do you Need to Get Approved?

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

Business owners don’t need to fill out or submit mounds of paperwork, or have to wait months to receive an approval or decline. Once a business has been approved, they can be funded in a little as a week.

The initial documentation is typically enough to get funding, but there are instances when additional documentation may be requested depending on the lender.

The following is the standard business documentation you should have prepared when starting the application process:

One-page application
Voided check (for your business account)
Copies of identification for all owners
Proof of ownership – Last filed Tax return , By laws for corporation or Articles of Organization for and LLC
Proof of EIN – If you do not have a tax return most funders can use a EIN letter or SS4 Letter along with proof of ownership
Three months of bank statements
Aging AR report if your in an industry where you have billing net 30-90

While not everything may be requested, the more the better here. Getting your documentation ready ahead of time will also speed up the time to fund, allowing you to get the capital you need ASAP.

Acquire a Home-Based Business Loan with Excel Capital

Finding funding for a home based business can be tough.

However, at Excel Capital, we strive to make obtaining funding easier and more convenient for small business owners in need of capital.

The application process is quick and, if approved, you could obtain funding in as little as 24-48 hours.

Click below to start your application:

Apply in minutes, get fast funding for your home-based business: Get Started

Construction Business Loans: Get the Funding Your Business Needs Today [2024 Guide]

April 18, 2024April 17, 2024 by Excel Capital

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?

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?

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:

Four months of recent business bank statements
Four months of business credit card processing statements
A one-page application
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

Merchant Cash Advance: 2024 Guide

April 18, 2024March 7, 2020 by Excel Capital

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.

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:

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:

The primary qualification factor
The main factor which decides how much you can be approved for, and
Your estimated future credit card sales volume serves as a kind of soft collateral that guarantees to a lender that they’ll be able to collect on the advance

All of this taken together makes your credit card sales volume by far the most important factor for approval.

How to apply

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.

Learn more about term loans here.

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.

How a CRM Can Benefit Your Business: Exclusive Interview with ConvergeHub Founder/CSO, Manash Chaudhuri

September 7, 2017September 7, 2017 by Excel Capital

Using a great customer relationship management (CRM) is extremely beneficial when it comes to running your small business. Not only does this type of software help to analyze customer interactions and data, it is also a great tool for marketing, inter-office communication, and overall company improvement. Excel Capital Management sat down with ConvergeHub’s Founder/CSO, Manash Chaudhuri to discuss their software and the benefits of using a CRM. Check out our exclusive interview below!

Excel Capital Mamagement: For business owners who may not be familiar, what exactly is a CRM?

Manash Chaudhuri: CRM is an acronym that stands for Customer Relationship Management, a technology, practice, or strategy designed to help businesses to perk up their interactions and relationships with potential and present customers. A CRM system also helps organizations to streamline business processes, stay connected to customers, and improve profitability. In general, when people talk about CRM, they usually refer to software, a tool that helps with contact management, sales and support management and more. A CRM system helps us to focus our organization’s relationships with individual peoples, which includes customers, colleagues, service users, or suppliers. It also helps in finding new customers, winning their businesses, provide customer support and other additional services throughout the relationship.

Here is an illustration of what a CRM is and what it can do for an organization:

ECM: What are the benefits of using a CRM system and what kinds of industries typically use them? Can business owners of all industry-types benefit from using the software?

MC: The primary benefit of implementing CRM system in an organization is that the software can help to provide a clear 360-degree view of your prospects and customers. Using a CRM platform, you can view everything in one place- a customizable, simple dashboard that can tell you customer’s previous history with your organization, the past and present statuses of their orders, any outstanding customer issues, and more. A CRM can also help you to include information from your prospect and customer’s public social media activities- their preferences and dislikes, what they are socially sharing or saying about your brand or your competitors. Marketing personals can use a CRM system to better understand their sales pipeline activities, which makes forecasting more accurate and simple. Using a CRM, you can find a clear visibility of every leads or opportunity, highlighting a clear path from inquiry to sales. Though CRM system has traditionally been only used as a sales and management tools, customer service is also seeing great benefits in using this software, which once embedded in your business DNA can even help HR and supply-chain-management in your company. Yes, all type of companies can benefit from using CRM, such as in market verticals namely – banking, consultants, customer support, law firms, finance, merchant funding, real estate, investment banking, healthcare, e-commerce, retail, insurance, professional services, and others.

ECM: When it comes to sales and marketing, why would you suggest business owners use a CRM rather than do everything manually or staying in communication via old-fashioned email?

MC: An active sales and marketing team can generate a deluge of data. Hence, more administration works mean less time for everything else in your company. Moreover, your reps can be out of the office talking to customers or for finding out valuable business information- but too often all these information gets stored in laptops, handwritten notes, or remains inside the heads of your sales and marketing teams. However this traditional way of retaining customer and business information can make details get lost, meeting not followed-up on time and prioritizing customers can be a matter of intricate speculations, rather than a conscientious exercise based on facts. Moreover, modern day customers may contact you over a broad range of platforms including emails, phones, or social media- asking questions about an issue or for following up on orders. Even, if you have successfully collected all these data, you may often face the challenge of making sense and extracting intelligence from this disparate information on diverse platforms. Reports can be hard to create and they can waste your sales and marketing team’s valuable selling time. Managers in your sales and marketing team can also lose sight of what their teams are up to, which means that they cannot offer the right support at the right time. Hence, without a common platform for customer interaction like CRM software, customer information, details of their interactions and communications can get lost in the flood of information, leading to slow and unsatisfactory response, which is why CRM software in need for replacing the traditional method of doing everything manually or staying in communication via old-fashioned emails. To put it briefly, a good CRM system gathers information from a huge variety of sources. It gives you unprecedented insights to spot problems, improve what you offer and identify gaps in your marketing and sales processes, which cannot be performed by following legacy methods or in this world of social media just by staying in touch with your customers over email.

ECM: To get back to marketing, email marketing campaigns are a huge deal these days. Why might a business owner use a CRM, such as ConvergeHub, rather than a software such as MailChimp, which is typically used for this sort of thing?

CH: If just sending email-blasts are your key concern, then email automation software like MailChimp can serve up your purpose efficiently. However, if you are looking beyond that, for a next generation software that offers a comprehensive marketing, sales and service suit then nothing can replace ConvergeHub. MailChimp like most of the other Email marketing solution relies on email tracking and web analytics, however, when you have a prospect showing interest; all these softwares will then have to export the data and then import or manual enter the data into some form of Sales management system. This is where ConvergeHub brings a lot of value. ConvergeHub not only offers a complete Email marketing solution and it also has a very nice handshaking mechanism which seamlessly move your prospect data from Marketing to Sales by just click of a button. It is a huge time saver and it can deploy your DRIPs or customer behavior based segmentation or other related automation activities without missing a single moment. Therefore, while MailChimp offers just limited marketing automation with basic functionalities, ConvergeHub is more than just a newsletter and email marketing tool. ConvergeHub is a fully functional customer engagement platform and a reliable and far more innovative MailChimp alternative, which can also integrate email automation software like MailChimp within its scalable platform.

ECM: Tell us a little bit about your company, ConvergeHub and what makes it a leader CRM systems.

CH: ConvergeHub is a powerful all-in-one cloud CRM software that combines Sales, Marketing, Customer Service, and Billing in one unified platform, which enables businesses to attract more prospects, win more deals, and build stronger customer relationships. ConvergeHub is a fully featured CRM and does not call for expensive add-ons. It is perfect for small to medium sized businesses that have the same software needs as large enterprises but do not have the additional budget to spend on multiple standalone software applications and their integration.

Some of the features that make ConvergeHub so special to owners of businesses include:

Sales Force Automation-SFA
Marketing Automation
Customer Service / Support / Case Management
Document Management and Collaboration
Partner Management
Project Management
Invoicing and Payments
Reports and Dashboards
Customizable Modules
Social CRM
Use of minimum mouse clicks

Finally, ConvergeHub CRM for SMB is also a price performance leader, which lets you create unlimited lead, contact, account, templates, automation, and you can ask for help anytime from our support team without worrying about additional cost.

Motel loans: What funding options are best for Hotels, Motels and Bed and Breakfasts.

February 19, 2020June 13, 2017 by Excel Capital

Motel Financing: How to Obtain the Working Capital You Need | Excel Capital Management

Owning and operating a motel business is no easy task whether you have one location or are in charge of a franchise. Keeping up with trends and the constant competition among other motel and hotel chains can be quite difficult at times, and some additional working capital may be needed to keep up. When it comes to applying for financing help, many motel owners have a tough time going the traditional route. Traditional banks and lenders tend to list motels as high risk for various reasons such as seasonality, low numbers of guest bookings, negative reviews, lack of collateral to pledge when obtaining financing, and more. These concerns are all justified, but it’s not the end of the road. There are many alternative funding options available to motel business owner. Let’s take a look!

Motel Financing Options

Split Funding aka 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 businesses credit card processing sales. These are usually only guaranteed by the future sales of your business.

Equipment Financing: Equipment Financing is a loan product used to help business owners purchase any type of equipment needed to run the business. The loan amount is dependent upon the type of equipment needed, as the repayment term is usually as long as the expected life of the piece of equipment and if it is used or new.

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.

ACH Loan: These loans may need personal guarantees, and 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.

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.

What Can Working Capital Acquired via Motel Financing Be Used For?

What’s great about all of the aforementioned motel financing options is that the working capital acquired through any of them can be used for virtually anything as long as it pertains to the business. Whether your motel has hit a rough patch and you need the capital to fix cash flow issues, or business is booming any you want to grow bigger and better, you can use it! Here are just a few popular working capital uses among motel owners:

– Business Expenses and Tax Payments

– Payroll and New Hires

– New and Additional Locations

– Equipment and Supplies

Three Crucial Steps to Take Before Applying for Motel Financing

As you would assume, there are many, many alternative lenders out there who can promise you the world when it comes to your motel financing needs. While most lenders and brokers out there are good guys, it is in your best interest to be cautious and to ask questions. Before you sign anything, make sure you fully understand the business funding solution you are applying for, how it works, and what the overall cost will be – literally and figuratively. Here are three crucial steps to take before you apply:

Identify Your Business’ Needs – First things first, why does your business need a loan in the first place? Sit down with your core staff members, financial advisers, or simply yourself to determine your business’ needs and how a quick business loan could help. Do you need to purchase inventory, hire additional staff, catch up on bills? Having a plan of execution once the loan is acquired is essential for success, as well as a plan for paying the loan back.

Do the Due Diligence – You may hear the phrase, “do the due diligence” a lot when researching quick business loans. In simpler terms, this means doing the necessary research before applying and accepting an offer with a lender. There are thousands of lenders and brokers out there – traditional and alternative. Don’t take everything at face value. Learn as much as you can about each lender you are interested in, compare pricing, read reviews, ask questions, and follow your gut if something just doesn’t seem right. You have the right to protect yourself and your business. The last thing you want to do is put your business in more of a financial bind or have setbacks. Research and knowledge is key. Do your due diligence.

Choose the Best Quick Business Loan Option – Maybe you did this when identifying why your business needs a quick business loan, but it’s a good idea to confirm again the type of loan product your business truly needs. Speak with your chosen lender to go over all of your options and get a better understanding of each financing option and how everything works.

Find Out What’s Needed To Qualify and Apply – All lenders have different business loan qualification guidelines. Depending on your business’ financial standing the amount of money you are looking to obtain, the documentation needed to be presented with an approval will vary. It is a good idea to at least have your last six months of business bank and credit card processing statements available, as well as additional financial documents like P&L and Balance Sheets and tax returns easily accessible.

The Application, Approval, and Funding Process

The great thing about motel financing is that the application, approval, and funding process is quick and simple. Generally, lenders that provide these financing options only require a simple, one-page application, four months of recent business bank statements, and four months of business credit card processing statements to get started. Once these pieces of documentation (and maybe a few others) are received, you can be presented with an approval and funded in as little at three business days!

For more information on motel financing options, contact one of our funding specialists today at 877-880-1106 or APPLY NOW!

Hard Money Business Loans and How One Can Benefit Your Business

May 24, 2017 by Excel Capital

Hard Money Business Loans and How They Can Benefit Your Business | Excel Capital Management

If you’re a small business owner, you most certainly are aware of the many reasons why you, or any other entrepreneur for that matter, might need a small business loan. The reasons could range from office renovation, purchasing new inventory, up-dating computers or other equipment, or paying unforeseen taxes and other obligations. Or, maybe business has been so good for you that you found yourself shorthanded and need to hire more people, but don’t have the cash on hand to cover the cost of adding personnel.

For small businesses, just as in any other business, cash is king. Having sufficient operating capital can mean the difference between growing your business and simply standing still. In some cases, it could even be the difference between great success and utter failure. Many small business owners, in the early stages of operation, may not have thought that they could get a loan to keep them going until they prospered. Seasoned business owners could have mistakenly assumed that the only place they could go for a business loan was the banks, and they wouldn’t be successful. Even thriving businesses are recognizing that they could benefit from an influx of cash, and these types of loans could be the answer to their problems. Not to worry! There are options. Consider a Hard Money Business Loan.

What is A Hard Money Business Loan?

Hard Money Business Loans are a viable alternative to bank loans for providing necessary capital to companies that may be under-capitalized, growing rapidly, in the middle of a turnaround, or highly leveraged. In many cases, a small business might just require a cash infusion for preventing their growth from coming to a standstill or for getting over a financial hurdle. Using your business’ assets could be the key to obtaining the working capital needed for inventory, equipment repairs and purchases, or anything else your business may need. In short, you would be borrowing against your future business income, therefore, gaining access to that revenue sooner rather than later.

What Can a Hard Money Business Loan Be Used For?

The beautiful thing about a Hard Money Business Loan is that the working capital acquired through it can be used for literally anything as long as it pertains to your business. Many small business owners opt to use their loans for:

Business Expenses and Bills
Cover The Costs Customers Who Fail to Pay On Time
Seasonal Slow-Downs
To Fix Cash Flow Problems
New Hires and Employee Training
Inventory and Equipment Purchases
Marketing and Advertising
Product Manufacturing
Office Space
Research and Development
Unforeseen Circumstances (ie: natural disasters, employee resignations, equipment failure)

What Types of Assets Can Be Put Up as Collateral?

Hard Money Business Loans, as mentioned, are given to businesses that have shown steady and stable operating history. The business must also possess assets that can be financed and have not been put up as collateral to another lending institution. In addition, the company must not have any serious legal or tax issues which could impact the loan. Here are a few other pieces of information to be aware of:

– Accounts Receivable are the main type of collateral used to obtain an Hard Money Business Loan. Other forms of collateral such as equipment, real estate, inventory, and more can be used depending on the alternative lender’s restrictions and requirements.

– The Hard Money Business Loan amount you are approved for is determined by the value of your collateral/assets. Businesses can generally borrow 75% – 85% of the value of their accounts receivable. If the collateral a business puts up is equipment or inventory, they can generally borrow 50% of the value.

– Most businesses are approved for an Hard Money Business Loan in the amount of $500,000, and this number can exceed well into millions of dollars. Alternative lenders offer far lower interest rates than traditional banks, however, these numbers vary depending on the lender.

Applying for a Hard Money Business Loan

You may hear the phrase, “do the due diligence” a lot when researching business loans. In simpler terms, this means doing the necessary research before applying and accepting an offer with a lender. There are thousands of lenders and brokers out there – who can off your a great Hard Money Business Loan. Don’t take everything at face value. Learn as much as you can about each lender you are interested in, compare pricing, read reviews, ask questions, and follow your gut if something just doesn’t seem right. You have the right to protect yourself and your business. The last thing you want to do is put your business in more of a financial bind or have setbacks. Research and knowledge is key. Do your due diligence, and you will be ready to move onto the next step.

Generally, regardless of the industry type, as long as your business has decent financial statements, collateral, customers that pay on time, and reporting systems, obtaining a Hard Money Business Loan shouldn’t be too difficult. An added benefit is that this type of funding solution comes with regular fixed payments and lower interest rates compared to a traditional bank loan. This means less worries and more time to focus on your business and its success!

Typically, most lenders that offer Hard Money Business Loans only require minimal paperwork in order to present your business with an initial approval. As mentioned, your business’ bank account can even be funded in as little as three business days! Here is a list of items to have ready when applying.

Completed application provided by your chosen lender
Four months of recent business bank statements
Four months of recent credit card processing statements (if your business accepts credit cards)
Clear copies of identification for all business owners
Voided check for the business bank account that is to be funded

Keep in mind, that because this type of loan is asset-based, additional documentation will be required, however, it is still much less than traditional bank requirements.Many Hard Money Business Loans have $750,000 to $1,000,000 in collateral requirements.

For more information on Hard Money Business Loans, contact one of Excel Capital Management’s funding specialists at 877-880-8086 or APPLY NOW!

What are the 4 C’s of Credit For Getting a Business Loan?

February 10, 2020March 8, 2017 by Excel Capital

The 4 Cs of Getting a Business Loan | Excel Capital Management

You’re probably already aware that your credit score plays an important role in determining your eligibility to obtain a business loan or line of credit and that’s why it’s more important than ever to know what the 4 C’s of credit are.

However, what most don’t know about the 4 c’s of credit is what specific factors lenders look for within that overarching category.

When determining your eligibility for a loan, lenders look for what are called the ‘4 C’s of credit’ and, in fact, they stretch beyond just your credit score.

The number and type of factors vary somewhat depending on the lender, however, the four C’s of credit were created to help simplify and clarify the loan process for small business owners looking to obtain a loan.

It can be looked at like a guiding light to help understand what lenders and other funding companies look for when evaluating a business for credit

What are the 4 C’s of Credit?

The 4 C’s of credit are as follows –

Collateral

Typically appearing in the form of property or other physical assets, collateral is any asset a borrower can offer to secure a loan.

If the borrower defaults on the loan, the assets they used as collateral can be seized. Many small business owners are wary of secured business loans because of this reason as they require hard collateral that is tied to your personal assets. Many business owners are and have the right to worry about crossing the line between business and personal. Making a business mistake shouldn’t have to affect your personal assets.

Fortunately, unsecured business loans often don’t require collateral, and if they do, it’s a form of ‘limited’ collateral such as a portion of business sales which isn’t required to be paid back if you go out of business, meaning the risks are much lower.

Capital

Capital refers to any business asset that can be sold to make loan payments. This includes available money and cash savings, investments, properties with equity, and other assets that you could sell or use to quickly obtain cash.

If business drops off and you’re unable to pay your loan payments for a time, lenders want to see that you have liquidity to cash out on so you can continue to make payments on time.

Capacity

Capacity refers to your business’ ability to make the revenue needed to pay back a loan.

Lenders don’t just want to see that you have assets you can use to pay off a loan (or which they can secure to do so), they want to see a history of being able to make regular payments regardless of those assets.

Character

The final ‘C’ in the 4 C’s of credit, lenders determine character by reviewing the borrower’s personal credit history and calculating several factors together.

Factors taken into account include:

Your total amount of debt
Delinquent accounts
Available credit
And whether you make payments on time

If you’re in need of a small business loan but don’t believe you can satisfy all four C’s of credit, don’t worry, there are several other options available. Now that you know what the four C’s of credit are you can easily understand how to prepare yourself and your business when you try to pursue a lender for any sorts of funds.

At Excel Capital, we provide a variety of financial solutions which we can offer even if you have bad credit.

Click here to complete our short application to get in touch with one of our financial specialists to see how we can help.

TrakLoans: How They Can Help Your Small Business

March 13, 2020December 15, 2016 by Excel Capital

As a business owner, you understand the importance of having the working capital necessary to grow your business and achieve success. Whether business is booming and you need capital for inventory purchases, expansion, new hires, and training, or you run into some cash flow issues over time and need it to these problems, most businesses will apply for funding at some point. You’re probably a little familiar with many of the alternative funding solutions we offer such as Merchant Cash Advances, Business Lines of Credit, Term Loans, and more, but now, we’d like to introduce to you the TrakLoan.

TrakLoans are a flexible, cash-flow friendly way to access small business capital fast. These loans work particularly well for businesses whose owners value having the amount they remit fluctuate with their daily payment card receivables. TrakLoans are also a stress-free funding solutions because instead of sending a large payment amount once a month, a flat percentage of your business’ credit and debit card sales are automatically remitted on a daily basis. That being said, a larger payment amount is only sent on busy sales days rather than slower days. Additionally, these types of loans have no maturity date and no fixed payment amounts. Thanks to this process, business owners can stay 100% focused on growing their business rather than repaying a loan. There are no checks to write or harassing phone calls coming to your business. The payment process stops automatically once the TrakLoan is repaid in full.

To add to the benefits, unlike traditional banks and lenders, alternative financing companies, such as Excel Capital Management, that offer TrakLoans have minimum qualification requirements. All that is required to get started is a completed one-page application form. No personal collateral is needed to qualify, and poor credit is not a deal breaker. For more information on TrakLoans, APPLY NOW!

How Automating Repetitive Business Tasks Can Save You Time

February 19, 2020September 28, 2016 by Excel Capital

As a business owner, you know that there are many tasks you and your staff find yourselves doing that just take up more time than they should. While important, spending unnecessary time on repetitive tasks that could be used to better the business in other areas can negatively affect productivity and company morale. The negative impact is made much worse for small businesses that just don’t have the manpower to handle hundreds of tasks per day, in turn, stunting the overall growth of the business. Here are a few common tasks to consider automating!

Checking and Answering Emails:

For many businesses, email is the lifeline. It is used to correspond with partners, answer customer inquiries, make requests, and much more. While checking your email is essential, if possible, try setting a few solid times throughout the day to check your inbox rather than every few seconds or minutes. If this is not possible, setting up your email filtering to allow urgent emails to go to one inbox and less important emails to go to another could save you time and stress. Additionally, try setting up automated email replies for when you are out of the office or even an autoresponse to let customers and partners know that you will reply to them shortly.

Payroll and Accounting:

Since you are most likely doing payroll weekly or biweekly, it may be a good idea to try to automate this process as much as possible – especially if you have a large staff. Consider hiring a payroll company to take on the job for you so you can focus on running your business, or if you want to handle most of the job yourself, consider purchasing a payroll, bookkeeping, or accounting software such as Quickbooks or Sage50. These types of softwares will not only help you with payroll management, but they can also help you with keeping track of business expenses, paying bills, and more.

Social Media Marketing:

By now, we’re sure you’re on top of the social media business marketing trends. Constantly creating and promoting content is essential in running a successful business, but it is a hefty job. If you are managing all of your social media accounts yourself, it is easy to quickly become overwhelmed. Consider downloading an app such as Hootsuite. This neat app packs quite a punch, allowing you to manage all of your social media accounts at once. You can even schedule posts for each account (maybe you use Twitter, Facebook, and LinkedIn) and track analytics.

Inventory Management:

Keeping track of inventory is time consumer, but one of the most important tasks for your business. Proper inventory management will require work from actual employees, however, human error does occur, not to mention, this task can be a tedious one. To make ensure that you are on top of what inventory your business has in stock, what needs to be purchases, and what is selling and what is not, consider using an inventory tracking system. Keeping a handwritten record or even a Microsoft Excel spreadsheet is helpful, but Fisbowl or FlowTrac are two great softwares that can make the task even more seamless.

Guest Blog presented by Kabbage: How Fintech Has Helped the Small Business Lending Industry Grow

April 19, 2017September 1, 2016 by Excel Capital

How Fintech Has Helped the Small Business Lending Industry Grow | Excel Capital Management | Kabbage

It is amusing the way popular art often foreshadows or even predicts the future. Science fiction movies focused on space travel long before the first probes were sent to explore the galaxy, and self-driving automobiles were part of novels on the future long before they even became a possibility. Perhaps the best example of popular culture accurately predicting the future happened in 1984. The movie “Revenge of the Nerds” depicted a ragtag crew of science geeks getting revenge on the jocks and popular kids at their school.

Today, as foreshadowed in the movie, nerds indeed have taken over the world. From one of the wealthiest men in the world, Bill Gates to the domination of the geek and nerd driven internet, the nerd now is in global positions of power. These same nerds, while long in the institutional financial space, have decided to shift their focus to the retail financial sector.

The Emergence of Fintech

Fintech has capitalized on the relationships that can be formed between finance and technology to drive innovation for everyone from businesses to everyday consumers. Whether it is having the capability to access a bank account on a tablet or paying for an in-store product with a mobile phone, these ties formed between finance and technology are the epitome of fintech.

The so-called fintech industry is targeting a treasure chest of over $4.7 trillion once dominated by old school players. Following in the footsteps of the other disruptive nerd driven technology, the fintech sector is on fire in regards to growth. The sector drew $12 billion investor dollars in 2014, an over 40% increase from the previous year.

Within the retail financial sector, small business lending, personal loans and loans for professionals have already been radically improved by the growth of fintech. This is not just speculation about the future – every day, small business owners are taking advantage of the new world of lending powered by the fintech revolution.

Fintech vs. Traditional Lending

The fintech revolution has the traditional institutions very concerned. Jamie Dimon, JPMorgan Chase’s CEO, warned in his investor letter that “Silicon Valley is coming.” Jim Marous wrote in The Financial Brand, The impact of digital technology and the digital consumer is transforming the way consumers access financial products and services. Beyond simple transactions, such as checking balances, the intersection of finance and technology (fintech) is impacting virtually all categories of financial services at an increasing rate, reshaping the industry’s status quo.

Backing up his contention, Marous cited, Results from a PwC survey, ‘Blurred Lines: How FinTech is Shaping Financial Services’, found that the majority of survey participants see consumer banking and fund transfer and payments as the sectors most likely to be affected over the next five years. The report included responses from 544 CEOs, Heads of Innovation, CIOs and top management involved in digital and technological transformation across the financial services industry in 46 countries.

While these projections and warnings remains premature, it is a tell as to what the future holds for the overall financial sector from the fintech revolution. Truth be told, the fintech lending space remains a tiny part of the overall lending industry. One example of the size differential could be considered with $9 billion in loans funded by a fintech firm. While $9 billion is a tremendous amount of money, it is peanuts compared to the total loan volume. Even just compared to the $885 billion in total credit card debt outstanding in America, it is like a flea on an elephant’s back.

An Analysis of the New Lending Industry

Traditional institutions stand to gain from the growth of fintech. Fintech has accelerated the growth of the small business lending sector in multiple ways. First, and perhaps most critically, fintech has lowered the cost of making loans for the lender. These savings can then be passed down to the borrower, creating a less-expensive product. Lending costs have been slashed by cutting out physical branches, legacy IT systems and burdensome regulations, allowing a more direct connection with the borrower.

Also, by moving the application process to the internet, additional costs can be cut from no more physical paper application processing. For example, the standard loan cost for a traditional lending institution is 5-7%. Fintech lenders can cut this number down into the 2% zone.

Next, fintech has opened up an entirely new clientele for business lenders. Due to a lack of pertinent data and ways of processing it, traditional small business lenders are forced to rely on the old fashion ways of approving borrowers. The old style approval process takes into account credit score of the business and owner as well as the collateral to secure the loan.

The new fintech small business lending firms consider hundreds of data points, often in real time, to make credit decisions. This practical use of big data enables the new wave of fintech small business lenders to make loans that were previously impossible by traditional means. Credit-worthy customers may not have the collateral or perfect credit score to qualify at a bank for small business financing. However, the new wave of fintech small business lenders can be secure in making these once impossible loans.

Finally, fintech is in the process of creating a more stable credit environment. The reason for this is the simple fact that banks rely on borrowed money to fund loans whereas fintech small business lenders use investor’s money directly to fund loans. This helps eliminate the inherent risks of borrowing to lend.

Wrapping things up, as you can see, fintech has revolutionized the financial industry and online business lending in particular. Although fintech remains a tiny part of the overall financial sector, it is rapidly growing. Using big data and high-speed processing computers, fintech firms can make loans that were once considered impossible by traditional lending institutions. In the process, fintech is super-charging the small business lending world with growth and new possibilities.

Kabbage is the industry leader in providing working capital online. Kabbage is dedicated to supporting the small business community and has funded more than $1.6 billion to help business grow.