Small Business Loan Tips

One of the biggest challenges a new small business must face is obtaining the finances necessary to support their initial growth. In order to proudly turn on your physical or metaphorical “open for business” sign, you’ll need to have access to a significant amount of capital in the form of a small business startup loan.

As one might assume from the title, a business start up loan is a loan meant to help with the financial needs of a new business. Small business start up loan proceeds can go towards things like working capital; the purchase of equipment, machinery, supplies, inventory, and furniture; and the purchase or construction of real estate.

Where Do I Get a Small Business Startup Loan?

If you’ve already started your hunt for a loan, you’re well aware that there is a seemingly infinite amount of lenders and financing options out there. Each one will come with their own set of pros and cons, and perhaps you’ve discovered that most of the low-cost options are not available to business owners without a couple years of business under their belts. To help you get started, here is a list of 5 viable options to secure a business startup loan.

Conventional Business Lending

Banks are traditionally known for their lending opportunities, and if you have a good relationship with yours, this may be a perfect place to go. When it comes to bank financing for business startup loans and lending, but banks will not typically offer conventional loans to new businesses. Through your bank you may qualify for:

Equipment Financing: Specifically designed to pay for the purchase of equipment and machinery, this loan is similar in structure to a conventional loan. However, the proceeds must only be used to purchase equipment or machinery.

SBA Microloans

In addition to the SBA 7(a) and 504 loan programs, the SBA also offers microloans which are typically made through development corporations and non-profit organizations. Approved for up to $50,000, a microloan through the SBA can be used for working capital or the purchase of inventory or supplies, machinery or equipment, or fixtures and furniture.

Microlenders

The SBA is not the only microlending option. Microlenders are non-profit organizations that offer small businesses the opportunity to secure financing in small increments (less than $35,000).

When it comes to microlenders, be sure to check out these two options:

Accion: Available for up to $10,000, this is a great small business startup loan if you’ve been in business for less than six month and have an incubator-based or home-based business. Since the required credit score is 575 or higher, this is also a good option for borrows who may not have stellar credit.

KivaZip: Kiva operates on a largely community-based, trust-driven platform. Businesses can crowdfund business loans from philanthropic-minded individuals up to $5,000. These loans carry a 0% APR and are provided to struggling entrepreneurs who have proven their character, invited their own network of lenders, were unable to access other financial means, and have a business that has a perceived positive social impact.

Separate Your Personal and Business Finances

You’ve been warned about mixing business and pleasure, but what about personal finances and business finances? At times, it may seem tempting to utilize your personal finances to help out when your business needs a boost, but it’s not always the best solution in the long run. Implementing a financial division between your personal and business finances can help you treat your business like the independent entity it is while safeguarding your personal finances.

Why is separating your finances so important?

Though there are many benefits to keeping your personal and business finances separate, two of the main reasons you should draw a line in the sands of finance are based on taxes and personal protection.

Taxes

Do taxes ever really seem cut and dry?  If you’re in the majority, the answer is no.  If you’re not, then rest assured that many of us are incredibly envious of your taxation acumen.  One of the main reasons you’ll want to split your business finances from your personal finances is taxes.It is much easier to keep track of business expenses if you use a separate business account.

Once you have your shiny new business checking account, keeping track of things like expenses is essential to properly filing taxes.  From office expenditures to operational and inventory purchases, every receipt counts.  When it comes time to file your taxes (or hand everything over to your accountant), a thorough collection of business-only information is going to save you a lot time and a significant amount of stress.

Personal Liability

Separating your personal and business finances is important for tax reasons, but perhaps equally, if not more important is a separation of your personal finances for the sake of your personal security. Using your personal finances to back any entrepreneurial venture can be risky business, but not just because of the initial financial gamble.

Entrepreneurs often wind up signing personal guarantees for leases, loans and lines of credit. Sometimes that’s necessary–especially when your business is young and hasn’t established a strong business credit rating. But your goal should eventually be to avoid personal guarantees as much as possible.  The way you do that is by building strong business credit, so lenders can be confident that your business can and will repay its debts

Tips for Separating Your Personal & Business Finances

Now that we’ve distinguished two of the more significant reasons to keep your business and personal finances separate, let’s take a look at a few of the ways that you can proactively put this division in place.

  1. Consider incorporating. incorporating your venture as a C Corp, S Corp or limited liability corporation (LLC) can provide tax benefits, but more importantly help protect your personal assets, provided you set it up properly and maintain it correctly.  By maintaining a corporate structure, you can protect your personal assets from business debts, losses and lawsuits. (Keep in mind, though, that if you sign a personal guarantee, creditors can try to collect from your personal assets if you default on a debt.) If you’re serious about creating a business, incorporating is a smart first step.
  2. Open a Business Checking Account. Once you’ve made the decision to start your own business, one of the very first things you should do is head to the bank and open a business checking account. There are multiple reasons why this is a healthy step for a business.  For starters, it will streamline cash flow and making record keeping much more efficient.
    Additionally, a business account lends itself to easy finance tracking – something that you or your accountant will vastly appreciate come tax time. As mentioned before, a separate business account can help signify to the IRS that your venture is a business and not just a side project or hobby, making more of your expenses tax deductible.
  3. Apply for Business Credit Card. Business credit is a big deal, and one quick and easy way to start to build it is by obtaining a business credit card. In addition to fantastic perks like building a credit history for your company, a business credit card will help you eliminate the need for personal credit cards for businesses purposes. Opening one of these cards will also help streamline business finances, and some cards reduce the risk of having your business transactions impact your personal credit. In addition, you may be able to deduct card costs (an annual fee and interest, for example), if you use it exclusively for business purchases. That may not be the case if you mix personal and business expenses on the same card.
  4. Set a Budget. Being armed with a business credit card and a business bank account is a terrific start, but there is another step that really can help you keep things in check – a budget. It doesn’t seem like setting a budget for your business would do a whole lot in terms of separating personal and business finances, but it can really come in handy.
    Preparing (and sticking to) a budget for your business can prevent you from delving into personal finances due to poor planning. Of course, emergency situations can happen and even the best planned budgets may not always work out as intended. However, by creating a clear cut budget, you’ll be able to reduce the risk of running into avoidable costs that would otherwise leave you turning to your personal finances for rescue.

How to Choose Credit Cards for Travel

Business road warriors are used to packing their bags. But wouldn’t it be more exciting to get ready for your upcoming trip if you knew there were sweet rewards involved?

That’s where business credit cards come in. You probably know of or have a personal credit card that rewards you for your purchases with miles or points that you can spend on flights or hotel stays. But business credit cards for travel sometimes offer even better rewards than personal cards, along with a host of other perks including helping you separate your personal and business finances and build business credit.

Here are some of the best business credit cards for travel we’ve identified for frequent flyers that could be a big win for your business.

The Platinum Delta SkyMiles card from American Express is a great card for frequent Delta travelers who plan to make a large amount in purchases ($50,000+) on their card each calendar year. This card has a killer signup offer of 35,000 bonus miles and 5,000 Medallion® Qualification Miles (MQMs) if you spend $1,000 in the first 3 months. MQMs help you get closer to reaching Medallion status in the Delta SkyMiles program. As an added bonus, you’ll get a $100 statement credit after you make a purchase on Delta using your card within the first three months.

Added benefits:

  1. Two miles per dollar spent on Delta purchases, and one mile per dollar on all other purchases.
  2. No foreign transaction fees.
  3. Earn more miles with boost programs: 10,000 bonus miles and 10,000 MQMs after $25,000 in purchases each calendar year, as well as another bonus after $50,000.
  4. Earn a domestic, round-trip companion pass each year you renew the card.
  5. Added Delta bonuses: free checked bag, priority boarding, 20% savings (via a statement credit) on eligible purchases made in-flight.

Drawbacks:

  1. If Delta isn’t a convenient airline for you, this won’t be the best card.
  2. $195 annual fee.

The Starwood Preferred Guest Business Credit Card from American Express offers a flexible rewards program for frequent flyers of many different airlines who enjoy comfortable resort and hotel stays. New cardholders will earn 25,000 bonus points after they spend $5,000 in the first 3 months. Along with a generous rewards program, new cardholders will earn additional bonus points if they spend even more. Earn SPG Gold status after 30,000 in purchases on your card in a calendar year, which allows you to score more hotel upgrades, late checkouts, welcome gifts during hotel stays, and more.

Added benefits:

  1. Five “starpoints” per dollar spent at Starwood Hotels, two points per dollar at Marriott Reward hotels, and one point on all other purchases.
  2. Points can be redeemed at over 1,300 hotels and resorts, and over 150 airlines within the SPG program.
  3. No foreign transaction fees.
  4. Free Boingo WiFi at over 1M Boingo hotspots.
  5. Access to Sheraton Club Lounge.

A Beginners Guide To Options

Healing Of The Kidney Stones Of An Infected Person Kidney stones are the result of particles that are present in the urine that forms up stones. When the chemical substances in the urine come together, they form the kidney stones. Calcium kidney stones are the most popular though there are others that exist. Natural means have been used for long to eliminate the kidney stones in the body. Medical help is mostly offered when the stones become bigger than normal. There are different shapes and sizes of kidney stones, but some are bigger to a magnitude of kidney stones. The large stones can prevent the flow of urine causing other complications. A patient suffering from kidney stones experience unexplainable pain in their body. It becomes extremely hard to deal with these stones for people who have no idea of them. Some possible actions can be adopted to keep the body free from the kidney stones. Once you notice symptoms of kidney stones is seeking help from a urologist. There will be measures to help you deal with the kidney stones. The lower part of pelvis experiences pain which should drive you to seek medical help. Prevention, therefore, becomes the easy way of getting rid of the kidney stones. Water is a paramount substance for a person seeking to flush the kidney stones from the body. Fluids like water are the best sure way of eliminating the kidney stones form the body of a person. Eight glasses per day is the average amount of water that a person is supposed to drink. By doing this, you will pass the stones out through urine. Drinking water that is free from contaminants will assist in getting rid of the chemical elements that may be found in the urine. When dealing with painful kidney stones, it ‘s nice to avoid drinks such as soda and fruit juices.
Case Study: My Experience With Wellness
The type of food taken by an individual contributes to the presence or absent of the kidney stones in the body. It is good to modify your diet to deal with the kidney stones. Healthy diet will help a person to deal with the buildup of the stones. Foods with calcium and those that are rich in animal proteins should get rid with. Staying away from this food will help you stay away from kidney stones buildup.
Finding Ways To Keep Up With Options
Doctors advice is imperative and should be adhered to. The doctor can recommend medication to help you pass the stones out. The work of the medication is to rid of the stones from the system. The stones can be dissolved by the medicines through changing the way the urine appears. If the medication do not work, the doctor can change treatment to a more efficient one. It is wise to come up with a way of getting rid of the stones without causing harm to the body.

What Do You Know About Houses

Here Are Tips In Purchasing New Construction Homes For Sale In Ox Bottom Crest There are a number of new construction homes for sale in Ox Bottom Crest. There are so many reasons why people prefer to purchase new construction homes such as new appliances and open floor plans. There are agents on the site of new construction homes that are for sale, so the buyers can have a smooth transaction. But, there are things that you need to consider so you can prevent losses. Below is your guide in purchasing new construction homes: A. Choose a real estate agent that has experience in new construction homes
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There are a number of buyers that do not think that they need to hire a real estate agent when purchasing houses. Most buyers think that they can save money when they do not hire a real estate agent. This is actually not true, since real estate agents can help you with the transaction and even protect you. Most builders only offer quality packages if you will use sign a contract with them that you agree to use the title of their company, their insurance company and even their lender. Just in case you will use the lender of the builder then your real estate agent will make sure that the interest rate is fair. Real estate agents are familiar with the industry standards.
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B. Check the contract before signing it Buying a new constructed house is a big transaction. Make sure that you understand every contract that you will sign. C. Get the home inspected Since the house is new they do not think that they need to have it inspected. Home inspection is necessary even in newly constructed home because this is how you will determine if their are any flaws in the construction, so you can check if their are flaws in the construction. You should choose a licensed home inspector to check the home. The inspector will have a checklist so they can check everything. D. Try to avoid lenders If you can pay for your home the better. It is best if you try to avoid borrowing from lenders. E. Conduct research on the builder You need to research on the builder so you will know if he or she is reliable or not. You can actually ask real estate agent if they know reliable builders. F. Get an appraiser If you plan to loan money from a lender then you will need the services of an appraiser. Select an appraiser that can answer all of your queries. There are really a lot of advantages when you by a new construction home. It is important that you have reliable and qualified professionals on your side when making transactions with home builders.

Case Study: My Experience With Rides

Rideshare; Best Means Of Transport Rideshare can also be referred to as car pool, car sharing and lift sharing. It can be the service that is offered to each person to take advantage of an individual traveling from one spot to another or for work. A deal between the automobile sharing friends in which they’ve to select a subject areas including who else will drive the car and when, where an individual should be taken from plus what is going to be the price of the gas. The ride posting services are ever more popular and is acquiring an increasing amount of famous people by day since people have understood its importance as it assists in lowering the number of cars on the road and also aids in lowering the gas exhausts. The extra advantages of ride sharing would consist of conserving of income, saving associated with parking spaces, decreasing the particular dependence on oil associated with a country, enhance the human relationships with individuals that everyday travel with you plus a lot more. The ride sharing services are also offered online via websites of which are offering the especially the services of assisting folks who wish to go for sharing a new ride on a standard basis, for example, to be able to go to work or institution and also for several specific one-time notes or events.
A Brief History of Rides
The rideshare providers are also on additional vehicles together with car. These services are available when there is a lot more than one person within the vehicle which is often the van, a tour bus, a vehicle or rail. Virtually any vehicle posting is considered ridesharing. It helps to improve the personnel significantly along with offering mobility towards to the open public. An added advantage described by mental experts is that those who travel together with their colleagues or friends to and from the office are the lot healthier than people travelling alone. Those who drive alone usually can face difficulties relevant to their bodies for example higher heart is better than, high blood pressure, feeling stressed for your everyday traveling, brief term storage loss due to the particular fact of the tension of traveling and lower protection power which leads to asking several sickness and conditions to their body.
Case Study: My Experience With Rides
The less traffic from rideshare leads to faster delivery of products and solutions and improved function output and morale of staff. Additionally, it results in increased parking space. The gas exhausts, reduction in stress degree and visitors congestion might also be reduced when on an average individual uses the ride posting services within 7 days. If setting up ridesharing occurs as shortly as per week it may result in a great deal more than four fewer cars on the highway at any point.

Small Business Startup Loans

One of the biggest challenges a new small business must face is obtaining the finances necessary to support their initial growth. In order to proudly turn on your physical or metaphorical “open for business” sign, you’ll need to have access to a significant amount of capital in the form of a small business startup loan.

As one might assume from the title, a business start up loan is a loan meant to help with the financial needs of a new business. Small business start up loan proceeds can go towards things like working capital; the purchase of equipment, machinery, supplies, inventory, and furniture; and the purchase or construction of real estate.

Where Do I Get a Small Business Startup Loan?

If you’ve already started your hunt for a loan, you’re well aware that there is a seemingly infinite amount of lenders and financing options out there. Each one will come with their own set of pros and cons, and perhaps you’ve discovered that most of the low-cost options are not available to business owners without a couple years of business under their belts. To help you get started, here is a list of 5 viable options to secure a business startup loan.

Conventional Business Lending

 

Banks are traditionally known for their lending opportunities, and if you have a good relationship with yours, this may be a perfect place to go. When it comes to bank financing for business startup loans and lending, but banks will not typically offer conventional loans to new businesses. Through your bank you may qualify for:

 

Equipment Financing: Specifically designed to pay for the purchase of equipment and machinery, this loan is similar in structure to a conventional loan. However, the proceeds must only be used to purchase equipment or machinery.

 

SBA Microloans

In addition to the SBA 7(a) and 504 loan programs, the SBA also offers microloans which are typically made through development corporations and non-profit organizations. Approved for up to $50,000, a microloan through the SBA can be used for working capital or the purchase of inventory or supplies, machinery or equipment, or fixtures and furniture.

Microlenders

 

The SBA is not the only microlending option. Microlenders are non-profit organizations that offer small businesses the opportunity to secure financing in small increments (less than $35,000).

 

When it comes to microlenders, be sure to check out these two options:

Accion: Available for up to $10,000, this is a great small business startup loan if you’ve been in business for less than six month and have an incubator-based or home-based business. Since the required credit score is 575 or higher, this is also a good option for borrows who may not have stellar credit.

KivaZip: Kiva operates on a largely community-based, trust-driven platform. Businesses can crowdfund business loans from philanthropic-minded individuals up to $5,000. These loans carry a 0% APR and are provided to struggling entrepreneurs who have proven their character, invited their own network of lenders, were unable to access other financial means, and have a business that has a perceived positive social impact.

Small Business Loan Ideas

You have a vision, a plan, and the motivation to start your own business or take your current one to the next level. Everything is ready to go, all you need is money. For many entrepreneurs, small business loans are the key to fulfilling short and long term goals. So how do you get a small business loan? Is it difficult? Do you need to meet certain requirements? If you’ve asked these same questions, then you’re in luck; that’s exactly what we are going to discuss.

Have a Plan

When it comes to securing a small business loan, half of the battle should be fought with strategy. One of the best ways to get all your financial ducks in a row is to devise a solid, well-thought-out business plan. This will show any potential lenders that you’ve done the research and completed your homework.

Here are a few general things you should keep in mind:

  • What kind of business are you starting and what are your long and short term goals?Before requesting a loan, you’ll need to be able to concisely define your business to a potential small business loan lender. What is your product and who does it serve? What is your projected revenue? What tactics and strategies do you plan to employ in order to reach that revenue mark? You should be able to confidently answer those questions before you step foot in a lender’s office.
  • For what do you need a loan?When it comes to requesting a small business loan, you’ll need to have a detailed list outlining what exactly you need the money for. Working capital costs, equipment and operation costs, or long term development costs all constitute good reasons for requesting a small business loan.
  • However, if you’re seeking a loan to pay down surmounting debt, recoup for poor performance, or fulfill payroll obligations, then you may want to consider alternative means of support.
  • How much money do you really need?Next, you’ll need to determine how much you need. Though this number may not be exact, you should be honest and realistic with your estimates. If you overestimate, lenders may shy away; however, if you underestimate, you may find yourself in tight spot far too early.

You have a vision, a plan, and the motivation to start your own business or take your current one to the next level. Everything is ready to go, all you need is money. For many entrepreneurs, small business loans are the key to fulfilling short and long term goals. So how do you get a small business loan? Is it difficult? Do you need to meet certain requirements? If you’ve asked these same questions, then you’re in luck; that’s exactly what we are going to discuss.

Have a Plan

When it comes to securing a small business loan, half of the battle should be fought with strategy. One of the best ways to get all your financial ducks in a row is to devise a solid, well-thought-out business plan. This will show any potential lenders that you’ve done the research and completed your homework.

Here are a few general things you should keep in mind:

  • What kind of business are you starting and what are your long and short term goals?Before requesting a loan, you’ll need to be able to concisely define your business to a potential small business loan lender. What is your product and who does it serve? What is your projected revenue? What tactics and strategies do you plan to employ in order to reach that revenue mark? You should be able to confidently answer those questions before you step foot in a lender’s office.
  • For what do you need a loan?When it comes to requesting a small business loan, you’ll need to have a detailed list outlining what exactly you need the money for. Working capital costs, equipment and operation costs, or long term development costs all constitute good reasons for requesting a small business loan.
  • However, if you’re seeking a loan to pay down surmounting debt, recoup for poor performance, or fulfill payroll obligations, then you may want to consider alternative means of support.
  • How much money do you really need?Next, you’ll need to determine how much you need. Though this number may not be exact, you should be honest and realistic with your estimates. If you overestimate, lenders may shy away; however, if you underestimate, you may find yourself in tight spot far too early.

 

Research Your Credit History and Know Your Score

While it may seem redundant and overstated, it’s absolutely essential to know your credit scores. Obviously, lenders put a significant amount of weight on your credit history. Knowing where you stand can help you evaluate potential lending opportunities.

Beyond that, knowing your credit history can help you identify and address weaknesses before you even go to a potential lender.

What You Need to Know About Business Loans

Nowhere is the saying “you need money to make money” more true than in the crowded, competitive, fast-moving world of small business. As you seek to establish and grow your enterprise, access to capital (or the lack thereof) will be one of your biggest hurdles.

For small business owners facing expenses that just can’t wait, traditional approaches—SBA loans from banks, for example—can be burdensome, inconvenient, and ultimately disappointing. On the other hand, while the APR for a bank loan is usually around 6 or 7%, the APR for an online loan can climb above 30%!

It’s a simple fact that the faster you need a loan, the more you’re going to pay for it. That doesn’t necessarily mean you’re going to regret it, though—if it grows your business, keeps you afloat at a crucial stage of development, and ultimately carries you forward, the cost will have been more than worth it. Let’s take a closer look at a few lenders and see what they have to offer by way of fast business loans.

Kabbage

Kabbage isn’t a “business loan” product, rather they are offer a business line of credit. They are worth mentioning here because business owners can receive funds from Kabbage the same day they apply.

Minimum requirements: At least 1 year in business, with a minimum of $50,000 in annual business revenue

Time for approval and funding: Kabbage’s online application process usually takes around 7 minutes to complete, and you can get funds the same day.

Required paperwork: Along with basic information—business address, tax ID, credit scores, and SSN—Kabbage looks at the online systems used by your business. It takes data about your business from online systems like Amazon, PayPal, QuickBooks, Etsy, etc., in order to evaluate your creditworthiness.

How much can you borrow: $2K to $100K. Kabbage will give you a maximum credit limit that you can borrow against, always keeping in mind that you only need to draw on the credit line as needed, without ever having to use the full amount. You only pay interest on the funds you use.

How long can you borrow it: either 6 or 12 months, with payments automatically deducted from your bank account on a monthly basis.

APRS and fees: The APR for Kabbage loans ranges from 30% to 100%. Most of these fees are charged in the first two months, although you can save money by paying the loan off early.

Personal guarantee and collateral: While Kabbage doesn’t require a personal guarantee, it does place a lien on your general business assets for loans over $20K. Your business assets can be seized if you don’t repay the loan, but your personal assets can’t.

OnDeck

OnDeck’s short-term business loan product exists as a way for business owners to quickly take advantage of opportunities or handle obstacles that they encounter. Unlike OnDeck’s merchant cash advance, an OnDeck short-term small business loan reports payment history to business credit bureaus, thus helping you build your business credit.

Minimum requirements: A personal credit score of 500 or higher, at least 1 year in business, with a minimum of $100,000 in annual business revenue

Time for approval and funding: OnDeck’s loan application process takes approximately 10 minutes. By applying online or over the phone, you can receive funding as quickly as within 1 business day after you’re approved. Being prepared—providing thorough information and having any necessary documents ready to go beforehand—can help speed up the process.

Required paperwork: Business tax ID, bank statements for the last three months, the SSN of business owner(s), merchant and credit card processing statements for the last three months (if applicable)

How much can you borrow: $5k to $500k. You will typically qualify for a loan that is 10% to 15% of your business’s annual gross revenues.

How long can you borrow it: 3 to 36 months, with payment automatically deducted from your bank account on a daily or weekly basis.

APRs and Fees: OnDeck loans range from around 20% to 40% APR, and the APR on their cash flow loans can be up to 100% APR.

Personal guarantee and collateral: OnDeck requires a personal guarantee and places a lien on general business assets.

Other financing options

Finally, let’s take a quick look at a few more affordable options for fast business loans. While these approaches may not be as fast as going to a lender like OnDeck or Kabbage, the extra effort might be worth it in the long run, given the amount of money you stand to save.

Credit Cards

Credit cards don’t always seem an obvious choice for people looking for fast business loans, but if used right they can be a quick and convenient source of business capital. If you have good credit, you might want to consider getting a business credit card or personal credit card to be used strictly for business expenses. The ideal way to use these cards is to pay the full balance every month. As you do so, you’ll keep that money available and build your business credit score at the same time. The average APR for a credit card is 16%, a significantly lower number than you’d get with Kabbage or OnDeck. And while it’s true that you’re limited to your credit line regarding what you can and can’t purchase, another advantage of credit cards is that many of them offer introductory 0% interest rates as well as rewards such as cash back with purchases, frequent flier miles, hotel stays, etc.

Invoice Financing

Do you have irregular cash flow because you’re often waiting for your customers to pay you for services or products you’ve provided? Invoice financing can be a good option for B2B businesses with long invoice cycles. Invoice financing allows you to get paid immediately rather than waiting for your customers to pay you. BlueVine is one such option B2B businesses may want to consider.

SBA 7(a) Express Loan

If your credit is solid, and you can wait a week or two for the loan, SmartBiz is specializing in issuing SBA loans in under 7 days. This only applies to SBA loans under $150K (larger loans still take 4 to 6 weeks on average). The nice thing about an SBA loan is that it will offer some of the lowest interest rates for which your business can qualify.

Credit Explained ABout Business Line

There are a number of ways to deal with the inconsistent revenue and costs associated with running your small business, and one of the best options is a business line of credit. A business line of credit is a flexible, often low-cost way to cover short-term financing needs such as purchasing inventory and making on-time payroll.

How does a business line of credit work?

A line of credit, or revolving line of credit, is a flexible loan option for businesses. Businesses are allocated a specified maximum amount of capital available to them through a lender based off certain factors such as current cash flow and business credit rating.

The business then decides when, if, and how they would like to use that capital. Interest will be charged only when you decide to pull money from the line. You will have a specified repayment period, but, like a credit card, there is no penalty for paying early (in fact, it is encouraged).

Although interest is only charged once you use the line, there may be a monthly maintenance fee for letting your line of credit sit unused. Check with your bank or lender to see if that is the case for any line of credit you are considering.

What is a secured vs. unsecured line?

A secured line of credit is a line in which the borrower puts up collateral as a security deposit on the line of credit. An unsecured line does not require any collateral assets.

Secured lines are often preferred over unsecured lines by both lenders and borrowers. The lender is taking on less risk, so they will usually grant a higher credit maximum at a lower rate for secured lines. New businesses or businesses with poor business credit might only qualify for a secured line of credit because of the inherently higher risk.

Unsecured lines of credit are more expensive because the lender assumes higher risk. Credit cards are a type of unsecured line of credit. Businesses with many years under their belts and stellar business credit are more likely to qualify for unsecured lines at reasonable rates.

What are lines of credit typically used for (and not used for)?

Lines of credit are great for many situations. Here are a few examples:

  • Your business has seasonal fluctuations — perhaps your sales take a dip in the summer. A line of credit will help during the periods of low sales.
  • Your clients take 30 days or longer to pay you for products or services you provide. You might need a line of credit to cover the interim time until you are paid.
  • Your product requires expensive materials — you may need a line of credit to cover the expenses while you build and sell your product.
  • You have the opportunity to receive a discount if you pay a particular bill early — if the resulting discount is significant, you can cover the bill with your line of credit while you wait for cash flow to catch up.

The uses of a business line of credit really can extend far beyond these to touch all businesses. A line of credit, however, is a form of short-term financing, so avoid using your line of credit for long-term expenses.

Business Credit Card in 4 Steps

More and more small businesses are turning to business credit cards as a way of having back up financing and improving their business credit scores at the same time. Many business credit cards offer perks just for using them, including frequent flyer miles and cash rewards. Business credit cards are great for business owners who need back up credit for emergency situations or to offset irregular cash flow. Additionally, making on time or early payments on a business credit card will help your business build its credit so that your business can secure better terms with vendors and suppliers, government and high profile private contracts, and the right business financing at the right price.

But how does one go about getting a business credit card? While the process is relatively painless there are many choices to take into consideration. Let’s take a look at some of the steps you’ll need to take in order to obtain a business credit card.

  • 1 Close your eyes, take a deep breath, and look up your credit scores.

The people to whom you’re applying for a business credit card will want to know how responsibility you behaved with your credit. A low credit score will not automatically keep you out of the running for all cards, but if you find yourself getting denied, you can check out this list of business credit cards with lower credit standards.

  • 2 Choose the right business credit card.

Spend some time thinking about how you plan to use your card so you can pick one that meets your needs. Do you want rewards? If so, cash back or miles (or something else)? Do you pay in full or plan to carry balances from time to time? If the latter, a low interest rate will be important. You’ll also want to understand whether the cards you are interested in are available based on your credit scores.

Time Saving Tip: Check out Nav’s business credit card marketplace if you need help choosing a business credit card or signup for a free Nav account and get matched to credit card and financing offers based on your credit.

  • 3 Apply for your new business credit card!

These applications usually ask for basic business and personal information such as your name and date of birth, the name of your business, its address, and your EIN (or SSN if you don’t have an EIN). If you’re the company owner, you will likely be required to give your personal social security number as well. You’ll also need to provide information regarding the type of business you’ve started—the options being sole proprietorship, partnership, and corporation—along with the number of years you’ve been in business and a little bit about your industry.

If you’re a startup wondering how to get a business credit card, know that business credit card applications are going to require your personal household income information. Usually when you’re filling out your application, you’re asked to enter your business income for the previous year. Since you didn’t have a business income last year, your creditor will have to look to your personal household income when making their decision.

  • 4 Sign the business credit card application.

This should be done by of one of the decision-making parties of your company. If you’re the only decision-making party of your company, so much the better. Keep in mind that most of these cards will require a personal guarantee on the part of the applicant. That means if your business does not pay the debt, you will be personally responsible.

A final note: The name “business credit card” is somewhat misleading. It’s more accurate to think of it as a small business credit card, because you can apply for one even if you don’t own an established business. Small businesses take many forms: the successful mom-and-pop bakery down the street qualifies as a small business, but so does the YouTube channel whose owner reviews video games as a hobby and charges a small subscription fee to her viewers. In the case that the YouTuber is a sole proprietor without an EIN, she would use her SSN to apply.