Getting funds to expand a small business can be a challenge. Banks are usually reticent to lend to green entrepreneurs, venture capitalists want to back businesses aiming to conquer the world. Credit cards are, at best, a short-term, high-interest solution.
Small business loans can be a good option, but what if you need the money quickly? Going with a lender that already knows the ins and outs of your business -- how and when you usually get paid, how much, etc. -- can get you working capital within a day of applying. Here are four popular choices:
QuickBooks Capital is available to anyone using QuickBooks for accounting. Loans run from $1,000 to $35,000 with payback over 3-6 months via weekly ACH withdrawals from your business checking account. Interest rates range from 10% to 26% annualized and all fees are specified upfront, at the time of application. Applying is usually fast because QuickBooks takes into account your data to make a decision -- a minimum of $50,000 in revenue over the prior year is required -- though you'll also have to pass a personal credit check. Make sure your personal credit score is at least 580 before applying.
Using Square to process eCommerce transactions is all that's required to qualify you for funds through Square Capital. The hitch: you can't apply, per se. Instead, the company evaluates your transactions history and makes offers that show up on the "capital" tab when you log into the Square dashboard. Accept an offer and get funds within a day if approved. (Celtic Bank underwrites all Square Capital loans.) The benefit? Like with QuickBooks Capital, repayment is automatic and processed as a percentage of new transactions (say, 11%) until the loan balance is paid in full.
If your small business has a rich sales pipeline and yet invoices can take 90 days or longer to be paid, Fundbox may be worth a look. The idea is simple: open an account and "clear" an invoice and you qualify to borrow money roughly equal to the amount of the invoice. Just don't go into the process expecting to clear $10,000 invoices. Fundbox will first want to see a history of your business collecting revenue before approving a big chunk of financing. Pricing can vary and payback terms are over 12 or 24 weeks, though you have the option to repay early.
While the company offers several options for obtaining funding, including traditional business loans and "bridge loans" — for owners who've applied for and are expecting to be approved an SBA-backed bank loan but who need working capital in the meantime. But for those who need cash fast, the company's Merchant Cash Advance program offers capital based on future credit card receivables. And like Square Capital, payback is based on a percentage of daily credit card sales. Approvals usually are granted within 24 hours with funds available within three days.
The key to using fast cash: have a payback plan
If there's a downside to these options, it's that they lack flexibility. Be aware of this fact and make a budget to ensure your repayments are made on time. Or, better yet, make payments early. At the very least, try to keep at least a month's worth of payments in your bank account so you aren't caught scrambling. The less interest you pay to expand, the more cushion you'll have when the unexpected occurs.
The best time to borrow to expand your business is never, if you can help it. For many eCommerce entrepreneurs that's not an option. Using your sales and income history to get the funding you need can be a worthwhile, low-hassle approach to get cash fast -- just be sure to go into the process knowing how and when you'll pay back every penny.