Monthly Archives: March 2017

Giving the Best Alternative Loans to the Credit Line

Kabbage’s automatic online approval process and easy repayment terms set it apart from many of its competitors. Here is a breakdown of why Kabbage is our best pick.

While some alternative lenders have you go through a lengthy application and underwriting process, application and approval for Kabbage is completed almost instantly, and totally online.

To get started, you provide some basic information about your business, including the following:

  • Business name and address
  • Company structure
  • Industry type
  • Month and year established

Instead of sending in financial statements, such as tax returns and debt structures, you link your application to a business checking account or other online service that you use, such as QuickBooks or PayPal. Kabbage’s platform automatically and instantly reviews the data on those sites to determine if you meet Kabbage standards for a loan. The company looks at this information to determine your average monthly revenue, time in business and transaction volume, among other things. 

The banks and online services you can connect with are Chase, Bank of America, Wells Fargo, PNC, U.S. Bank, Regions, BB&T, TD Bank, USAA, Citibank, Capital One, SunTrust, Navy Federal, BBVA Compass, PayPal, Authorize.Net, Stripe, Sage, Square, eBay, Shopify, Amazon, Etsy, Intuit QuickBooks and Xero.

As part of the approval process, Kabbage allows you to link your application to your bank account or a business service you already use. Kabbage’s platform automatically reviews the data to determine your eligibility.

After conducting a quick analysis of your data, which also includes a personal credit check, Kabbage quickly lets you know if you’ve been approved for a line of credit and, if so, for how much. The process typically takes only several minutes to complete. Once approved, you can receive the loan instantly. You can also link additional services to your account to potentially increase your line of credit.

Since every business has a different financial makeup, it’s impossible for us to say exactly what it will take to be approved for a line of credit with Kabbage. Your financials, such as monthly revenue, transaction volume and credit score, play a large role in not only whether you get a loan, but also for how much.

However, in order to even be considered, there are two minimum requirements you need to meet. You must …

  • Have been in business for at least 12 months.
  • Have a minimum of $50,000 in annual revenue or $4,200 per month over the last three months.

What separates Kabbage from many other online lenders is the minimum amount of revenue the company requires before it will consider you. For many of the other lenders we looked into, the minimum revenue requirements were at least double what Kabbage requires.

Kabbage also looks at your credit score when deciding whether to give you a loan and determining the term rate you will receive. The representatives we spoke to said they typically look for credit scores of at least 600. However, there have been instances when they have approved borrowers with credit scores as low as 550.

A Kabbage line of credit works more like a credit card than a traditional loan: You use only what you need and pay fees on only how much you actually use. For example, if you’re given a $20,000 line of credit but only use $10,000, you pay fees only on the $10,000. With Kabbage, you can draw money against your line as often as once per day.

The company offers lines of credit up to $150,000. Each draw against your line of credit is considered a separate loan. Each time you take out one of those loans, you have six or 12 months to pay it off. A minimum loan of $10,000 is required for a 12-month loan term.

With Kabbage, you pay a set monthly fee each month, plus an interest fee. If you have a six-month loan, you pay one-sixth of the loan back each month, plus interest fees that can range from 1.5 to 10 percent.

Other than the monthly fees, there are no added costs for a Kabbage line of credit. Nearly all of the other lenders we considered charge at least an additional origination fee.

To make the payment process easier, Kabbage combines all of your payments into one due date each month. Additionally, there are no early payment penalties, which some of the other lenders we considered charge.

Kabbage does not impose any limitations on what you can use your line of credit for. How you use the money is totally at your discretion.

To manage their line of credit, borrowers can use a mobile app. With the app, you can draw money from your line of credit, make loan payments and view your transaction history.

We were pleased with the level of customer service we received from Kabbage. To test the type of support you can expect, we called the lender numerous times, posing as a business owner interested in a line of credit.

Each time we contacted the lender, helpful representatives were immediately available to answer all of our questions. Rather than grilling us on what type of business we had or how much money we needed – which many of the other lenders we called did – the Kabbage representatives made sure all of our questions were answered first.

The support agents we spoke to thoroughly answered all of our questions about the lines of credit, how the repayment process works and who qualifies. By the end of our calls, we had a clear understanding of how the Kabbage loans work.

We were also impressed with Kabbage’s online help center. It features the most extensive FAQs section of nearly all the lenders we investigated, answering questions on payments, fees, loans, applying and security.

Kabbage offers an extensive help center with valuable FAQs and videos that explain the entire lending, application, approval and repayment processes.

You can contact the Kabbage customer support team via phone, email and a form on the company’s website.

One downside of Kabbage is the short time you have to pay back your loans. While the company recently started offering a 12-month repayment term, not all borrowers qualify for that option. Those who don’t have only six months to pay back their loans. If you are looking for longer loan terms, consider our best alternative lender for working capital loans, Fundation.

We also found a number of complaints about Kabbage that were filed with the Better Business Bureau. According to the BBB website, as of August 2017, there were 42 complaints filed against Kabbage over the past three years. Of those, only six were resolved to the satisfaction of the complainants. Although Kabbage addressed the other 36 issues, either the consumer did not accept the response or the BBB has not heard back from the consumer as to their satisfaction.

The Best Alternative Loans for Bad Credit Loans

OnDeck has low credit score requirements, a fast funding process and excellent customer service. Here is a breakdown of why it’s our best pick.

While a poor credit score will eliminate you from consideration with many alternative lenders, it doesn’t with OnDeck. While the majority of OnDeck borrowers have a credit score of at least 660, the lender considers everyone with a credit score above 500. This is one of the lowest minimum credit scores we found among all the alternative lenders we analyzed. Most of the other lenders we considered require credit scores between 550 and 600.

However, the low credit score requirement doesn’t mean OnDeck approves loans for floundering businesses. It just means that instead of using credit scores as a primary factor in lending decisions, the company focuses on how businesses perform financially in terms of monthly revenue and cash flow. To be considered for a loan, you must have been in business for at least a year and have at least $100,000 in revenue over the past 12 months.

Of all the alternative lenders we looked into, OnDeck had one of the quickest application and approval processes. You can fill out an application in just a few minutes by going online or calling the lender and speaking to a loan specialist, who will fill out an application for you.

OnDeck asks for basic information about your business – name, address, tax ID number, years in operation and legal entity – and requires you to provide your estimated gross annual revenue and average bank balance.

After you submit the application, OnDeck conducts a soft credit check. This is beneficial to those with bad credit, because it doesn’t lower your credit score like a hard inquiry does. Many of the other lenders we examined only conduct hard credit checks.

OnDeck also looks at your last three months of bank statements. You can provide these in two different ways. One option is to electronically authorize your bank to send OnDeck the information via a one-time import. This is the recommended option because it streamlines the approval process by quickly allowing OnDeck to review the data.

Providing your banks statements is ne of the final steps of the OnDeck approval process. You can do so by allowing your bank to send the statements electronically to OnDeck, or you can send, email or fax them on your own.

The other option is to send hard copies of your bank statements via mail, email or fax directly to OnDeck. The downside of this option is that a loan specialist needs to review the information manually, which can lengthen the time it takes to get approved.

Depending on how the bank statements are sent, approval can be completed in just a few minutes, with funds deposited into your account within 24 hours. This process was significantly faster than it was with most of the other lenders we researched, which took anywhere from three to five days to approve loans, and five to seven days to provide the funding.

Loan Terms

OnDeck offers both term loans and lines of credit. What most impressed us about OnDeck was the transparency of its loan terms. Unlike other lenders, which seemed to want to hide the details of their loan programs, OnDeck clearly defines all of its loan terms on its website.

OnDeck offers term loans up to $500,000. These are fixed-rate loans, with payments remaining the same over the life of the loan. The lengths of the loans range from three to 36 months. Most of the lenders we evaluated offer loans of only up to 12 months.

Although OnDeck does want to know how you plan to spend the money, there are no restrictions on what you can use the loans for. OnDeck loans are typically used for a variety of purposes, including working capital, new inventory or equipment, hiring of employees, expansion, remodeling, marketing, and cash-flow management.

OnDeck’s interest rates have a total interest percentage, which is the total amount of interest you pay as a percentage of your loan amount, including any fees, as low as 9 percent, with average rates of 23.6 percent. It charges a one-time origination fee of 2.5 to 4 percent.

You pay back OnDeck loans on a daily or weekly basis, with the same fixed amount automatically debited from your bank account. Having the money automatically withdrawn helps with your cash flow and prevents you from missing larger monthly payments. Not all of the lenders we looked into offer this option.

Lines of credit up to $100,000 are also available from OnDeck. Interest rates for lines of credit are as low as 13.9 percent, with average rates at 34.1 percent. There is also a $20 monthly maintenance fee. However, that is waived if you take out $5,000 on your first draw.

We were pleased with the customer service we received from OnDeck. To test the company’s customer support, we called the lender multiple times, posing as a business owner interested in a loan.

Loan specialists immediately answered each of our calls, and, instead of quickly trying to sell us on a loan, they took the time to answer all of our questions. During all of our calls, loan specialists never rushed through their answers. They all took the necessary time to thoroughly discuss each question. Many of the other lenders gave one- or two-word answers and generally seemed disinterested in making sure we had a clear understanding of how their loans worked. By the end of our calls to OnDeck, we had a clear understanding of its loan programs.

OnDeck also offers live chat support. We used this service several times to further inquire about various aspects of the loans. The live support answered all of our questions immediately and in just as much detail as we received over the phone.

The loan specialists from OnDeck are available via phone, live chat and email Monday through Saturday. This is the only lender we researched that provides support over the weekend.

The biggest downside of OnDeck is that it only offers secured loans. However, rather than requiring a specific value of collateral, OnDeck loans are secured by a general lien on the assets of the business and backed by a personal guarantee. This could be a turnoff for some businesses. If you don’t want a lien placed on your business, we would encourage you to consider our second-place winner in this category, SnapCap. This lender offers unsecured loans, a minimum credit score requirement of 500 and an easy, one-page application.

We also found a variety of complaints about OnDeck that were filed with the Better Business Bureau. According to the BBB website, as of August 2017, there were 39 complaints against OnDeck over the past three years. Of those, nine were resolved to the satisfaction of the complainant. All of the remaining complaints were addressed by OnDeck, but the complainant did not accept the response or the BBB has not heard back from them on their satisfaction. It’s important to note that most of the alternative lenders we reviewed had some criticisms levied against them with the BBB. Despite the complaints, OnDeck is an accredited member of the BBB, with an A+ rating.

Another potential negative for businesses with bad credit using OnDeck is the minimum required credit score. Although 500 is the lowest minimum of any of the lenders we examined, it might still be too high for some businesses. The only lender we found that doesn’t factor credit score into its approval process is PayPal. This lender is our alternative best pick for best merchant cash advance. PayPal might also be the best option for online businesses already using the service to collect funds.

Giving the Best Alternative Loans for Startup Loans

After conducting much research and analysis, we recommend Accion as our 2017 pick for the best alternative lender for startup loans. To understand how we selected our best picks, you can find our methodology, as well as a comprehensive list of alternative lenders, on our best picks page.

Accion is one of only a few alternative lenders to offer affordable loans to startup businesses, and its customer service was among the best we found. Here is a breakdown of why it’s our best pick.

Whereas most alternative lenders don’t work with startup businesses, Accion, a nonprofit microlender, has a loan program specifically for businesses that have been open for less than six months. Most of the other lenders we analyzed require businesses to be open for more than a year to even be considered for a loan.

Because startups don’t have an established track record for lenders to evaluate, Accion assesses both business and personal finances. The company considers the business’s cash flow, as well as personal income from your job if you have one, when determining whether to approve you for a loan. The lender needs to see proof that one of those two streams will allow you to repay the borrowed money.

Accion is unique in that it evaluates businesses differently based on geographic location. Each state has a different set of minimum requirements for applicants to be considered for a startup loan. These are some of the more common requirements:

  • A minimum credit score of 575
  • Sufficient cash flow to support monthly loan payments
  • No bankruptcies in the past 12 months or foreclosures in the past 24 months
  • No late payments on your rent or mortgage in the past 12 months
  • Proof of income
  • Be current on all of your business and personal bills
  • A business plan that includes a budget and cash-flow projections
  • Collateral – such as real estate, a vehicle or business assets – for the loan

Remember that these are only minimum requirements. Each business and owner has a different financial makeup, so it’s impossible for us to say exactly which businesses will qualify.

Because startup loans are riskier than those for established businesses, there is an extensive application and approval process. You start by filling out an online application, which asks a variety of questions about you and your business, including the following:

  1. Whether you own or rent your business location
  2. What types of bank accounts you hold for your business
  3. How many years of education you have
  4. How long your business has been open
  5. How long your business has been in its current location
  6. Your business’s legal structure
  7. Total monthly personal income and expenses
  8. Total monthly business revenue and expenses
  9. Total liabilities
  10. Total value of the business and personal assets you’ll use as collateral
  11. What you will use the money for
  12. If you have merchant cash advances
  13. If you have received business consultation services
  14. Type of financial records kept
  15. Business assets
  16. Current number of employees
  17. Future number of employees

Accion has a fairly extensive online application that asks a variety of questions about yourself and your business. It takes roughly 15 minutes to complete. After you are finished, a loan officer will contact you to walk you through the rest of the process.

An Accion loan officer reviews the application to determine if you’re a good loan candidate. If you get initial approval, you’ll then need to provide proof of the information submitted in your application, such as revenue, your business plan and cash-flow projections.

The loan officers review all of these documents to make a final determination on whether to approve you for a loan and, if so, for how much. Those who aren’t approved are given specific reasons why, along with advice on what they can do to improve their chances in the future. Typically, you’re eligible to reapply within six months.

In all, the loan application and approval process takes an average of about one month. Although this is much longer than many other alternative lenders’ processes, it is still shorter than the traditional bank loan process.

In addition to the minimum requirements, Accion loans carry different terms based on location. Each state has a different maximum startup loan amount, ranging from $10,000 to $100,000. Arizona, Colorado, Nevada, New Mexico and Texas have a $100,000 limit, while Illinois and Indiana have a $20,000 limit. Every other state has a $10,000 limit.

Although these amounts vary greatly, all are more than the amount that many of the other alternative lenders we examined offer to startup businesses. Most of the other lenders we looked into that work with new businesses offer loans of just a few thousand dollars.

There is a lot of flexibility in possible uses for Accion startup loans. While the lender does want to know what you will use the money for before approving you, there are no set restrictions on those uses. The loans can be used to purchase inventory, buy or lease equipment, hire employees, pay for professional expenses, or finance any other startup costs.

Although the interest rates may vary, most of Accion’s startup loans have annual percentage rates starting at 10.99 percent. This is significantly lower than the APRs on loans from many of the other lenders we considered, which have starting rates between 20 and 30 percent.

In addition to the interest rate, a few other fees may apply, depending on the state in which you live. These fees include closing costs of 3 to 5 percent and a $135 processing fee that’s applied only to closed loans. One big difference between Accion and other lenders is that with this loan, you also need to put up collateral, which is typically real estate, a vehicle or other business assets.

Loans are repaid on a monthly basis over the length of the loan, which can range from six to 60 months. To help ensure that you pay on time, Accion gives you the option of having the money automatically debited from your account.

We were incredibly impressed with the level of customer service we received from Accion. To test the level of support, we called the company several times, posing as a business owner interested in a startup loan. Most of the time, our call was answered immediately by a representative ready to answer our questions. There was one time when we had to leave a voice message for someone to call us back.

Overall, the Accion representatives were much more attentive to our needs than many of the other lenders we examined. Instead of focusing on determining whether we were a good loan candidate, like most of the lenders we contacted did, Accion listened to our questions and answered them thoroughly.

By the end of our calls, we had a clear understanding of how Accion startup loans work, including available loan amounts, the minimum requirements to be considered for a loan, the type of collateral needed, how the application process works, how long it takes to be approved and how you pay back the loan.

It was obvious from our calls that Accion places a big emphasis on helping small businesses. It was refreshing to speak with a lender that seemed more interested in our well-being than in how much money it could make off of us.

We were also pleased with the amount of detailed and helpful information on Accion’s website. You can select the state you live in to see the exact loan types and terms available in your area. There is a comprehensive FAQs section, as well as a library of tips, articles and videos to help you grow your business.

Accion has an entire resources section devoted to helping small business grow and succeed. The section includes a variety of tips, articles and videos.

Accion representatives are available by phone or email Monday through Friday from 9 a.m. to 5 p.m.

Accion’s biggest downside is that the application and approval process is significantly more detailed than those of many other alternative lenders. The application is more comprehensive, borrowers need to provide more physical documents, and the entire process is much longer. While it typically takes at least a month to get your loan with Accion, many other lenders we investigated provide funds in less than five days. The collateral for Accion’s loans could also be a problem for some businesses.

If you want a simpler and faster application process, we would encourage you to consider our second-place winner in this category, CAN Capital. This lender provides loans to businesses that have been open for at least two months, doesn’t require any collateral, has an easy online application and makes funds available in as little as two days. However, to qualify, your business must have a yearly gross revenue of at least $150,000. In addition, with CAN Capital, you must be prepared for higher interest rates and smaller loan amounts.

Another potential negative of Accion is that its startup loan programs differ by state, which could be confusing and frustrating for businesses that could qualify for loans in some states but not the state in which they are located. Another downside is the added fees. Although most lenders have an origination fee, they don’t charge borrowers just for filling out an application, as Accion does.

How to Create a Positive Workplace

The power of positivity is something we hear and speak of quite frequently. But how often do we practice what we preach?

Because negativity can spread like the flu throughout an office, you should focus on ways to restore energy and passion in your workers. Learning to see the sunny side of a situation can save employees from anxiety and burnout.

Don’t allow a few letdowns to hurt your company’s overall culture and performance. Chris Haroun, founder and CEO of Haroun Education Venturesand a Udemy instructor, outlined three tips for achieving a positive workplace.

When hiring new talent, you should focus on more than just an applicant’s skills, experience and qualifications. Personality is a major factor to consider, and a worker’s character should complement the company’s values.

“One bad apple can spoil an entire firm’s culture and productivity,” said Haroun.

He noted that it’s important to hire people who will strengthen your company’s productivity and culture. You’ll want a team player who is willing to tackle any problem that might surface – and can do it with confidence. Rather than backing down in the face of adversity, your employees should push forward and find ways to make it through any situation. Note these attributes from the start to avoid recruiting toxic employees.

Your company culture is crucial to retaining motivated, positive talent. To boost productivity, commend your workers for their performance and acknowledge their success among their colleagues.

Employees will want to impress their company, and healthy competition is often necessary in the workplace. This will increase their confidence and encourage workers to support one another while working hard on their own tasks.

However, if there is an issue with an employee’s work, take them aside individually to discuss it.

“There is nothing more demeaning and destructive to a corporate culture and productivity than being criticized in front of your peers,” said Haroun.

Don’t gossip about a mistake a worker made or condemn them in front of their peers, he added. All that will do is embarrass or anger them, which will hurt their performance even more. You are their leader; focus on building them up rather than tearing them down.

There is good in every situation – don’t forget to look for it. Even in the most seemingly impossible scenarios, you can still turn bad days better by focusing on the bright side of the situation.

For instance, if someone quits or is fired, tell yourself that a more suitable worker can be hired to provide the company with unique insight that was lacking.

“Perception often becomes reality when it comes to workplace challenges,” said Haroun. “Rather than seeing a negative situation as a weakness, see it as an opportunity to turn the weakness into a strength.”

Should you find yourself feeling anxious or pessimistic, look for one positive outcome of the situation at hand, Haroun added. Give yourself an opportunity to see the light by remembering to look up.

“If you disagree, then think about how many incredibly successful entrepreneurs have a negative attitude,” he said. “I can’t think of any.”