If you’re in need of a business loan, but your credit history is less than perfect, you may believe that you’ll have trouble finding a lender that will work with you. Fortunately, private loans for business is on the rise, and there are lenders who can provide revenue-based loans. Here’s what you need to know about these types of loans, how you can qualify, and what you can expect.
In most cases, when a business needs funds – either for startup, expansion, or a major purchase – it relies on one or more types of business loans. The most common is the traditional bank loan, in which the business owner borrows a set amount of money and repays it each month plus interest. For example, if a business owner were to borrow $40,000 over a period of five years, or 60 months, he or she would make payments equal to $667 monthly, plus interest per the lender’s terms. Although this works well for many businesses, there are some industries in which sales may slow down at certain times of the year, thus making it difficult to repay term loans with set payment schedules.
Whereas a traditional loan depends on your business plan and/or the owner’s personal credit history, a revenue-based loan is different. Lenders look at things outside of the business type and credit rating. They primarily consider things like time in business and the amount of revenue the business generates each month, which makes it easier for business owners to obtain the funds they need. The best part is that these revenue-based loans are repaid as a portion of the revenue the business generates, so when sales are slow, repayment scales to suit.
Qualifying for a revenue-based business loan is much easier than qualifying for a traditional loan, in most cases. In fact, through Thinking Capital, business owners only need to meet the following criteria:
If you can meet this simple set of guidelines, you can get the funding you need.
These flexible loans range in value up to well over a quarter million dollars, and if the business can meet all the criteria, the funds could be available in as little as 24 hours. Because there’s no traditional credit check and loan decisions are based on your revenue, interest rates and fees may be higher than with a bank loan. Often, business owners are able to decide for themselves how much of their daily sales will be used to repay the loan; amounts between 3% and 15% are not uncommon throughout the industry.
If you need a substantial sum of money, but you’ve been turned down in the past due to your personal credit history, there are other options available to you including bad credit business loans. A revenue-based loan is an option that considers your company’s sales as the primary factor, which makes getting the funds you need simpler, easier, and faster.
Advice and research for Canadian small businesses from our expert team
