Traditional for-profit lenders aren’t the only sources of capital for small businesses. There are a variety of non-profit lenders that offer financing and other services to business owners. These lenders typically focus on small businesses in their community that have the potential to provide an economic impact—usually by empowering the business owners and creating jobs.

Many of these non-profit lenders focus on smaller loans of under $50,000. Because these lenders are typically mission-driven and targeting businesses with the potential to help the community, borrowers are often offered advice and mentorship to help the business owner maximize the value of the financing to his or her business.



Non-profit lenders often offer favorable terms including low-interest rates, to business owners unable to access capital from traditional sources. And, many non-profit lenders offer advice and other business-related assistance, workshops, and loan decisions based on more than a business's financial statements.

In furtherance of their mission to support community economic development, non-profit lenders tend to develop strong relationships with the small business owners they lend to. Through such engagement, they are often able to help a borrower navigate particular challenges before it’s too late to make a difference.

It is important to note, however, that non-profit lenders don’t typically have the same resources a large bank might have, limiting the amount of capital they have to lend and the number of businesses they can serve. Borrowers can sometimes also experience a time-consuming and quite “hands-on” application process.

Because many of the business owners that find success with non-profit lenders are some of the smallest small businesses, the micro-loan amounts and terms are often a perfect fit for business owners that don’t have large capital needs.

For example, the average loan size of an SBA loan is closer to $400,000 as compared to the less than $50,000, or even sub-$15,000 many non-profits offer their borrowers. Most any borrower going to a traditional bank looking for these smaller loans would likely be directed to a credit card, rather than a low-interest micro-loan.



There is a wide variety of non-profit lenders and lending models. Non-profits like Kiva Zip offer online crowdfunded loans of less than $5,000 to businesses making a positive social impact in their communities. Kiva’s US chapter has been around since 2011 and, like most non-profit lenders, tries to apply a different lens in determining a borrower’s creditworthiness. They believe that a good network of support, strong relationships, and the integrity of the business owner is just as valuable when evaluating whether or not the business is viable as traditional financial metrics.

Federally-licensed Community Development Financial Institutions (CDFIs) access private and public funds when lending to small business owners and as the name implies, they focus on businesses that have the potential to impact developing communities and low-income borrowers. Some of the better-known and established CDFIs include Accion and City First Bank.

There are other non-profit organizations that serve the small business community and offer funding advice. The Association for Enterprise Opportunity (AEO) and The SCORE Foundation are two good options. The SBA’s Microloan Program also offers loan programs through CDFIs designed to help small business owners and can be a useful resource.

Each non-profit lender has different lending requirements, so it pays to do your homework. Depending upon the lender, business owners can use loan proceeds for working capital, to purchase inventory or equipment, ramp up a marketing campaign, expand, or other similar uses.

As with other alternative lenders, if your business has sufficient cash flow to support a loan payment, you haven’t declared bankruptcy in the last 12 months, and have been current with personal obligations like rent or a mortgage for the last year, even if you otherwise have less-than-perfect credit you may qualify with non-profit lenders.

The smallest small businesses, particularly those in developing communities, often aren’t served well by traditional for-profit lenders—making non-profit lenders an important part of the small business lending landscape.

Non-profit lenders focus on small loans under $50k. These lenders often offer favorable terms including low-interest rates, to small business owners unable to access capital from traditional sources.

Non-profit Lenders For Small Businesses | Business Loans

Non-Profit Lenders

Guide

Although factoring has been around for thousands of years, its popularity has risen recently, with more than $3 trillion in accounts receivable being factored in 2013 alone, a large increase from a few years ago.

Factoring is technically not a loan and is sometimes referred to as a “lockbox” at banks that offer the service. It’s the preferred method of financing in the textile industry and can be useful for any businesses that don’t have other assets to offer as collateral and need capital quickly.

A “factor” is a third party that purchases part or all of a company’s accounts receivables in exchange for a percentage of the invoice. The “factor” then owns the outstanding invoices and collects them from the customers. The factor earns a profit from the difference between the discounted rate negotiated to buy the account receivables, and the full invoice amount collected from the customer. 

Interested business owners can contact a factor (there are several independent factoring companies, searchable via the Commercial Finance Association) or any bank that offers the service. From there, you can research a variety of factors and choose the one that is the best fit for your situation.

Most factors target specific businesses based on their annual revenues and the volume of invoices they produce each year. Some factors even specialize in particular industries. Once you choose a factor, they will review your client base to determine the creditworthiness of your average client, including a review of your previous shipment and collection information. If a client’s account is deemed acceptable, the factor will negotiate to buy your invoices for between 85% and 95% of the face amount, depending on the factoring agreement and average client creditworthiness.

Fees often range from 2% to 4.5% of the total invoice amount for every 30 days the invoice is unpaid after factoring. Payments are generally advanced within one to three days, and the factor will then collect the total value of the invoices from the company’s clients. Once the invoice is paid, the factor will pay the business the balance of the invoice minus the agreed-upon fees. The fees in a factoring agreement are based on variables such as the credit quality of the client base and the size of the invoices. These fees are negotiable in the initial contract with the factor and can change.

 Invoice payments must be paid to the factor, and the factor has a legal right to communicate directly with a selling company’s clients to ask for payment. 

There are two main varieties of factoring agreements: recourse factoring and non-recourse factoring.

: A company sells its accounts receivables to a factor with the understanding they will pay the factor for any invoices the factor is unable to collect. This is the most common form of factoring in the United States.

 The factor assumes all the risk for uncollected invoices. If an invoice goes unpaid, the business is 

 liable. Since this agreement carries an increased risk for the factor, the transaction fee is usually as much as one percent higher than a recourse factoring agreement. It can also sometimes take longer depending upon the creditworthiness of the customers being invoiced.

Factoring is a valid option for businesses in many industries. It’s often used in the manufacturing sector because of the traditionally long cycle for producing consumer goods that are distributed through multiple channels before ultimately reaching consumers. It’s also used in many other industries involving business-to-business sales.



Factoring can be a good option for small businesses looking for quick access to capital without going into debt, giving up equity, or encumbering capital assets.

Factors provide immediate working capital so your company can continue to produce and ship without interruption while giving clients acceptable terms to pay.

Factoring can be expensive when compared to the cost of traditional lines of credit—though it is less costly than missing sales or letting growth overwhelm the business.

The business owner must be willing to allow the factor to collect the invoice directly from the customer.

Depending on the industry and the nature of the business, factoring may be a viable option to many small businesses in need of capital—and in some industries is standard practice. The ability factoring provides to access capital quickly makes it a viable option for many small business owners.

Like any other financing option, it’s important to do your homework to make sure this is a good option for you and your business. Make sure you completely understand the terms of any factoring agreement before you sign on the dotted line.

The business owner sells some or all of AR at a discount

Two types of factoring: recourse and non-recourse

The factor collects the invoice from the customer

Available online and from some traditional lenders

Should you consider Factoring? Is Factoring right for your business? Learn more about Invoice Factoring.

Invoice Factoring | Facts On Factoring | Business Loans

Changing Factoring

When business owners need cash, there are a host of options available to help them make purchases and cover costs. Business credit cards may seem like one of the most straightforward options – but there are plenty of important factors to know before you open or use one. Here’s what to look for in terms of rules, benefits, rates, eligibility, and more.



Why Have a Credit Card for Use in Your Business?

Unlike many financing options for business owners, business credit cards are often available to business owners at any stage. Because the cards may be based on the personal credit, they are often easier to cover on your own than a traditional loan.

In addition, using a credit card for your business can be an important step towards establishing/improving your business credit.

Keep in mind: Many small business owners use their personal credit—including credit cards, cash advances, home equity, etc.—to start and build their businesses. The drawback to this is that if the business does not generate sufficient revenue to pay the bills, the owner’s personal credit can take a hit. Maintaining a separate business credit line can protect you from this situation.

Here are a few more reasons to maintain and use a credit card in your business activities:

Using a card can be fast and easy, simplifying payment processes as well as returns and exchanges, and providing fraud protection.

Many businesses won’t take checks, but will take credit cards.

Credit card statements provide automatic record-keeping. Your monthly card statement shows all of your purchases and payments—and you may also get an end-of-year summary, including a simple list of transactions that are sorted and subtotaled by category.

Most credit cards offer benefits including “reward/loyalty points” and cashback, discounts on certain stores and services, extended warranties, and other protections on purchases (trip cancellation insurance, auto rental collision damage waiver, road service, price protection, etc.).

If you already have a credit card for personal spending, you could also use it for business-related purchases. But it’s preferable to have a separate credit card(s) dedicated to business use, even if you’re a small business. If you’re incorporated and have employees, it’s a good idea to maintain a just-for-business card.

Note that a “credit card” means there is a credit line associated with the account, allowing you to either pay the bill in full, or overtime—including, of course, monthly interest, and, depending on the card’s rules, fees (typically for late payments). By contrast, a “charge card” was originally used to refer to “pay in full” accounts, but these days, “credit card” commonly refers to both pay-in-full and pay-over-time cards.

Like applying for a mortgage or other loan, you’ll have to provide information such as checking and savings account numbers, and have a good credit history.

Your personal and/or business credit history and rating may also determine how much—or how little—a spending line and credit limit you can get, and how much interest you will be charged on any pay-over-time balances.

Depending on where you apply (be it a bank, credit union, AmEx, etc.), you may be able to qualify for a business card as a Schedule C sole proprietor even if you don’t have a Federal Tax ID/Employee Identification Number—which is easy and free to get from the U.S. government.

Similarly, you may be able to qualify even if your business is so new that it has neither established credit history (as opposed to your own personal credit history), nor any established revenue.



Personal Credit Scores vs. Business Credit Profile

Keep in mind: If you don’t have a good personal credit rating, you may have trouble getting a credit card for your business.

If your personal credit makes you ineligible for a business credit card, consider a charge (pay in full each month) card, a low spending limit, or a prepaid card. Like with personal credit cards, establishing a good track record here can allow you to increase your spending limit over time.

And remember that, just as your personal credit rating will influence what kind of card you can get for your business, how responsibly you use your business card (e.g. whether you pay your bills on time) can influence your personal credit rating, which in turn can help when you are applying for a business loan or line of credit down the road.

A business credit card can be useful for many types of purchases, notably travel expenses. But the card, and its associated credit line, aren’t right for everything.

In particular, a business credit card should not be used for:

For some purchases, like financing new equipment, a bank may place a “purchase money lien” requiring that money go directly to the vendor.

A key reason to have a credit card for business use is to automatically keep personal purchases, and associated fees, separate from business expenses—just as you keep separate checking accounts for personal versus business activities.

Note: You’ll still want to match line items on your monthly card statement to your business ledger, but you won’t have to first identify which items on a monthly statement are business-related.

Remember that fees, interests, and other costs on the card used for business are legitimate business expenses. Also, your employees may need to make company-related purchases away from the office. With a card account just for your business, you can have cards issued for these employees, helping you track their expenditures.

A good starting point in selecting credit card(s) for your business is identifying which one(s) the companies you deal with taking. For example, a business that accepts MasterCard typically accepts Visa, and vice versa—but not all businesses accept American Express. (So you may want to get an American Express card and a MasterCard or Visa.)

 The annual fee for a card can be anywhere from free to several hundred dollars, with $30 to $100/year being typical. (The more expensive fees are usually for cards with air travel and “concierge” benefits.) In general, the first-year fee is $0.

 Interest rates (for credit—pay-over-time—accounts) vary depending on a variety of factors. Some cards start with 0% for the first six to twelve months—and can increase from there.

 “Events” can also trigger changes in your interest rate. These include your payment history to the card—be late one too many times on a payment, and your interest rate can really go up. Depending on the card, even being late on a completely unrelated bill, like a utility bill, can trigger an interest rate jump. (Often, you can requalify for a return to a better rate after being compliant for six to twelve months. But don’t expect the bank to proactively make that change—call and request a rate reduction when you feel like you’ve waited long enough.)

A business credit card is not subject to the same protections that consumer cards are, like those provided by Congress’ 2009 

Credit Card Accountability Responsibility and Disclosure Act

, which limits late fees and rate increases.

It’s also important to read where card activity reports will go—will they be associated with your consumer records, or go only to business credit reporting agencies? Also, if you will be giving employees access to the card account, will you be personally responsible for payments?

Depending on the nature of your business and your business-related expenses, you may want to consider a “branded” credit card, e.g. from the airline or hotel, you patronize frequently, for benefits like better upgrades, membership points, free checked bags when flying, and the like. If you travel internationally for business, check prices on foreign-transaction fees.

There are clear reasons—and benefits—to having one or more business credit cards available for use. Like personal credit cards, you have to select and use them responsibly. If properly managed, they can help your cash flow and accounting, expedite aspects of doing business, and possibly save you money.

Credit balance is paid in regular monthly payments

Available online and from banks or credit unions

Why opt for a business credit card & learn how to choose them? Business credit cards offer flexible funding for your business.

Understanding Business Credit Cards | Businessloans.com

Business Credit Cards

One of the largest challenges a startup faces is securing the funding it needs to get off the ground. Most startups require some amount of seed money to get started, but without any history of credit or revenue, they can face difficulties securing a loan.

Fortunately, there are several funding options for startup founders who need cash to see their entrepreneurial ideas realized. Here’s a guide to financing for startups at all stages.

An alternative way to find the money for a startup is to reach out to friends and family. While many founders hesitate to approach friends and family (because of the potential for emotional and relational conflict), it’s one of the most successful ways for early-stage entrepreneurs to find capital.

The business owner can enjoy the benefits of a low- or no-interest loan, while the family member or friend is using their cash to foster a dream and support a vision. Depending upon the relationships, it can be easier for an early-stage entrepreneur to obtain a loan from a family member or friend compared to a traditional business loan. However, it’s still recommended to have a contract and terms of agreement for both parties.

This option is especially nice for any startup owner who has access to influential contacts or family and friends that have money available for investing. As long as the business owner can prove his or her idea as a viable business and show a plan to generate revenue, a loan from friends or family members is usually without any pre-qualifications. For more information on friends and family loans, check out our Guide to Family and Friends Financing.

Crowdfunding has helped launch hundreds of businesses. While other types of funding require a certain number of years in business or a minimum amount of profit, crowdfunding allows a startup founder with a great idea to often bypass all of those requirements.

What is crowdfunding? Essentially a startup develops a well-thought-out business plan prototype of their idea or service. They then pitch these ideas to the public through an online crowdfunding portal. The ideas are funded by crowds of people who are willing to invest in exchange for an exclusive gift, pre-orders, or just because they want to help. In recent years, some crowdfunding platforms (because of changes in the law) allow a business owner to offer equity in exchange for investment as well.

For more information on crowdfunding, including how to make your campaign successful, check out our Guide to Crowdfunding.



An angel investor is an individual with private money to invest in a company in anticipation of an exit (or equity event) in the future. Most angel investors are interested in the next generation of ideas and are willing to fund startup ideas they believe in. As a consequence, they tend to focus heavily on technology startups.

The process to receive funding from an angel is relatively straightforward, although finding the 

 angel can be a challenge. There are online communities where angels congregate and your local university is another good place to look. A Google search in your area for angel investors will likely reveal groups closer to your business. The business owner raises capital by selling equity in the company. Typical shares granted to angels range from 10-50% of the business.

This funding option can be a good fit for technology-focused businesses that are established beyond the beginning startup stages, but still, need guidance with marketing and product creation. An angel investor may not only provide money, but also mentorship for a startup owner who’s looking for more experienced partners or guidance.



The Small Business Administration (SBA) offers loan guarantee programs available through participating banks and other financial institutions. Some advantages of an SBA loan could include attractive payment terms, better repayment options, and smaller down payment when compared to other traditional financing options-all of which are designed to lead to better cash flow for a startup.

 This is the most common type of SBA funding for startups. To be eligible a business startup must be for-profit and fall within the “small business” standards of the SBA. There are usually lower collateral requirements and longer terms in comparison to conventional funding. For more info on SBA loans, check out our Guide to SBA Loans.

 Microloans are a type of SBA loan given to startups to use as working capital for inventory, supplies, machinery, equipment, and furniture. The average microloan is about $13,000, and the maximum is $50,000. Funds from a microloan 

be used to pay off past debts or to purchase real estate.

Both programs are best for startups that are two years of age or older and in a good revenue-generating cycle. Traditional SBA loans generally take anywhere from 60-90 days for approval and processing to finalize, with amounts of $150,00 or more being distributed at one time.



For business owners with equity in their homes, it’s not uncommon for an entrepreneur to seek a home equity loan for funding a startup. Granted, while this plan can provide needed capital, it does put a homeowner’s place of residence at risk.

The amount of money that a startup could potentially use for funding from a home equity loan varies, and is based on the difference between the value of the home and how much is owed on the current mortgage.

With this type of loan, the business owner will receive the entire amount of the funds all at once. Though the terms vary, it’s likely a homeowner will be required to pay back the home equity loan based on a 15-year term.



A 401K loan is a specific type of loan that involves a unique legal structure, which is managed by a third party. The money comes from the borrower’s personal retirement funds, taken from an IRA or other investing account, and put into a “new investment” (the new business). This type of loan probably shouldn’t be the first on any startup founder’s list because it puts the small business owner’s retirement savings at risk.

If the business plan is solid, the return on investment could be much higher than a traditional investment account or retirement fund. 401k financing is relatively new, and requires a unique legal structure – if you go this route, make sure you are working with a reputable firm, and have everything reviewed by your attorney.

Startups of all sizes have difficulty securing funding

Non-traditional options are most popular for startups

SBA loans and some traditional financing possible

Home equity and 401K loans are also an option

Curious about the best business financing and loan options available for your startups. Check out a comprehensive guide curated by our team at businessloan.com

Business Financing Options for Startups | Businessloans.com

Financing Options for Startups

Whenever your business applies for any type of loan—be it a credit card, a line of credit, a term loan, a business mortgage, etc.—having a strong business credit profile is critically important. Even though many business owners don’t realize they have both a business profile and a personal profile, the lenders do and you can’t afford to ignore either.

One of the best ways to encourage lenders to look at something other than your personal credit profile is to focus on building a strong business profile.



What a Business Credit Score Says About Your Business

Your business credit profile is designed to reflect the relative risk of your business as a borrower—E.g., how likely it is that you will be late in making payments, or even default on a loan. Your profile plays an important part in getting you a “Yes” or “No” on a loan application — and if you’re approved, your score will influence the interest rate you’re offered. Keep in mind that your business credit profile is just one piece of the overall picture for the lender reviewing your application and some lenders look at a lot of other data in addition to your credit profile to evaluate your business.

Your business credit profile is compiled from a variety of sources, including:

Credit obligation information – the credit that your business has obtained from other lenders or businesses

Legal filing that may disclose the company’s recorded liens, lawsuits, judgments, or delinquent taxes

Other information found in public records; or reported databases

Lending institutions will request your credit profile from one or more of the credit bureaus, and factor that information into how they evaluate your application. 

What Influences Your Business Credit Profile

Ultimately, you control your business credit profile. It’s based on how you manage payments to your creditors, utilities, vendors, and tax obligations. The longer you maintain a track record of paying your bills on time, the better your profile will be. Credit profiles are very subjective and can change often as additional information is reported. Here are some of the specific components that go into your business profile:

 – detailed information about your accounts with utilities, credit cards, banks, suppliers, and other creditors. This information will include the date when an account was started, any current outstanding balances, any past due status, and a detailed history of payments.

 – information about your company found in the city, state, county, and federal records, such as business licenses, property ownership, tax reporting status, and potentially negative information like tax liens, lawsuits, judgments, and previous bankruptcy actions.

This information and more is collected by the credit bureau and processed through various formula-driven analyses to create a profile, which measures the financial condition of your business and its capacity to manage additional debt. Business credit profiles are different than consumer credit scores in that different information is used to produce a unique evaluation of the business’ credit profile.

There are several credit reporting agencies that handle this data collection and analysis. The major business credit bureaus include:

You can check their websites for more information about what data is collected and how scores are determined. Each credit reporting agency has its own scoring method, including what information they collect, the algorithms used to weigh various data to create a “score,” and the numerical range they’ve established to report their information. Unlike personal credit scores, which are all based on a set numerical range (500 is low, 800 is high), your business credit scores may use a scale of 1-100 for one bureau, and a different scale with another.

NOTE: the information used by these credit bureaus is not guaranteed to be complete or correct. Your vendors aren’t required to send the trade payment information to them, and it’s easy for errors to be made by similarly named companies or incomplete information. The good news is that the credit bureaus want their data to be accurate and are willing to review and correct any errors on your credit report you identify. You can request a copy of your credit report and report any errors directly to the credit bureau. Business credit reports reflect transactions presumably completed using your business name, address, and your company’s federal Tax Identification Number (TIN). As such, it’s 

very important to establish and maintain a business identity distinct and separate from your personal identity

Organize and register a legal business entity, such as a corporation, partnership, or LLC and register for a tax identification number with the IRS

Engage in business transactions, bank accounts, and other business activities in the name of the business entity and report income with a separate income tax return

Most lenders will consult your business credit profile (and for most small businesses, your personal credit score) before deciding whether to extend credit to your business. The lower your score, the “higher-risk” your business will appear in terms of repaying credit. Remember, lenders are looking for loans that will be profitable to them, so a bad profile or a lower personal credit score will likely mean that if you’re approved, you’ll pay a higher interest rate. Your business credit profile may also impact your company’s access to other business relationships, like trade suppliers, insurance coverage, and leasing agreements. 



Track and Improve Your Business Credit Profile

Knowing your business credit profile isn’t difficult, but sometimes the steps to ensure it’s accurate and make corrections can be a long process. Start with these steps to find out what’s in your current report.

Check to see if your business already has a credit report on file – you can get started at Experian’s BusinessCreditFacts.com here.

If your business doesn’t have a credit report on file, you may need to verify information about your business with one of the major credit reporting agencies in the U.S.

Start regularly monitoring your report – the major credit reporting agencies provide reports for many companies.

Note that your actual credit “profile” is a proprietary grade that is shared with lenders and suppliers that might issue trade credit.

Make certain that your report is accurate. These reports may contain errors, such as another company’s identification or business account information, including negative experiences. You can and should do your best to correct them, although this may take time and effort. If errors do exist, be sure to inform any financial institution where you have a loan application pending that there are errors.

What can your business do to improve an existing credit profile?

Organize as a legally registered company, not just a Schedule C reporting activity.

Comply with all local requirements for a business license or any other registrations required.

Register the information above with the business credit agencies to get on their radar earlier.

Pay all invoices, debt payments, and taxes on time and settle all other business matters as agreed.

Make sure the vendors you use report your credit history to the bureaus. If they don’t, your good credit with them won’t be reflected on your business credit report.

A strong business credit profile can make it a lot easier to obtain new credit funding. You can take control and improve your profile by diligent oversight of what’s included in your credit report, as well as responsible management of your business financial arrangements. Taking these actions will be worth it in the long run and increase your odds of finding a small business loan.

The score reflects how risky your business is for lenders

Based on payment history, public records, credit utilization ratio, and more

Determines the size of your credit line, loan amount, and loan interest

Should be closely monitored to ensure creditworthiness

Learn more about what is a business credit & what influences business credit score? Hassle-Free business loans. Multiple lenders. Flexible terms. Apply online.

Complete Guide to Business Credit Score | BusinessLoans.com

Business Credit 

If a business owner needs quick access to cash to meet a short-term need for capital, sometimes he or she can leverage their credit card merchant account to access funds. A merchant cash advance (MCA) is an alternative to the lengthy approval process and strict credit requirements required for a traditional term loan.

A merchant cash advance (MCA) isn’t technically a loan, but rather a cash advance based upon the credit card sales of a business. A small business can apply for an MCA and have an advance deposited into its account fairly quickly.

Merchant cash advance providers evaluate risk and weight credit criteria differently than a banker. An MCA provider looks at the daily credit card receipts to determine if the business can pay back the funds in a timely manner. Basically, a small business “sells” a portion of future credit card sales to acquire capital immediately.

Rates on a merchant cash advance can be much higher than other financing options and depending on the company, can be prohibitively high. It’s critical you understand the terms you’re being offered so you can make an informed decision about ROI.

An agreement is made between the small business owner and the MCA provider regarding the advance amount, payback amount, holdback, and term of the advance. Once an agreement is made, the advance is transferred to the business’ bank account in exchange for a future percentage of credit card receipts.

Each day, an agreed-upon percentage of the daily credit card receipts is withheld to pay back the MCA. This is called a “holdback” and will continue until the advance is paid in full. Access to a business owner’s merchant account eliminates the collateral requirement required for a traditional small business loan.

Because repayment is based upon a percentage of the daily balance in the merchant account, the more credit card transactions a business does, the faster they’re able to repay the advance. And, should transactions be lower on any given day, the draw from the merchant account will also be less. This means that during times of slow business, the business’ payback is relative to their incoming cash flow.

A business that uses a merchant cash advance will typically pay back 20% – 40% or more of the amount borrowed. This percentage is called the factor rate.

Note: there’s a difference between the holdback amount that a small business pays every day (as a percentage of their sales receipts) and the repayment amount for the entire advance. There could, for instance, be a holdback of 15%, and a repayment of 30%, so it’s important for business owners to understand this distinction.

How long it will take to pay back the money, and

How big the monthly credit card sales are.

For Example: A business is advanced $10,000 and agrees to pay back $13,000. This means the payback, or factor rate is 30%. Moving forward, the business agrees to have 15% of the business’ credit card transactions withheld by the advance company (the holdback) until the $13,000 is collected. If the business is averaging $14,500 a month in credit card sales, approximately $2,160 would be withheld each month and the advance would be paid back in roughly six months.

Typical holdback rates may range from 10%-20%, though this can vary widely based upon the business and risk.

How to Know if a Merchant Cash Advance is Right for Your Business

When does it make sense for a business to use a merchant cash advance? An MCA is an option when a business needs access to capital quickly to take advantage of an opportunity to purchase inventory at a discount, a special marketing opportunity, or other short-term capital needs. And, because credit requirements are less stringent, it could be an option for a business that does a lot of credit card transactions but might have less-than-perfect credit.



The time it takes to get approved for a merchant cash advance could be anywhere from hours to a few days, depending on the paperwork and other details. And once the process is approved, a business could see the funds in their account within 2 days.

The application process isn’t as complicated as a traditional loan, which typically makes the merchant cash advance approval process a faster option. Here are the steps a business needs to take:

 Typically, the application will be one to two pages and you will be asked for your social security number, business tax ID, and other important information about your business.

 You will probably be asked for several months of credit card processing as well as bank statements. You will likely also be asked to provide proof of citizenship as well as a copy of the lease for the business location.

 It could be as quick as 24 hours for your business to be approved for a merchant cash advance.

 This type of funding may require the business to switch to a new credit card processor. It can be inconvenient to switch processors but it is sometimes a necessary part of the approval process for many MCA providers.

To use the previous example we mentioned, the funding details might be something like this; a small business is approved for $10,000 and required to pay back $13,000. The merchant account will be debited 15% every day until the entire $13,000 is paid back.

The money from the MCA will be deposited into the small business’ bank account and repayment via the merchant account will begin automatically.

This type of financing does not build business credit because merchant cash advance providers do not report to business credit reporting agencies.

Rates for a merchant cash advance can be much higher than other types of financing, and rates vary widely by provider. It’s important to make sure the ROI is positive before you sign on the dotted line.

Repayment: daily or weekly debit from merchant account

Advance secured by direct access to the merchant account

Payback maybe 20% to 40% of the amount borrowed

Merchant cash advance providers can be found online

Learn the best way to best utilize merchant cash advance to help fuel your business growth. Hassle-Free application. Fast funding. Apply online.

What is Merchant Cash Advance? Flexible Terms. Apply Online.

Merchant Cash Advance

With traditional lenders maintaining a tight leash on credit, more and more business owners turn to a new breed of lenders for their financing needs — a group found entirely online. Fueled by web-based tools that speed up the application process and determine eligibility in a matter of minutes, these lenders typically approve more loans than traditional banks. They can provide financing much quicker than their traditional counterparts.

Many online lenders use technology to evaluate businesses differently from traditional lenders. For example, online lenders may access a business’ transactions and cash flow via their bank account’s website or examine other digital data points to analyze a business.



This type of lender provides business owners with loans that range from three to 24 months. These loans are often used for specific, shorter-term projects such as purchasing inventory, launching marketing campaigns, or general working capital. Some examples of shorter-term lenders are:

OnDeck – works largely with “Main Street” businesses and offers loans of up to $250,000. OnDeck has loaned over $3 billion nationwide. (Disclosure: OnDeck is the sponsor of this site)

Kabbage – started lending to online businesses and now offers loans up to $100,000

These lenders provide business owners with loans that range from 1-5 years with amounts up to $500,000. These loans are often used for longer-term projects such as major renovations or the opening new location. Some examples of these longer-term lenders are:

Lending Club – the largest personal peer to peer consumer lender now offers business loans up to $300,000

Funding Circle – started in the U.K. and has lent over $700 million globally to small businesses; Funding Circle offers loans up to $500,000

A major benefit of online business loans is how easy it is to apply for a loan. Applications are usually just a single page and tend to be very straightforward. They can be completed online, over the phone, or via fax. However, there are certain things you’ll need for non-bank lenders, including:

Connection to your business bank account or paper bank statements (for certain lenders)

Financial statements (typically for larger loan sizes)

Another advantage to working with online lenders is the 

. The shorter-term lenders can often provide a decision in minutes or hours, while the longer-term lenders may have a decision within a few days. In a world where an application for financing in a traditional setting can take weeks or even months, the speed and simplicity offered by online business lenders are a major attraction for many business owners.



Online business loans tend to have a higher interest rate relative to traditional bank loans. However, they also have much higher approval rates and can provide funding far quicker than traditional lenders. The rates will vary by lender, term, and risk and are typically lower than other options such as merchant cash advances. Repayment methods also vary depending on the lender, so make sure to do your research and find the best fit for your business. Some lenders require a fixed amount daily or weekly, while others require a traditional monthly payment.



Qualifications and Requirements for Online Business Loans

These both vary from lender to lender, but here are some general guidelines:

 Industry requirements vary by lender, but restricted industries sometimes include financial services, home builders, real estate investors, etc.

Take advantage of our comprehensive guide on Shorter-Term & Longer-Term Online Business Loans. Get funded as fast as 24 Hrs. Apply online now.

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