Have you got good sales volume or overall revenues?
Is it from B2B or retail sales?
How does it reflect on your bank statements?
Depending on these answers, you may be a good candidate for Business Revenue loans.
What does a Business Revenue loan look like?
How is it structured?
– It is based on the overall revenues/sales of the business,
– Most require sales greater than 150K in the previous year, or are trending toward this in their first 6 months,
– Showing growth in the past year and most recent year, not a downturn,
– Tend to be a ‘small’ loan amount, anywhere from $5,o00 up to $150,000 (or more), approximately 2-10% of your annual revenue
– Payback is generally via daily ACH debits, either as a set dollar amount or a % of your normal merchant processing volume
– This means small daily payback amounts, rather than one large payment per month, allowing better cash management
– They typically have a short term, 6-12 month payback that starts immediately (some up to 18 months)
– They are more expensive than traditional loans, but are available to owners who have credit issues or don’t qualify for traditional loans and have an immediate cash need
– Fees are based on the perceived risk by the lender
– Funders may also offer quarterly payouts instead of one large lump sum, to ensure you can handle making the payments
So why would you want to get a business revenue loan, given the added expense? Some owners don’t have much of an emergency fund left. If the roof leaks or the A/C breaks, you have to get it fixed or there is no revenue to use for anything. If a new product line takes off with high profit margins, and you don’t have funds to take advantage of it, or discounted inventory, or another opportunity, you are losing money daily, maybe hourly. Could be everything is tied up in accounts receivable, or you have challenged credit, and there’s just no money in the bank; you have a problem. These are common reasons to explore business revenue loans.
How do you qualify?
Here are some common themes among lenders:
– Lenders typically want to see at least 15 deposits per month to your business checking account (more is better)
– Your business account needs to maintain average daily balances of at least $5,000 (that’s not all the time, but average)
– Your business account needs to have only rare overdrafts, preferably no days with negative balances
– This type of funding is most frequently used by retail businesses who have multiple deposits on an almost daily basis, but sometimes exceptions are made based on the dollar amounts of the deposits, etc.