A business cash advance, also known as a merchant cash advance (MCA), is a financial product that is fast to underwrite and approve, and where credit score has little impact. It is not a loan. It is a purchase of a portion of a business’s future sales. Business owners get cash up front, and then repay their advance as a percentage of the sales they make over time, allowing them to get cash fast and expand their business without damaging their cash flows.
A cash advance is based on a business’s sales, as demonstrated in their most current three months of bank statements. That and a short application is all business owners need to submit in order to begin a relationship. Often, after the initial advance is over 50% repaid, they become eligible for another round of financing, with a higher approval, better rate, or both. Over time, they are able to grow their financing options along with their business.
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At Lince Capital, our loans are for businesses that don’t qualify for traditional loans or for businesses that have urgent short term cash needs. If you have the following situation, we could help.
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The Small Business Administration (SBA) is the government agency that partially guarantees SBA loans and was founded in 1953 to support small business owners across the United States. An SBA loan provides a guarantee to banks and lenders for the money they lend to small business owners. This guarantee protects the lenders interests by promising to pay a portion of the loan back if the business owner defaults on the loan. So when a business applies for an SBA loan, it is actually applying for a commercial loan through a bank or authorized SBA lender, structured according to SBA requirements with an SBA guarantee.
Essentially, SBA loans alleviate the risk associated with lending money to business owners. Read more about SBA’s role in the process.
In the past, small business owners had one option when looking to secure an SBA loan – walking into a bank. However, many businesses might not know that while one bank may say ‘no’, another bank will say ‘yes’ to the same potential borrower. Technology now gives loan-seekers the ability to find an SBA loan provider online that is a good fit. Because Lince Capital works with multiple banks with varying credit requirements on our platform, we’ve been able to secure loans for many applicants who were initially rejected by their local banks. What’s our secret? It’s no mystery – we have created strong partnerships where sophisticated software allows us to match borrowers with the bank most likely to approve and fund their loan. Don’t waste your time going from bank to bank. We will do it for you quickly and efficiently.
Cost of an SBA Loan
Now for the good stuff: How much is an SBA loan going to cost you? The news here is positive – it’s tough to beat the low interest rates and long repayment terms for these loans. SBA loans tend to be the least expensive financing available to small business owners.
SBA loans come with different rates depending on the lender you work with; however, the SBA establishes the maximum amount that can be charged for these loans. SBA loan interest rates are variable and depend on the loan amount:
As with other types of small business loans, there are several fees associated with an SBA working capital loan. You will be charged a one-time referral fee of no more than 2% the loan amount and a one-time packaging fee of no more than 2% the loan amount for non-commercial real estate loans. For working capital loans between $150,000 and $350,000 there is a 2.25% guarantee fee paid to the SBA. Bank closing costs for working capital loans typically add about another $450 and include standard bank fees, though additional 3rd party report charges may apply. Fees are deducted from loan proceeds so you get the net amount when your SBA loan is funded. Keep in mind that rates and fees are subject to change without notice at any time.
Even after fees, SBA loans are vastly cheaper than the majority of alternative financing and alternative lender options. Questions? Please visit our Q&A, or contact us today!
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