I receive many requests for funding from a variety of business owners across the country and many of them have questions about how it works. I decided to answer some of the most common questions here as FAQ format to help business owners who are considering new funding.
- "How much can I get" - There are exceptions but the rule of thumb is 1-3 times your average monthly revenue. That is, if your business is averaging $100k in monthly revenue, depending on industry and credit profile you can expect an offer between $100 - $300K
- "What is required to get a quote" - An application and the last three months of business checking account bank statements. Companies that take credit cards may also need to provide separate CC processing statements as well.
- "What are the qualifications" - Generally all industries are approved with some exceptions (like Adult entertainment). Most lenders have minimum fico score requirements as well, 525 is my lowest but I've seen 480 scores get funding. Also, revenues below $10k per month are mostly declined with some exceptions.
- "Can I get funding if I have a bankruptcy" - It depends on if the BK is open (not yet settled) or closed. Closed BK's within 6-12 months can get solid funding offers.
- "Is there an upside limit" - Funding of large amounts ($500K TO $5mm) happen all the time so, no there isn't. The main criteria is revenues and credit profile. Many companies who are seeking equity financing use jumbo advances to bridge themselves until their offerings are completed. As long as the revenue can justify the amount there is no real upside limit.
- "Is there an early payoff penalty" - No. In most cases there is actually a significant discount for early payoff.
- "What security is needed" - No collateral is required to receive funding from private business lenders unless you're looking to finance commercial property. Business owners who sign make a personal guarantee that the business will pay but there is no security other than a signature (promise to pay).
- "How much will my payment be" - Payment schedules are usually either daily or weekly with interest and principal included in each payment. For example a payoff amount of $40K over 12 months will have a $769 weekly payment taken automatically via ACH from the business checking account.
There are obviously many more questions than these but I though it would be helpful to cover at least the ones I hear most frequently.
The best way to learn what you need to know in order to make an informed decision is to call me and I'll gladly spend the time to answer any questions you have.
