Business Loan Solutions Empowering Your Business Growth with Tailored Financial Support

It depends. Some lenders can be more difficult to get approved for. For example, banks and SBA loans tend to feature the strictest requirements. However, online lenders are more lenient and more likely to offer a wider range of small business loans.

It’s best to apply for small business loans strategically. You should apply with both bank and non-bank lenders to get a general understanding of what your business qualifies for and, more importantly, ensure you have options to choose from.

Most lenders will need to see a 580 to 620 credit score at a minimum to approve a business for a small business loan. Banks and credit unions are a bit more restrictive, with a 700+ minimum FICO requirement.

Some non-bank lenders work with businesses with poor credit histories. However, these lending institutions often impose higher interest rates as a trade-off.

Small business loans typically don’t feature a set minimum amount, although many lenders will only work with businesses seeking $10,000+. If you’re seeking capital below a lender’s minimum funding amount, consider using business credit cards, personal investments, or fundraising to achieve your goals.

There’s no limit to how many times you can apply for small business financing. You can even apply for additional loans while you pay off your original one. Some lenders, though, see a borrower with multiple loans as inherently risky, so you might find it challenging to secure financing if you have existing loans.

Unsecured loans have no collateral requirements, whereas secured loans are backed by collateral. Secured loans are generally easier to obtain because the collateral offering mitigates some of the lender’s risk. If the borrower were to default, the lender can seize the collateralized asset and recoup some of the lost cost.

Unsecured loans are usually preferred, but the robust eligibility requirements won’t work for every borrower. However, if an unsecured loan is what you need to achieve your goals, it’s possible to negotiate a compromise that satisfies both parties.

It’s not very hard to get business equipment financing. In fact, in many cases, it’s actually easier to get approved for business equipment financing than other types of loans. All you need to qualify is a FICO score of at least 1+ year of business history and at least $500,000 in annual revenue. 

With business equipment financing, the materials you’re purchasing will act as collateral for the loan. This gives lenders an extra layer of security – which in turn improves your approval odds. 

National has business equipment financing options for all types of businesses, and you’ll find it’s easier to get approved compared to traditional banks. Plus, the application process is fast and straightforward. There’s no need to go back and forth collecting numerous documents. You can simply upload your paperwork into the online portal with just a few clicks. National’s application process for business equipment financing is designed to be completed in about a minute. Funding times for your loan can be as fast as 3 days or less.

You’ll typically be able to finance used equipment for 1 to 5 years. If the equipment you are purchasing isn’t too expensive, you may be able to get a shorter-term loan. 

The repayment term on your business equipment loan is important because it represents how long you’ll be in debt as well as the overall cost of financing. Longer-term loans feature lower monthly payments but can be more expensive over the loan’s lifetime. Shorter-term loans have higher monthly payments, but you’ll be in debt for less time and save on interest fees overall. 

Still, many businesses will select a repayment term based on the monthly payment amount they can afford. Make sure to consult with one of our Business Financing Advisors to help you understand which would work best for your scenario.

Yes! It is possible to secure startup equipment financing even with bad credit. You’ll need to have at least 6 months of business history and $500,000 in annual revenue in order to bypass credit score requirements. 

National fills in the gaps where banks and traditional financing options fall short – especially when it comes to financing startups. With a FICO score requirement of at least 650, National is inherently more flexible. But even if your credit score is lower than 650, you may still be able to access financing solutions catered to your needs.

There are several types of equipment financing available, so it’s necessary to identify a business’ needs as well as each lender’s eligibility requirements and costs. Evaluate these factors when choosing an equipment financing loan.

Business Needs

Before choosing an equipment financing loan, evaluate why the financing is necessary and whether the equipment will help the business improve efficiency or otherwise add to its bottom line.

Ultimately, each business’ needs dictate the type and size of equipment financing loan it needs. In some cases, equipment financing may not be the best option, or purchasing new equipment may not be a savvy business decision.

Eligibility Requirements

It’s necessary to look at eligibility requirements when comparing equipment financing so you know whether you’re likely to qualify for a loan at a competitive rate. Eligibility requirements vary by lender, but equipment financing companies generally consider these eligibility factors:

Cost

Equipment loan borrowers generally pay interest rates spanning anywhere from 2% to 20%. However, equipment financing also may come with application fees and origination fees that add to the overall cost. Business owners should expect to pay origination fees equal to around 3% of the total loan amount, although this cost can vary from lender to lender.

Finally, most equipment financing requires a down payment of around 15% or 20% of the purchase price, though this number varies, and some lenders don’t require down payments at all.

When choosing an equipment financing loan, it’s best to compare providers based on the factors above.

Interest rates range from 7% to over 50%, depending on the lender you’re working with, the financial background of your business, and the economic conditions surrounding the transaction. Equipment financing rates mirror those of secured financing products, as the purchased equipment serves as collateral for the loan.

Equipment loans are generally longer term. Repayment ranges from 3 to 5 years on average, but some lenders offer prepayment discounts, which allow you to shorten your repayment schedule considerably.

A term loan is a set amount of money given to a borrower from a lender, where the borrower repays the amount on an agreed-upon schedule. You have a start date, where the funds are deposited into your business bank account, and an end date, where you’ve paid off all the principal and interest.

The borrower can repay the amount before the end of the term and potentially reduce their cost of capital, depending on the lender they’re working with. They’re used for inventory purchases, business expansions, remodels, and working capital, amongst many other business purposes.

There’s essentially no difference – Term loans are a type of loan where the borrower has a time period in which they make regular payments toward the principal and interest of the financing. If

Other types of financing are similar to term loans, but none of them are as basic. For example, revenue-based financing provides a lump sum of capital, much like a term loan, but the repayment periods are generally shorter, and approvals are based on profitability.

All term loans have the following characteristics in common:

• Lump sum payment
• Consistent repayment schedule
• Established start and end dates
• No equity transactions
• Potential to save on the cost of capital with early repayment
• Late payments/defaults damage your business’s creditworthiness and credibility with the lender

If you’re looking for a straightforward financing method, you should explore term lending and the options available to you.

Generally, yes, but it depends on the type of loan. Some loans, like equipment financing, must be used for specific purposes—in this case, to purchase equipment. Others, like general short-term loans or lines of credit, can be used for a variety of expenses including payroll, materials, and other operational costs.

Repayment terms can vary widely based on the type of loan:

• Short-Term Loans might require repayment within 6 to 18 months.
• Long-Term Loans could have terms from 1 to 10 years, depending on the lender and loan purpose.
• Lines of Credit are typically revolving, with payments based only on the amount drawn.
• Equipment Financing terms are usually aligned with the lifespan of the equipment but are generally capped at 5 years.
• Invoice and Revenue-Based Financing involve repayment terms set as a percentage of future revenues or receivables.

Yes, as with any form of borrowing, there are risks involved:

• Debt: Taking on too much debt can strain your financials and impact your ability to operate.
• Collateral: Some loans require collateral, which means you could lose your assets if you fail to repay.
• Interest Rates: Higher rates can increase the cost of borrowing significantly, especially with short-term loans.

Choosing the right type of contractor loan involves assessing your business’s specific needs, financial health, and the project at hand. Consider factors such as the amount of funding needed, how quickly you need access to funds, the loan’s cost, and the flexibility of repayment terms. Comparing different types of loans and lenders can also help you find the best fit.

Yes, it’s possible to get a contractor business loan with bad credit, but your options may be more limited. Some lenders specialize in lending to businesses with less-than-perfect credit and may focus more on your business’s revenue and potential rather than just your credit score. However, expect higher interest rates and fees as a trade-off for the increased risk the lender is taking.

The time frame can vary widely depending on the type of loan and lender. Some forms of financing, like short-term loans or lines of credit, can provide funds in as little as a few days. More complex loans, such as long-term loans that require collateral, may take several weeks to process.

Yes, Small Business Administration (SBA) loans can be used for construction-related expenses. These loans are often utilized by contractors for acquiring land, purchasing new equipment, or building new facilities.

 SBA loans are known for their competitive terms, including low interest rates and longer repayment periods, which can be particularly beneficial for large-scale construction projects. However, obtaining an SBA loan involves a stringent approval process, including detailed scrutiny of the business’s financials, a solid business plan, and sometimes collateral.

Subordinated debt offers an avenue to expand capital facilities without refinancing or taking out a new loan entirely. Since it’s subordinated, it won’t interfere with collateralized assets or senior facilities.

It allows for overadvances when senior lenders are unwilling to do so. For ABL and factorers, it offers a fast and efficient way to cover clients’ capital gaps and manage balance sheets.

Although subordinated debt often comes with higher interest rates, the benefits often outweigh the cost. Given the current interest rate environment, subordinated debt often presents a comparatively affordable option for capital funding.

A subordinated loan, also known as subordinated debt, junior debt, or junior security, is a form of borrowing where repayment is prioritized after the settlement of all primary loans, assuming there are sufficient remaining funds. In contrast, primary loans are classified as senior or unsubordinated debt, indicating their higher priority in repayment over subordinated loans.

Subordinated debt is a form of debt financing, meaning there is no equity transaction between the borrower and the subordinate lender. The financing doesn’t dilute stockholder value.

Senior debt describes the funds the tier 1 lender provides in the transaction. The senior lender usually enters the equation before the subordinate lender, and the senior lender’s debt is paid before the subordinated debt in a default situation.

The main difference between the two is the priority in which each lender is repaid during a default or liquidation event. Debt with a higher priority over other forms of debt is always considered the “senior debt” in that scenario.

Debt is listed as a liability on any balance sheet. The order is as follows:

• Current liabilities
• Senior debt
• Subordinated debt

Subordinated funds won’t decrease the business’s equity, so there’s no dilution of ownership.

Subordinated debt is broken down into various types, ranked in order of repayment priority: high-yield bonds are at the top, followed by mezzanine debt (both with and without warrants), Payment in Kind (PIK) notes, vendor notes, and other debt obligations. A subordination scale can also depict this hierarchy, where high-yield bonds are the least subordinated, and vendor notes have the highest subordination.

Mezzanine debt is a hybrid form of financing that sits between secured senior debt and company equity in the capital structure. It’s subordinate to senior debt, entailing more risk but offering greater potential returns. Mezzanine financing often blends debt and equity characteristics with regular interest payments and an option to convert into equity under certain conditions.

Asset-backed securities frequently feature subordinated tranches, which rank lower in priority compared to senior tranches. These securities are financial instruments supported by asset pools, like loans, leases, credit card debts, royalties, or receivables. Tranching these assets divides risks and characteristics, attracting a wider investor base due to differentiated risk profiles.

The predominant form of mezzanine debt is unsecured, subordinated debt, making them fundamentally similar in nature. However, the principal distinction lies in the fact that mezzanine debt typically involves debt paired with equity participation, a feature not commonly associated with subordinated debt.

Mezzanine debt can contain covenants, warrants, and other stipulations that can suddenly surprise business owners with a loss of ownership. For this reason, it’s recommended to explore alternative options to mezz debt before finalizing a contract.

Of all SBA loan products, microloans are the easiest ones to qualify for. Most lenders don’t require high FICO scores (575 on average), but you may have to offer collateral or a personal guarantee. Additionally, your business must operate for profit and be in “good character,” meaning the owner can’t have a criminal record with “dishonest” crimes such as fraud, burglary, or theft of any kind.

Instead of the traditional credit pull, the SBA leverages the FICO Small Business Scoring Service to determine a borrower’s eligibility, which doesn’t damage credit. Personally guaranteeing an SBA loan won’t show up on your personal credit report, either.

Entrepreneurs can leverage SBA loans for “almost” every business purpose. You can:

• Purchase land
• Inventory/supplies
• Raw materials
• Improve a property
• Working capital
• Equipment
• Payroll
• Construct buildings (up to 2)
• And more!

You can’t use an SBA Loan for investment real estate (to sell or lease), refinance existing debt that would “expose the SBA to a loss,” pay delinquent taxes, or relocate the borrower from a community where their departure would result in a significant increase in unemployment.

The SBA caps funding amounts at $5 million, although you can technically borrow up to $16.5 million. Through the SBA 504 loan program, eligible energy-efficient businesses or manufacturing projects can secure more than one 504 loan, up to $5.5 million each.