Small business owners have reached their limits when attempting to raise capital beyond friends and family. Their only option that they are aware of are banks, and more than not they are met with voluminous document requests, collateral requirements, and weeks (maybe months) of waiting just to get an answer. 85% of the time the answer is “no.”
Fortunately, an alternative lending market is available to business owners both small and large. Business revenue funding can provide you with working capital in less than 7 days.
What is Business Revenue Funding?
Business revenue funding is an advance or loan product provided by alternative “banks” that utilize different underwriting techniques and methods to arrive at a lending decision in less than 48 hours and can fund in less than a week. They have algorithms, like most banks, that use data that banks do not use. Social data, internet reviews, web sites, etc…. are used to help determine a lending amount and term. Business performance, cash flows, daily balances, industry type, number of monthly transactions, etc…. dozens and dozens of predictors most people would never think can help in determining whether or not to provide capital to a business. The internet and technology has allowed annalists and model builders to look at millions of pieces of data in just seconds/minutes to make lending decisions. Traditional banks still look mostly at FICO scores. Alternative lenders will staff rooms of IT professionals that help build an infrastructure enabling them to make capital offers to businesses in less than 24 hours. Imagine filling out a one page application and providing only a few bank statements and ownership documents and receiving a lending decision in hours.
Are Business Revenue Funding Products Expensive?
Business revenue funding products are expensive. The small businesses they approve are all considered high risk. Just about any small business that is declined by a bank for a loan is considered high risk. Also, take into account that these are unsecured and require no personal guarantees. With that said, rates will run between 15% and 50% (average being 35%) with repayment terms of 3-18 months (6 months being the average). Now, because of the risk the repayment is performed daily M-F via either a bank ACH or via your credit card proceeds. The alternative lenders get daily payments to help mitigate risk. What this means for the small business owner using this business revenue funding is that they need to use the funds they get immediately otherwise they end up repaying their loan with the loan proceeds that doesn’t do anyone any good. These loans are for short term fixes like inventory, payroll, taxes, expansion, supplies, new hires or just plain working capital.