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Business Loans and Financing Options

by Lori FairbanksLast Modified: March 1, 2018

Intro
Best Picks
Reviews
State of the Industry
Pricing
Negotiation
Does You Qualify for an SBA 7(a) Loan?
Consider an Alternative Loan?
Best Crowdsourcing Services
Best Fundraising Sites
Best Merchant cash advances
Common Business Loan Questions & Answers
Map
Services
Compare Quotes

The Best Business Loans and Financing Options For 2018

Working capital is the lifeblood of any business, so financing that delivers money quickly and at an affordable rate is imperative. There are a lot of options for financing: You can get a traditional small business loan, apply for an SBA loan, sell equity to the crowd or factor your outstanding invoices, just to name a few options. Each comes with its own terms and rates, so there is always a financing solution for your business's unique situation. 

This guide reviews several different types of financing options available to businesses. You'll become familiar with not only how each type of financing works, but also the typical terms and rates for each of these financing options. We'll also offer you a look at some of the best lenders in the industry so you can start deciding who you want to partner with. Taking on debt is always a strategic choice, so we created this guide to make sure you're well informed before signing on the dotted line.

Best Picks

Alternative Loan
Low-Rate SBA
Cash Advance
Small Business
Bridge Loan
Equipment Financing
Crowdfunding Platform
Fundraising Site
Balboa Capital

Best Alternative Small Business Loan

Balboa Capital

Alternative business loans are meant to support small businesses with working capital to maintain operations. There are no restrictions on what Balboa Capital's loans can be used for, whether it's salary, expansion or inventory. Balboa Capital's loans amount up to $250,000, based on your gross revenue and bank balances.

You can apply for Balboa's lines through the company's website, which includes a loan calculator that estimates your available funding based on your annual revenue, monthly credit card volume and credit rating. The application requires information about both the business and owner, with bank statements to back it up.

Chase - Business Loans

Best Low-Rate SBA Loan

Chase - Business Loans

Chase offers low interest rates for its SBA 7(a) loans, making it an affordable way to obtain financing for qualifying businesses. To qualify for this type of loan, which is offered through the federal Small Business Administration, small businesses must operate for profit, do business in the U.S., have "reasonable invested equity" and use alternative financial resources before seeking a loan. If eligible, businesses can obtain SBA 7(a) loans through a lending partner like Chase.

Through Chase, there are no set loan minimums, and financing is offered up to $5 million, making it a good source of loans small and large. Long-term loans are seven years for working capital, 10 years of financing for equipment purchases and 25 years of financing for real estate. There are some additional requirements for the SBA 7(a) loan, including securing the loan with collateral and obtaining the permission of any party that owns at least a 20 percent stake in the company. There may also be additional requirements depending on your business's credit rating, which is determined by the bank.

PayPal Working Capital - Business Loans and Financing Options

Best Cash Advance for Small Businesses

PayPal Working Capital - Business Loans and Financing Options

PayPal Working Capital offers highly affordable rates – as low as 6 percent – on its loans, making it one of the best merchant cash advance services for new businesses. It also boasts attractive eligibility requirements, which are flexible and forgiving, meaning even businesses with questionable credit can obtain financing. It's especially easy to get approved through PayPal if your business already uses the company to process payments.

PayPal offers loans through WebBank, which structures its financing like a merchant cash advance. The loans, which can be used for virtually any business purpose, range from $1,000 to $85,000. The combination of low repayment costs, simple eligibility requirements, and the fact that the service doesn't require personal credit checks makes it a highly flexible and affordable service for any business.

Wells Fargo - Business Loans

Best Small Business Loan

Wells Fargo - Business Loans

If you're an established small business with a strong cash flow, Wells Fargo's small business loans offer attractive terms and a low down payment requirement of 10 percent. Wells Fargo doesn't specify any minimum loan size and offers loans up to $5 million. The term length of the loan depends on the uses, but Wells Fargo is flexible with the applications for the money. Working capital loans have terms up to seven years, while loans for equipment go up to 10 years and real estate loans offer terms up to 25 years.

Wells Fargo requires collateral to secure your business's loan and allows you to put up business assets or real estate to back the loan. The bank also requires a personal guarantee from anyone with a 20 percent stake in the business. Standard interest rates on the loan apply, ranging from 2.25 percent to 2.75 percent. Rates can be either fixed or variable, and the loan requires a low down payment of 10 percent. The downside is that Wells Fargo has one of the highest cash flow expectations, so only established businesses with strong revenue are likely to qualify.

Alpha Funding Corp.

Best Bridge Loans for Small Businesses

Alpha Funding Corp.

Alpha Funding Corp. offers two distinct bridge loan programs, as well as a rehab bridge loan option. The approval process for any of these loans is roughly two to three weeks, making it a faster service than average.

The lower-tier bridge program offers loan amounts ranging from $100,000 to $2.5 million. These loans carry a 10 to 12 percent interest rate and up to a 72.5 percent loan-to-value (LTV) ratio. These loans don't require expense deposits, but Alpha Funding Corp. requires collateral.

American Capital Group

Best Equipment Financing for Small Businesses

American Capital Group

American Capital Group offers up to 100 percent financing on new or used equipment, including soft costs like taxes and shipping. The company also offers operating leases if you'd prefer to use capital or leave your credit open for other types of investments.

Eligible equipment for financing includes IT, manufacturing and office equipment. There are also loan options available for medical, fitness, restaurant, container, POS and audiovisual equipment. To apply, you fill out a request form online or call a representative. Approval can be secured through the rep, and once you've signed the agreement, you can apply it immediately to your equipment purchases.

Bolstr

Best Crowdfunding Platform for Small Businesses

Bolstr

Bolstr is a small business crowdfunding site that allows businesses to court small-scale investors. Rather than selling equity, it allows borrowers to make direct payback from profits until reimbursing investors plus a small profit. To qualify for the service, you must be a business in good standing for at least two years.

Bolstr allows companies to crowdfund up to $500,000, but it also permits smaller campaigns. Companies that go to the crowd set their own fundraising goals depending on their business needs, and the funds become available once 100 percent of the goal is reached. Each crowdfunding campaign on Bolstr lasts 30 days.

Classy

Best Fundraising Site for Nonprofits

Classy

Classy offers a fundraising service for individuals and nonprofits interested in raising money for a cause. The platform offers personalized fundraising pages with events, notifications and reports. There is a range of plans to choose from depending on your needs. Pages all come with unique URLs, and Classy logos don't appear on your fundraising pages, allowing you to fully personalize your fundraising campaign.

The platform allows you to coordinate events with your fundraising page, managing registration and ticket sales easily. It's also easy to keep track of your fundraising campaign and view who is contributing what. Classy's reporting and analytics keep you apprised of your fundraising progress, including in-depth filtering and exporting of reports.

Reviews

Here are all our reviews of business loan and financing providers. These reviews include small business loans, merchant cash advances, equipment financing, crowdfunding platforms, bridge loans, alternative business loans, and equity crowdfunding reviews.

State of the Industry

When most people think of financing, they think of a bank. In many cases, this is appropriate. Small business and SBA loans often come through banks, but other methods of financing, like invoice factoring and equity crowdfunding, come from other sources altogether.

Because the lending industry is so disparate, it's difficult to gain a comprehensive view of the lay of the land. However, here are some financing options to keep in mind as you move forward.

  • Conventional loans and SBA loans: Sixty-three percent of employer firms have some form of outstanding debt, but most small firms (54 percent) hold total debt of less than $100,000. Bank credit and loans are a key source of financial support for small businesses, which typically lack the same access to financing options – such as equity capital markets or public institutional debt – that larger companies have.
  • Equipment financing: Equipment financing is a huge market. U.S. businesses spend a great deal of money on software and equipment each year. In 2015, investment in equipment totaled $1.5 trillion, 68 percent of which was financed. By 2020, the market is estimated to grow to $1.8 trillion, with $1.24 trillion financed. Major areas of investment include communication equipment, computer equipment and software, which totaled 41 percent of all equipment acquisitions in 2015.
  • Invoice factoring: The global factoring industry amounts to $3 trillion. This form of financing allows companies to receive cash upfront for their outstanding invoices, typically in return for a small fee. In 2016, more than $2.5 billion in factoring was provided worldwide.     
  • Equity crowdfunding: A newer creation of the JOBS Act, equity crowdfunding allows American companies to sell small amounts of equity to accredited and nonaccredited investors alike. In 2015, the estimated volume of crowdfunding around the world totaled $34 billion. Fifty-six percent of that crowdfunding took place in North America. For the U.S., startup fundraising volume reached approximately $1.2 billion in 2015, where equity crowdfunding remained a new method of raising capital.

Of course, other types of financing are available as well. Before you set out in search of any kind of financing, whether it's common or unique, it's imperative that you do your homework about the reliability of the lender and the obligations that come with the money you'll receive.

Debt or the sale of equity can be great ways to free up capital for your company's growth, but irresponsible borrowing can spell a death sentence for your business. Educating yourself and preparing for repayments or generating a return on investment is key to a successful financing experience.

Pricing

Depending on the type of financing you're looking to obtain, you will run into a number of different pricing models. For example, a crowdfunding website will likely offer a subscription model for hosting your page, while a conventional loan comes with repayment terms and interest rates. Each type of loan comes with separate eligibility requirements, repayment terms and costs.

Invoice factoring offers businesses a cash percentage of their outstanding invoices for a fee. Typically, advances range from 70 to 85 percent. Factoring rates apply and are influenced by a number of items, such as the volume of invoices you wish to factor each month, the industry you're in, the creditworthiness of your customers and how long it takes, on average, for your customers to pay you.

Conventional loans, on the other hand, tend to offer longer repayment periods for a nominal interest rate. Crowdfunding platforms offer investors a return for the liquidity they provide businesses upfront. The pricing models and terms of repayment are entirely based on which type of financing your business chooses, so it's important to understand the specific type of financing you're utilizing. Here are a few things to look out for in general.

  • Interest rates: Interest rates can be simply described as the price of the financing you're accepting. Most people are familiar with interest rates, as they are the common way conventional loans and lines of credit are priced. A good rule of thumb is to apply the interest rate to a loan of $100 for easy math; for example, a 3 percent fixed interest rate on a loan of $100 means you'll be paying back $103 at the end of the repayment term.      
  • Repayment terms: It's important to understand the life of the loan and how many payments you'll have to make. Some loans are shorter by nature, such as bridge loans, while others, like real estate loans, can last for decades. Understanding the repayment period and associated terms is key to really knowing how much you're on the hook for and how often. Abiding by these terms is crucial for a healthy credit rating. 
  • Investment or loan? Not all financing is created equal. Loans are different from investments, but both typically require you paying back more than you were given; otherwise, why would someone give you money in the first place? With loans, failure to pay back along with the return (see interest rates) can damage your credit and even lead to collections. Investments are more often treated as bets on your business by private parties. However, if your venture is successful, you have an obligation to your investors to generate a return.

Editor's Note: Looking for business loan? We can help you choose the one that’s right for you. Use the questionnaire below to have our sister site, BuyerZone, provide you with information from a variety of vendors for free:

 

Negotiation

Much like pricing models, negotiating tactics vary widely depending on what type of financing you're attempting to obtain. Oftentimes, financing is based on factors like your credit rating, business history, cash flow and existing assets. How likely you are to successfully pay back a loan on time has a lot to do with the interest rate, or price, of your loan. The health of your business will often determine whether an investor chooses your business for their portfolio. In all cases, documentation to back up your claims is a must.

While negotiations vary depending by financing type, as well as your personal situation, companies will generally offer a set of terms related to your application. In some cases, like equity crowdfunding, there is no negotiation; the investor chooses entirely what they want to offer based on your business and your crowdfunding campaign. The best way to understand how to negotiate is to understand the type of financing you're seeking inside and out, and to have a clear, accurate picture of the business's finances and future prospects.

Does Your Business Qualify for an SBA 7(a) Loan?

Why Get an SBA 7(a) Loan?

SBA 7(a) loans are desirable because rates are capped, fees are regulated and terms are flexible. They can also be used for a variety of purposes, including the following:

  • Business expansion or acquisition
  • Large purchases such as machinery and materials, furniture and fixtures, or other equipment and supplies
  • Building purchase, construction or renovation
  • Long- or short-term working capital

If your finances are in order and you have good credit and ample time, an SBA-backed loan can be a good option. However, if a fast turnaround is critical or your credit needs improving, online lenders offering alternative small business loans can help you procure the funding you need.

Peer-to-peer lending is another option if your credit isn't quite good enough for a bank loan or if the amount of money you want to borrow is smaller than banks want to lend. Merchant cash advance lenders can provide you with a useful solution if you need cash quickly, and it's convenient for you to repay the loan in small daily installments that the lender automatically subtracts from your credit card sales. If you fill out the survey at the top of this page, you'll receive quotes from lenders offering various funding options.

Before applying for any loan, it’s wise to make sure you qualify for it. While each lender may have its own requirements, the SBA mandates some basic requirements for any business to qualify for an SBA 7(a) loan. For example, you must do business in the United States and have invested equity, a sound business plan and purpose, and a legitimate need for funding. You must also have utilized other sources of funding, including personal assets, before seeking a 7(a) loan. We list several additional qualifications below. You can read more about eligibility for SBA 7(a) loans here

  • Be a small business. To qualify for an SBA 7(a) loan, your business must be categorized as a small business as defined by current SBA standards. Sizing standards for businesses vary by industry and are measured by revenue or number of employees. The sizing method depends on the North American Industry Classification System code and description.
  • Work for profit. Your business must be trying to make money; nonprofit organizations don't qualify for these loans. However, other programs, sponsored by the government and independent lenders, are available for nonprofits.
  • Work in a qualifying industry. While many industries qualify for an SBA 7(a) loan, there are some that don't, such as government-owned companies, lending institutions and life insurance businesses. A complete list of ineligible industries is posted on the SBA’s website.
  • No government loss incurred. If your business has caused the government to lose money, it isn't eligible for an SBA 7(a) loan. On a related note, if one of the company’s owners (any individual owning 20% or more of the business) is associated with another business that has caused such a loss, your business is ineligible.
  • No delinquencies on government debts. You can be indebted to the government, for things such as a mortgage or a student loan, but you must be current on your payments.

Should You Consider an Alternative Small Business Loan?

Although the SBA 7(a) loan is prized for its low rates, few fees and lengthy repayment terms, alternative small business loans are increasingly popular because they're easier to apply for, with shorter applications and fewer documentation requirements. They're also more readily available for companies that may not qualify for conventional bank loans or SBA loans, such as those with less-than-perfect credit or new companies that haven't been in business long enough to establish a credit history. Plus, online alternative lenders can approve and fund the loan more quickly than banks, which is an important consideration for many businesses.

These loans are typically smaller than SBA 7(a) loans, ranging from $2,000 to $150,000, though some lenders may offer as much as $500,000. However, the amount your business qualifies for may vary depending on the health of your business, which online lenders gauge using your cash flow, personal and business credit history, and other considerations. This type of loan has shorter terms, as most lenders offer terms between one month and five years. On average, however, most loans terms are between 12 and 24 months.

Alternative loans typically have higher interest rates and more fees than conventional loans. Although there are many reputable alternative lenders, this market lacks the regulations of bank loans. Because these are business loans rather than personal loans, the Truth in Lending Act doesn't apply, potentially leaving small businesses vulnerable to predatory lenders.

No matter which type of loan you apply for, it's important that you thoroughly read the contract and understand the loan's interest rate, fees, penalties and repayment terms. Taking out a small or startup business loan is a risky undertaking for a small business, and it's important that you're certain you'll be able to repay the loan, as consequences for defaulting are significant. Although applying for an SBA 7(a) loan may require you to submit more paperwork than many other loan options, it's a regulated loan with capped interest rates, limited fees and flexible terms. These are important considerations when you're looking for business funding, as it makes the 7(a) loan more affordable than many other types of loans, especially those that lack regulation. 

Best Crowdsourcing Services

In 1999, SETI, the Search for Extra-Terrestrial Intelligence, launched a project called SETI@home, in which it asked anyone with a computer to run the SETI screen saver program. This program used the idle time of personal computers to crunch data collected by the Arecibo radio telescope. The result was the most powerful "computer" of its time. While the program never found alien life, the data has been used in the study of pulsars, plus the idea of the home PC supercomputer has been used in other areas of science. It's an excellent example of the power of the crowd.

Crowdsourcing harnesses that power for a variety of projects: from getting the best graphics for your website to involving tens to hundreds of people in doing simple data-crunching tasks that computers are still not qualified for. Researchers have used it to track hurricanes or to take the pulse of their target market. Some businesses have found that using crowdsourcing has let them get projects done quicker and more cheaply than if they had them done in-house or hired out the work to a specific company. The Oxford Workforce's 2020 Report projects that 83 percent of companies will use a flexible workforce over the next three years.

With the creation of the internet, online crowdsourcing has made it increasingly convenient for businesses to take advantage of this new way of hiring labor. Companies can access skilled and unskilled labor across the world without concern for time zones, labor laws or dealing with different currencies. Crowdsourcing companies handle the details of contracting the freelancer and handling the payments. 

Crowdsourcing generally covers four areas:

Crowd Labor: Crowdsourcing labor lets you seek freelancers to complete all or part of a project online. You can either seek people to perform specific tasks at a set price   such as with the crowdsourcing site Fiverr   or you can post projects as contests or work for hire and have talented freelancers compete. Amazon Mechanical Turk allows you to split projects that have a huge number of tasks that cannot be done by computer, such as classifying photos, and pay pennies per task.

Open Innovation/Crowd Creativity: These crowdsourcing companies allow multiple people to post on projects. HitRECord is an art and video crowdsourcing company that lets people post and collaborate on artistic projects whose results have competed in film festivals. Chaordix uses a similar approach but for product innovation.

Access Distributed Knowledge or Experience: Wikipedia is the most common example of a crowdsourcing website used to access and share knowledge from multiple sources; however, there are companies that foster this for more specific business purposes. This can also include customer feedback or beta testing.

Crowdsourcing Funding: Companies and solopreneurs are turning to the public for funding of ideas. If crowdsourcing fundraising is your area of interest, check out our crowdfunding and business crowdfunding sites.

Crowdsourcing: What to Look For

Crowdsourcing technology has grown sophisticated, connecting freelancers and enthusiasts with companies looking for projects or simple task completion. It's progressed beyond want ad lists to include file sharing, video, social media and more. Each company has its own unique angle and focus area. Therefore, even the top crowdsourcing sites might not be the best for your particular needs.

As you consider the best crowdsourcing site for you, check these features and tools:

Approach: Each company takes a different approach to how it finds and connects freelancers. Some treat each account as a one-time, task- or project-specific deal. In these cases, you only have interaction with the freelancer with respect to giving feedback and payment on the project completed. A few that do this let you directly contact the freelancer after the fact if you'd like to hire them directly for future projects. Other websites have social media crowdfunding tools that let you develop a community. In this way, you can develop an active fan base, introduce more than one project and garner feedback.

Filtering: Some companies attract a pool of freelancers that they evaluate for skills and then match to your project. Others open projects to anyone and leave the evaluation to you. Still others allow anyone to pipe in with the crowd also determining quality through likes.

Platform: A few sites, like Fiverr, have you search for the type of work you need, then find the freelancer that appeals to you. However, most sites let you post a project. For sites like these, check the platform they provide for posting your project description.

  Do they lead you in the aspects to consider   summary, feel, color scheme, desired effect?
  Do they let you upload samples?
  How formal is the form? 
  Does it let you specify due dates and payment, or are these pre-determined by the site?
  Does the platform allow you to give feedback privately? Publicly? 
  Does their software allow you to establish a community? Speak to the freelancers one on one in order to develop a working relationship for the future?

If you run your business on the go, you may want to consider crowdsourcing companies with mobile platforms as well.

Pricing Scheme: Some sites allow you to set your own price, while others have packages. The package you purchase determines the quality of freelancers that apply and sometimes affects how many bids you get as well as how quickly the project is done.

There are many benefits to crowdsourcing. You can access the talents of people you don't know, often in other states or countries. You can get a wide range of proposals to choose from. Crowdsourcing often works more quickly and more cheaply than traditional hiring methods. As the notion of hiring freelancers to do one-off tasks grows, crowdsourcing websites will increase in popularity and utility. Check out these 10 well-known crowdsourcing solutions to see which best meets your needs.

Best Fundraising Services

We researched nine of the top fundraising sites and analyzed each platform’s fees, management tools and ease of access to the money you raise. GoFundMe is our top pick for best crowdfunding site, in part because so many people recognize the name. This company charges a flat 5-percent fee on donations and promises to answer support questions within five minutes. You can set up all-or-nothing campaigns or regular campaigns that give you access to donated funds immediately. GoFundMe is one of the most popular fundraising sites and has powerful name recognition. Funds you raise can be withdrawn at any time, and this company charges lower fees than many others.

OUR TEST RESULTS - Why Trust Us?
We picked nine of the top fundraising sites to research. Fundraising is fundamentally different from crowdfunding, so we made sure to pick sites that only ask for donations, with no products or gifts offered in return for contributions. Kickstarter and Indiegogo, two of the most popular crowdfunding sites, are focused on products. Fundraising sites are focused on individual and nonprofit causes and campaigns.

Many of the fundraising sites we compared are smaller and less well-known, but we researched them anyway, just to make sure we weren’t undergoing selection bias by choosing sites that have good name recognition.Business.com has been reviewing tech products and software for over a decade. We’ve published reviews about fundraising sites since 2015. 

How We Researched
To compare each company, we looked at fee percentages, fundraiser management features and how easy it is to withdraw money from each site. These sites have a lot of similarities, but each company offers a different set of features.

Some sites, like Classy and Razoo, charge a monthly platform software fee to stay in business. Others, like GoFundMe and Fundly, make money by taking a percentage of donations. We compared these different ways of collecting fees separately. We also looked at organizations that use specific platforms and which platforms have the most name recognition.

Other Things to Consider with Fundraising Sites

Fees
Each fundraising site we researched varies in its fees and costs. Some are free, but most extract a fee from the donations you collect. Fees generally hover between 5 percent and 8 percent. And that’s in addition to the 3 percent fee that third-party credit card processors charge.

Customization
The main goal in hosting a fundraiser on one of these sites is to raise money for something that’s personal to you. Each site we researched lets you customize your fundraiser description, add personal photos and videos, and send out updates to your donors. Some sites, like Classy, take personalization further and let you create your own URL and send receipts and automated thank-yous to donors.

Analytics & Reporting
All the sites allow you to see how much money you’ve raised, but some give you special reports and segmentation features. If you’re managing a fundraiser for someone else or a nonprofit, these features can help gauge your effectiveness at spreading your message. Classy’s pro plan integrates with Google Analytics and Salesforce, so if you need tracking, that’s a good option.

Support
Every site we researched has customer support. Our top pick, GoFundMe, guarantees that it will answer your support emails within five minutes. Some services also let you speak with a professional coach or team to help you reach your goals. 

Best Merchant cash advances

Merchant Loans: What Are They?

Merchant cash advances are often referred to as payday loans for businesses. There's a good chance that if you're already having cash flow issues, a merchant cash advance is going to exacerbate your situation. Make sure you understand what working capital loans for businesses are before jumping into a business deal with these financial services.

Fewer Regulations
Although a merchant cash advance seems like a loan, it's technically labeled as a commercial transaction, which means the financial services are not subject to the same regulations that banks, credit unions and other financial institutions are by the federal government. This is why rates can be so high and repayment terms can be problematic for struggling small business owners.

Legalese
Contracts can be lengthy and confusing, so read through them and other documents carefully and ask questions of the lender to make sure you understand. Some of the terms may be unfamiliar because these services are not the same as the banks and credit unions you're accustomed to working with. Be certain that every fee discussed and agreed upon is in writing before you sign a contract.

Disclosure
Some business cash advance companies aren't forthcoming with fee percentages or repayment costs and terms when you first contact them. Most of them expect you to go through with the application process, which often involves a hard credit check, which can put a mark on your report, before they reveal more information.

In fact, a representative from one lender we spoke with wouldn't provide us with information that we were able to glean from the calculator on the lender's website unless we submitted an application. Look for a lender that is transparent regarding its fees and terms and is willing to communicate with you about the process and what you should expect.

Merchant Cash Advances: Does Your Business Qualify?

Most small business owners can easily qualify for a merchant cash advance, which is another reason why it's such a tempting solution. The qualifications vary lender to lender, but generally, you need to 1) own a business for at least three months, and; 2) meet a minimum in terms of credit or debit card sales generated per month.

PayPal Working Capital, the best merchant cash advance service, requires that you ring up $20,000 in sales per year, that you use PayPal to process payments and that you've been doing so for at least three months. Fora Financial also has forgiving minimums: You need to have been in business for three months and you need to provide four months of bank and credit card statements when you apply.

Only our two highest-rated merchant cash advance companies don't require personal credit checks: PayPal and Square Capital. Most want to examine your credit history, which can hit your report hard if you're applying with several lenders. Even if your business qualifies for a cash advance, you could be rejected for other factors, which are solely at the discretion of the lender.

Small Business Cash Advance: Repayment Terms

As with all of the other determining factors, your repayment terms after securing a merchant cash advance can vary lender to lender. Here's what we found:

Repayment Cost
This is the percentage that you will pay back, or interest, which is usually a flat, fixed fee. However, it's not an annual percentage rate (APR), and it's often referred to as a factor rate. These rates can reach as high as 39 percent from the best merchant cash advance services. The best rate we found was from PayPal at about 6 percent. American Express Merchant Financing also offered rates as low as 6 percent, but can go up to 14 percent. If you were to get a cash advance of $10,000 at 25 percent, you would pay back $12,500, or a factor rate of 1.25. So, you would be paying $2,500 to borrow $10,000.

Repayment Schedule
You usually have the option of paying back what you borrowed by setting up daily remittance, which is pulled directly from your credit card sales, and it's based on a percentage. This means that you and the lender agree on a percentage of the borrowed amount in advance, and you pay based on what you earn every day.

Say, for instance, you borrowed $10,000 and agreed to pay back 10 percent of your earnings every day. If you earned $1,000 in credit or debit card sales one day, the merchant cash advance service takes $100 that day. If you only made $300 in sales that day, the lender only takes $30. If you're having a good sales month, you could potentially pay off your advance quickly. If not, it could take much longer to repay it. Alternatively, you could set up a monthly payment schedule at a fixed amount so you aren't out more cash than you anticipate.

Repayment Rebates
Risk is always involved when a financial service lends money. So, it would benefit the lender to offer incentives to have you repay sooner rather than later. Some merchant cash advance companies offer discounts to small businesses that pay back the full amount borrowed in advance of the term length. This means you end up paying a lot less in interest. However, the longer you take to repay what you've borrowed means the service gets back the full factor rate, or interest, it's charging you, which is why only a handful of these services offer these rebates.

Additional Fees
Aside from the factor rate you pay on top of what you borrow, many merchant cash advance businesses tack on extra fees that drive the cost of this loan higher. Nearly half of the services in our lineup charge an origination fee, which is a processing fee that normally ranges from 2.5 to 4 percent of what you borrow.

Merchant Cash Advances: Our Verdicts & Recommendations

To find the best merchant cash advance service, look out for a company transparent about its rates and fees. It should offer low repayment costs and penalty-free repayment terms. If you can afford it, it's best to find a company that offers prepayment discounts so you pay less in interest.

If you're already using PayPal for credit card processing, it's a good lender option. PayPal requires that you make $20,000 per year in sales, and it lets you borrow as little as $1,000. You can repay the borrowed amount based on a fixed daily percentage, which is less of a hit to your bank account than a monthly cost. Also, its repayment cost averages 6 percent, the lowest rate among the services we evaluated.

Square is another good choice, especially if you're already a customer of the credit card processing company. Its repayment cost is lower than the average at a range of 11 to 15 percent, and it has no minimum repayment requirement, which gives you more flexibility as you pay back what you've borrowed.

American Express also offers one of the lowest repayment costs of the merchant cash advance services we reviewed at 6 to 14 percent. The company may require a personal guarantee so they're sure they get their money back, but it also offers a prepayment discount, so you can cut the cost of your cash advance even lower than your first agreement. Qualified businesses can borrow up to $2 million, the most of all the services we evaluated.

Rapid Capital Funding doesn't tack on extra fees, such as application or origination fees, but it is one of the potentially priciest services overall – you could end up paying as much as 39 percent on top of what you borrow.

Brand new businesses may have a harder time finding funding solutions, so Fora might be a good option. It only requires that you be in business for at least three months, and you can get a quote over the phone. Your cash flow has to be high though – you need to prove your sales are at least $10,000 per month.

There are alternative business funding solutions available, but if you've exhausted your resources and you need cash now, a merchant cash advance may be what's best for you and your small business. Be sure to read contracts carefully and that you understand what you're agreeing to before signing on the dotted line.

Common Business Loan and Financing Options Questions & Answers

Have a business loan or financing option question of your own?

Hi Renata - Wais and George are 100% correct in asking their questions. What business are you in and what do you need the money for? The banking world is a different place than it was even 10 years ago especially for small businesses looking to borrow. Collateral has to be stellar or replaced by some really spectacular business history. If you repost some details I am sure there are plenty of us who can give you some good or even great advice - but I'm hesitant to give more here without...

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First, you'll need a business or strategic plan that describes how much and how you will get revenue that merits 3rd party funding via a loan or cash infusion (also a loan of sorts). Alternatively, your type of business might resonate with a crowd-funding platform (Kickstarter, etc.), BUT you'll still need a strategic plan that answers the same questions in order to optimize your likelihood for success.

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Man, the issue is, a lot of people have billion dollar ideas. The problem is getting someone to believe in you. Networking is imperative and time is an issue. The longer you wait, the quicker it will be for someone else to create your idea. With no avenues for getting funding, you need to use networking to find someone that may know someone. -LinkedIn may be an avenue. -Investment forums. -Small Business Association meetings. -Check with your banker, they may not be interested,...

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I can't speak for all investors. I can speak for how I look at business plans in the tech industry. The answer I'd give is somewhat in-between simplified and detailed. Specifically, The business plan should convey that you know what value you will be creating...and have a solid idea of how to navigate to product-market fit and then tackle the challenges of scaling the business. It's much less about the detail: since no forecast will be accurate, it's not worth digging down to three...

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What counts the most is "confidence" - confidence that there's a chance to make a return on the investment. That's simple, but then things get fuzzy rapidly. First, there's "return." Most investors want a financial return, especially for larger investments, but some are looking more broadly (i.e., "to change the world"). You need to tailor your pitch to this. Further, there is a time value to returns and you need to fit the investor's timeframe. (For many VCs, the fund expires at a...

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Ask three questions: 1 What is my most important business objective(s) and timeline and which relationship type best fits that? 2 What kind of personal relationship and responsibility am I most desirous and comfortable with? 3 What are the consequences and process of getting out of a commitment that doesn't work? (buy back, buy-sell, repayment) Partners, angels, capital investors have some overlap but are very different business arrangements and usually better fit to those three...

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Map

Fora Financial
242 W 36th Street
New York, NY
Fora Financial
Bizfi
460 Park Ave South
New York, NY
Bizfi
Swift Capital
409 Silverside Rd
Wilmington, DE
Swift Capital
ForwardLine
21700 Oxnard Street
Woodland Hills, CA
ForwardLine
American Express
P.O.Box 981535
El Paso, TX
American Express
South End Capital
17412 Ventura Blvd
Encino, CA
South End Capital
RCN Capital
75 Gerber Rd E
South Windsor, CT
RCN Capital
Alpha Funding Corp.
1810 E Sahara Ave
Las Vegas, NV
Alpha Funding Corp.
ARF Financial
433 North Camden Drive
Beverly Hills, CA
ARF Financial
Grand Coast Capital Group
1515 Hancock Street
Quincy, MA
Grand Coast Capital Group
BRC Capital Solutions
244 5th Ave
New York, NY
BRC Capital Solutions
Marlin Finance
300 Fellowship Road
Mount Laurel, NJ
Marlin Finance
TD BankCherry Hill, NJ
TD Bank
American Capital Group
23382 Mill Creek Drive
Laguna Hills, CA
American Capital Group
Wells Fargo
200 Berkley Street
Boston, MA
Wells Fargo
US Bank
1 Federal Street
Boston, MA
US Bank
North Shore Funding Co.
601 Jericho Turnpike
Syosset, NY
North Shore Funding Co.
Patch of Land
195 Plymouth Street,
Brooklyn, NY
Patch of Land
Liberty SBF
1500 JFK Blvd
Philadelphia, PA
Liberty SBF
Fundera
123 William St
New York, NY
Fundera
Crest Capital
3460 Preston Ridge
Alpharetta, GA
Crest Capital
EquityNet
54 W 40th Street
New York, NY
EquityNet
Onevest
401 Park Ave South
New York, NY
Onevest
Localstake
1010 Central Ave.
Indianapolis, IN
Localstake
Fundable
1322 Manning Parkway
Powell, OH
Fundable
Katipult
Sun Life Plaza, West Tower
Calgary,
Katipult
Crowd Valley
1 Market Plaza
San Francisco, CA
Crowd Valley
CrowdForce
1434 Spruce Street
Boulder, CO
CrowdForce
Thrinacia
19162 22nd Ave.
Surrey,
Thrinacia
EarlyShares
120 S. Sierra Ave
Solana Beach, CA
EarlyShares
Experiment
100 Avenue of the Americas
New York, NY
Experiment
MyEvent
221De la Commune St
Montreal,
MyEvent
Razoo
1725 Duke Street
Alexandria, VA
Razoo
NDC Grow America Fund
1 Battery Park Plaza, 24 Whitehall St
New York, NY
NDC Grow America Fund
SmartBiz
417 Montgomery Street
San Francisco, CA
SmartBiz
Bolstr
1046 W. Kinzie
Chicago, IL
Bolstr
CircleUp
30 Maiden Ln
San Francisco, CA
CircleUp
Newtek
212 W 35th St
New York, NY
Newtek
YouCaringSan Francisco, CA
YouCaring
American Business Lending
1420 W Mockingbird Lane
Dallas, TX
American Business Lending
CRF Connect2Capital
801 Nicollett Mall
Minneapolis, MN
CRF Connect2Capital
FundRazr
171 Water Street
Vancouver,
FundRazr
FirstGiving
100 Cambridge Park Drive
Cambridge, MA
FirstGiving
Indiegogo
965 Mission Street
San Francisco, CA
Indiegogo
Wells Fargo - Business Loans
420 Montgomery Street
San Francisco, CA
Wells Fargo - Business Loans
Chase - Loans
270 Park Avenue
New York, NY
Chase - Loans
Celtic Bank
268 State Street
Salt Lake City, UT
Celtic Bank
Rapid Capital Funding
11900 Biscayne Blvd.
Miami, FL
Rapid Capital Funding
CAN Capital Merchant Services
2015 Vaughn Road NW
Kennesaw, GA
CAN Capital Merchant Services
Capital for Merchants
250 Stephenson Hwy
Troy, ME
Capital for Merchants
U.S. Bank
5803 Skylane Blvd.
Windsor, CA
U.S. Bank
PMC
777 South State Road 7
Margate, FL
PMC
InnoCentiveWaltham, MA
InnoCentive
DesignCrowd
Level 4, 2 Hill Street
Surry Hills,
DesignCrowd
Freelancer
L20 680 George St
Sydney,
Freelancer
OneSpace
33 Bronze Pointe
Swansea, IL
OneSpace
Chaordix
1240 20 Ave SE
Calgary,
Chaordix
Upwork
441 Logue Avenue
Mountain View, CA
Upwork
99designs
2201 Broadway
Oakland, CA
99designs

Services

List of 100Business Loans and Financing Options

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