Frequently Asked Questions
Alternative lending is a broad term used to describe the wide range of loan option available to consumers and business owners outside of a traditional business loan.
These alternative options are most commonly used when an individual or business owners cannot obtain traditional bank loan for any number of reasons or they are looking for unconventional loans which are generally not offered by traditional banks.
Interest rate (APR) – Is usually much higher than what a borrower can get from a Traditional lender.
Turnaround time – Usually faster than in traditional lending; decision is made online in few minutes and funding can be available within days, in most cases.
Cost and fees – Borrower have to pay a lot fees, which may include origination fees, Closing costs, down payment, etc.
Qualifying for a loan – Processing is more flexible, no business plan is required, and Borrowers with poor or less than perfect credit are eligible to apply.
There are the direct lenders and peer-to-peer lenders and they operate mostly online.
Some offer term loan and line of credit, while others specialize in unconventional lending such as invoice factoring or invoice financing and asset based lending, merchant cash advance or a combination of all of these.
In a nutshell, simply because they have been filling the gap in the lending industry and offering loans to small businesses even at a higher costs but at an accelerated pace. These are loans that the traditional banks have rejected or do not offer.
You don’t have to have a good or excellent credit score to apply for a term loan or line of credit from an alternative lender. A credit score as low as 550 can make you eligible.
No. Only if you are applying for a tern loan or credit line. Even then, they are quite flexible when this criteria is used in making lending decision, as compared to a loan from SBA lender. Small business owners with less than perfect or bad credit can qualify for a term loan or line of credit from an alternative lender. However, credit score is not relevant when you are considering invoice factoring or invoice financing.
Experian, Equifax and Transunion are the three major credit reporting bureaus.
You can find Experian and Equifax logo on our home page and click on any one of the two to get your credit score.
Yes. Most accommodate application from start-ups that have been in business 6 months to 2 years.
No collateral is required for term loan or line of credit.
This varies from lender to lender; some don’t even require a down payment at all.
Companies can improve their cash flow effectively by selling their accounts receivable to a factoring company. The factor waits for your A/R to be paid while
your company gets immediate cash. This ensures that the company has cash for expenses.
The U.S, Small Business Administration (SBA) provides a number of loan programs designed for creditworthy small business owners who may not be able to obtain a conventional loan or loan terms that meet their business needs. The U.S. SBA does not make loans, yet provides a guarantee for SBA loans made to small businesses by lending institutions that participate in the SBA loan programs.
SBA lenders credit score requirements vary according to the type of loan. However, it will be very difficult to get an SBA loan if you have a credit score below 620, and most lenders want to see a credit score between 700 and 800.
For SBA 7(a) loans, which is the most common type, the minimum credit score is 640.
SBA 7(a) Express loan, designed for small businesses that need small amount of loan (under $350,000), most people who qualify have a minimum credit score of 640.
For SBA/CDC 504 commercial loan, minimum credit score is 680. For SBA Microloan, offered by SBA authorized non-profit intermediaries, the minimum credit score is 620-640.
SBA 7(a) Express offers the fastest turnaround time of 36 hours or less and it’s ideal for a qualified small business who is looking for a loan of up to $350,000, and at a very reasonable time. So also SBA 7(a) Export Express, which also offer a maximum of $350,000 to exporters to finance orders and other related export activities. Decision is made by the lender in 24 hours.
Yes, but SBA 7 (a) loan is not fully collateralized. Loans under $25,000 do not require collateral. However, for loans between $25,000 and $350,000, SBA allows lenders to use their existing collateral policy.
What is a business plan and how do I get one?
A business plan is a written document that describes in detail how a business is going to achieve its goals. A business plan lays out a written plan from marketing to financing and operational view. Not only SBA lenders require a business plan from small business borrowers; all traditional lenders require the same. We do not write business plan but we can refer you to one of the leading companies in the U.S that provides such service.
10% – 20% down payment is usually required.
No. Not for SBA Microloan, SBA CAPLines, SBA Export and SBA Disaster loans.
We can let you determine which of the options is right for you based on your response to the pre-qualifying questionnaires. We will be able to guide you in making the best decision for your business.
There are many lenders available online. Each varies in terms of lending, amount, credit score requirement, length of payment, interest rate (APR), origination fee, closing costs, down payments, other fees, geographical lending areas, etc. Collecting and putting these information together to develop a comprehensive comparative analysis of each lender, can be a daunting task and time consuming for a small business owner. That is why it’s very important to engage the services of a professional like us, to get the job done for you.
Having a good credit score by itself does not guarantee that you will qualify for an SBA loan; other criteria are used in the underwriting process. If you meet the basic eligibility requirements but failed to qualify, we will review your situation and find out why you failed to qualify. If this can be corrected, you may possibly re-submit your application; otherwise, we may request to refer your application to an alternative lender if you so desire.
We work with many different alternative and SBA 7(a) lenders and it’s not possible to list them all on our website. However, if you are successfully pre-qualified for financing at the initial stage, the first lender that you will be referred to will be one in our network. It is only when your application failed to qualify for funding, that’s when you have the option of seeking financing through another lender who may not be outside our network of lenders.
You can do so electronically by clicking on the link that you see in the email that will be sent to you.
If your project is not listed among the ones that the lenders are normally interested in funding, then your project is not likely to be eligible. However, if unsure, contact us by email or call for verification.
When you submit an Executive Summary to us for review, which is the first step to take, we will let you know if your project meets the basic requirements of the lender.
Unfortunately, our lenders restrict funding to certain countries based on their risk factors, such as political risk, currency stability, economic growth forecast, and so on. Project funding requests coming from any of those countries that has been determined to experience or is forecasted to experience any or all of these variables in the near future, will certainly not be considered for financing.
Please check with us by email or phone call to let you know the status of your country’s eligibility prior to sending an Executive Summary.
This varies by lender and will be determined by various factors including quality of the project, country risk level, amount of equity contribution, etc. In general, rate starts at 7.5% fixed. This is generally a lower than the rate a borrower will receive in his/her country, which is usually range in the double digits.
The minimum and maximum borrowing limit depends on the lender. One has a minimum of $1 million, while other lender has a minimum of $6.5 million. Maximum in all cases is $1 billion.
This also varies by lender. Some require that the project being funded,should be used as collateral; others may require the project and /or other reasonable assets,to be used.
This will also vary by lender. While the standard requirement is 10%, other lenders may base the requirement on the quality and the outcome of valuation of the property in question.
This varies by lender, but may not exceed 15 – 20 years.
In general, there are due diligence costs, legal fees, etc., and closing costs. These are some of the standard costs. The actual amounts vary by lender and will be disclosed to the borrower during the processing period.
No. Theses costs are separate and serve different purposes but they are not tied to the loan. The due diligence costs, legal fees, etc., are the fees incurred by the borrower while the lender or a third- party assigned by the lender to conduct due diligence and verify every information about the borrowing organization, so as to detect any unfavorable information that may jeopardize the loan repayment, if granted to the borrower. Closing costs are the standard cost after a loan has been approved and are usually paid at the time that the loan commitment papers are signed, in most cases.
The funding process for international projects usually takes much longer time than funding request processed domestically. However, from the time that the borrower submits al the required papers and documents and the due diligence report is positive, the entire process may take between 2-3 months, as the case may be.