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What is a Bank Term Loan?

Here at OnDeck, we've been sharing a variety of small business financing options, from business credit cards to receivable financing to business equipment leases, and more. This week, we'll be talking about bank-term loans.

What is a bank term loan?
Bank term loans are issued by a bank with long-term repayment plans - typically extending beyond one year. These loans normally come with fixed interest rates, and they allow banks to distribute funds in a way similar to lines of credit. Business owners can use bank term loans to draw funds as needed and must pay a fixed amount based on the remaining balance.

What are the different types of bank term loans?
Long-term bank term loans can run for as long as 10 or 20 years, and they often require collateral. Bank term loans can also run for much shorter periods, however, such as two to three years. Banks often refer to the shorter-term options as intermediate term loans.

How long does it take to apply, and how much does it cost?
This depends entirely on your bank, but you can definitely expect the process to stretch across a number of weeks. After filling out your application, the banks will conduct a full credit analysis of both you and your business. They'll also analyze your holdings, revenue, cash flow and other financial factors. 

Why do businesses obtain bank term loans?
Bank term loans are used for many different reasons, and are entirely dependent on the business in question. Common uses include purchasing real estate, a new facility, or equipment.

What are the differences between a bank term loan and small business financing obtained from OnDeck?
A bank-term loan will be dependent on your personal credit, and banks tend to lend to more established businesses looking for large loan amounts. OnDeck, on the other hand, looks at a variety of factors – not just personal credit – to evaluate the health of a small business. With our streamlined loan application process, you can receive funding in as fast as one business day.

A bank term loan might be an option for you, but always make sure to fully evaluate what works best for your business.

 

OnDeck is a Google Ventures-backed company with an A+ rating with the Better Business Bureau. The company offers small business loans nationwide to over 725 different industries. For more information about OnDeck small business loans, click here.

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What Are Business Credit Cards?

Business credit cards are yet another tool that small businesses have at their disposal to help manage their financing needs.  But what are they?

What are business credit cards?
A business credit card provides access to a line of credit with a set credit limit in order to make purchases and withdrawals. Like a consumer credit card, it carries an interest charge if the balance is not repaid in full each billing cycle. Unlike a business line of credit, business credit cards do not require collateral.


What is the difference between a true business loan and a business credit card?
True business loans, like those offered by OnDeck, lend the full amount upfront so you can be flexible with your capital. True loans have fixed interest rates while the interest rates of business credit cards can fluctuate with little notice.

What does repayment look like?
Unlike traditional loans, business credit cards don’t have fixed repayment periods. The terms are dependent on the type of card you have, and can be flexible due to the often unpredictable nature of business cash flow.

Will it build my business credit?
Maybe, maybe not. Some business credit cards report repayment while others don’t.

What is eligibility based on?
Credit card issuers will consider both business credit history and the owner's personal credit history. They'll also be looking at your business's licenses, permits, and insurance policies.

Are business owners personally liable for the debts incurred via the cards?
Maybe. Liability depends on whether or not the card carries commercial liability (wherein the business itself is liable for all debts), or joint and several liability (where both the individual applying for the card and the business itself are liable for the debts). So, if you're applying for a business credit card, be sure to confirm what kind of liability you're signing up for – or you might end up in an arrangement that isn't beneficial to you or your business. 

Are business credit cards subject to the same regulations as consumer credit cards?
Small business credit cards are not regulated in the same way that consumer credit cards are. The interest rates on business credit cards can be raised and altered by issuers much more freely than can be done with consumer credit cards. 

Make sure when you’re considering the different options for financing that you take all these factors into account. Pick the financing that’s right for you.

 

OnDeck is a Google Ventures-backed company with an A+ rating with the Better Business Bureau. The company offers small business loans nationwide to over 725 different industries. For more information about OnDeck small business loans, click here.

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What is Receivables Financing?


Small business owners have many options when it comes to financing. We have previously discussed peer-to-peer lending, business lines of credit, and merchant cash advances, to name a few. So what is receivables financing?
 

What is receivables financing, and how much does it cost?
Receivables are defined as amounts owed to a business – essentially outstanding invoices – and are considered to be assets. In a receivables financing agreement, a business borrows against the amount of its outstanding invoices for cash.

For example, a company may receive an advance for 65-80% of invoices from bankers specializing in this type of financing. Once the invoice is paid off, bankers will pay out the existing balance after collecting a fee – which may be between 3-5% of the overall invoice.

 

What are the different types of receivables financing?
There are multiple forms of receivables financing that small businesses can engage in. The two main types are:

  • Invoice discounting: A loan taken out against the invoice assets. This allows a business to borrow funds against other funds that it is owed.
  • Factoring: When a small business sells its receivables to a third party in exchange for funds. This is an actual sale of the assets so the default risk transfers to the financing company.

What does the factoring process look like?

  1. An invoice is generated once a business sells a product to a customer.
  2. Rather than wait for payment from the customer, the business sells the invoice to a factoring company.
  3. The factoring company buys the invoice and remits a percentage of its total to the business, keeping the balance on reserve.
  4. The factoring company collects payment in full from the company’s customer.
  5. The factoring company returns the balance on reserve to the business, less a fee for assuming collections risk.

When do businesses engage in receivables financing?
Receivables financing makes sense when a business has structural cash flow gaps—for example, because they are required to pay for their goods (materials, inventory) well in advance of when they will receive payment for the cost of those goods.

Will it build my business credit?
Receivables financing will not build your business credit as third party buyers are not required to report back to credit bureaus.

What are the differences between receivables financing and OnDeck?

  • OnDeck offers true business loans up to $250,000. 
  • OnDeck reports payment back to credit bureaus, so our loans build business credit.
  • OnDeck considers cash flow, time in industry, and other factors when assessing a loan. A lender in receivables financing decides to extend credit to a business usually based only on the receivables assets.

When considering the different types of financing available for your business, make sure to evaluate the costs and benefits of each option. 
 

OnDeck is a Google Ventures-backed company with an A+ rating with the Better Business Bureau. The company offers small business loans nationwide to over 725 different industries. For more information about OnDeck small business loans, click here

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What Is Peer-to-Peer Lending?

There are numerous ways that small business owners can get financing for their business, and peer-to-peer lending is one option.
 

What is peer-to-peer lending?
Peer-to-peer lending is one way to obtain small business financing. It refers to businesses that turn to other consumers and organizations - as opposed to verified lenders - in order to get loans and funding. 
 

What do peer-to-peer lenders consider when a business applies for a loan?
Peer-to-peer lenders largely base their considerations on credit scores and use these to establish risk scores. These risk scores then determine the interest rate of the loan offered. For more information about your business credit score, click here.
 

Why would a business turn to a peer-to-peer loan?
Peer-to-peer loans are often available in a short amount of time and can seem like good options when traditional routes are off the table, but loan size is usually limited to $10k.
 

Will it build my business credit?
No. Peer-to-peer lenders aren’t required to report repayments.
 

How long does it take to apply, how much does it cost, and what does repayment look like?
Application time, cost, and repayment all depend on the company and investors you apply with. Application turnaround can be quick, but rates can be as high as 50%.
 

What are the downsides of peer-to-peer lending?
There may be restrictions on peer-to-peer lending in certain states, but more importantly the loans themselves are often unsecured.
 

What is the difference between peer-to-peer lending and OnDeck?

  • OnDeck offers true business loans up to $250,000 that build business credit.
  • In addition to credit scores, OnDeck considers cash flow, time in industry, and other factors when assessing a loan.
  • OnDeck reports repayment behavior back to credit bureaus.
  • With OnDeck, you can receive a decision within minutes and funding in as fast as 1 business day.

Peer-to-peer lending might be an option for you, but always make sure to fully evaluate what works best for your business.

OnDeck is a Google Ventures-backed company with an A+ rating with the Better Business Bureau. The company offers small business loans nationwide to over 725 different industries. For more information about OnDeck small business loans, click here

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What is a business equipment lease?

Every week, we seek to arm small businesses owners with the right tools to make informative financing decisions. In previous posts, we’ve covered merchant cash advances, business lines of credit and SBA loans.

Today, we are going to explore business equipment leases –  a form of financing 80% of businesses use to lease equipment, according to the Equipment Leasing and Financing Association1

What are business equipment leases?
A business equipment lease is a secured form of financing where a piece of equipment is collateralized over time. At the end of the series of payments, you can purchase the piece of equipment at either an agreed upon amount or the fair market value.  

What is the difference between a true small business loan and a business equipment lease?
There are several differences between true business loans – such as those offered by OnDeck – and business equipment leases. 

  • Business equipment leases are specific to equipment needs, and don’t cover other expenses such as inventory or marketing. True business loans – such as those offered by OnDeck – can be used to finance all types of business needs.  
  • Business equipment leases are often credit score sensitive. At OnDeck, our personal credit score minimum is 500.
  • Typical business lease amounts are between $25,000 and $2 million. OnDeck offers loans between $5,000 - $250,000

How long does it take to apply and how much does it cost?
Often, equipment providers offer some form of equipment lease financing, so it’s best to ask your vendor directly about the application process and fees. However, the lease commits you to keeping the equipment for a long period of time, so the lifetime cost may be higher than if you purchased it outright. 

What does repayment look like? 
Payments are typically monthly or quarterly and are often tax deductible. 

What are common uses?
Business equipment leases are specific to equipment needs – such as financing the purchase of medical equipment like dental chairs, restaurant-grade ovens, refrigerators, or computers. It’s available to businesses at any stage of development – from startup to more established businesses. 

Will it build my business credit?
Yes - most providers report repayment back to the credit agencies. 

OnDeck is a Google Ventures-backed company with an A+ Rating with the Better Business Bureau. The company offers small business loans nationwide to over 725 different industries. For more information about OnDeck small business loans, click here.

 

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What is a Small Business Administration loan?

Our Humpday Help section is designed to provide business owners useful information about the different types of financing available.

We’ve answered your questions about business lines of credit and merchant cash advances. Today, we are going to explore SBA loans. 

What is a Small Business Administration loan?
The U.S. Small Business Administration is a federal government agency that provides support and financing to small businesses. An SBA loan is made by a financial institution – such as a credit union or bank – and a portion of that loan is guaranteed by the SBA. Most large banks have an SBA loan department. 

What is the difference between a true business loan and an SBA loan?
There are several differences between true business loans – such as those offered by OnDeck - and SBA loans. They include:

  • The SBA guarantees loans to startups. At OnDeck, businesses need to be open for at least one year.
  • An SBA loan application requires in depth financial documents and a business plan – reference the loan application checklist before you apply. OnDeck requires a 1-page application and your last month business bank statement. 
  • SBA loans have a maximum of $5 million. OnDeck loans range from $5,000 - $250,000. 
  • The SBA requires tangible collateral and typically about 20% down from the business owner. OnDeck loans are backed by a personal guarantee, and in some cases a lien on the assets of the business. 

How long does it take to apply and how much does it cost?
The application and approval for an SBA loan requires a significant time commitment – typically 60 days –although it depends on the amount of money being issued. The interest varies by the applicant, lender, and your term length, and is subject to designated SBA maximums. To learn more, click here

What does repayment look like?
Repayment is monthly, quarterly or even seasonal in some cases. 

What are common uses?
The SBA offers loans to establish new businesses or to expand your current business, including purchasing inventory, equipment, real estate, etc. 

Will it build my business credit?
Yes. SBA loans can be very helpful in building your business credit.

If you have any additional questions, please leave a comment for us below. Be sure to check back next week when we explore equipment leases. 

OnDeck is a Google Ventures-backed company with an A+ Rating with the Better Business Bureau. The company offers small business loans nationwide to over 725 different industries. For more information about OnDeck small business loans, click here.

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What is a business line of credit?

Our Humpday Help section is designed to provide business owners useful and helpful information about the different types of financing available.

Last week, we explored merchant cash advances. This week, we will examine business lines of credit.

  • What is a business line of credit?

Business lines of credit are funds that are available for you to withdraw from as you need them.  

  • What is the difference between a true business loan and a business line of credit?

Although some companies use the terms interchangeably, the two are quite different. True business loans, such as those offered by OnDeck, lend the full amount upfront so you can put the capital to work immediately.

With a business line of credit, you can “draw” on your account whenever you need the capital – whether that need is tomorrow, next week, or next month. 

  • How long does it take to apply and how much does it cost?

It depends on the company providing you the credit and the amount of your line. Be sure to ask your provider. 

  • What does repayment look like?

A business line of credit requires payments only as you draw on your account. For example, though your company may maintain a business line of credit, your balance will remain at zero until you make withdrawals. 

However, once you draw on your account, repayment can be weekly or monthly. Also, some providers charge a monthly fee for maintaining your account – be sure to ask your provider about this. 

  • Will it build my business credit?

Yes. Business lines of credit help increase your company’s creditworthiness because providers report repayments back to credit bureaus. For information about your business credit, click here.

  • What are common uses of business lines of credit?

While true business loans (such as those offered by OnDeck) are ideal for immediate capital needs, business lines of credit are designed for capital needs in the foreseeable future since you can draw on it when you need.

Examples include managing your business’ cash flow, supporting accounts receivable, taking advantage of special deals on inventory, or buying or repairing equipment. 

If you have any additional questions, please leave a comment for us below. Be sure to check back next week when we explore SBA loans. 

OnDeck is a Google Ventures-backed company with an A+ Rating with the Better Business Bureau. The company offers small business loans nationwide to over 725 different industries. For more information about OnDeck small business loans, click here.

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What is a merchant cash advance?

At OnDeck, we understand that accessing capital can sometimes feel like a daunting undertaking for business owners.

That’s why, every Wednesday, our blog will contain “Humpday Help” to provide you with important and useful information about the different types of financing available to small businesses. 

Today, let’s explore merchant cash advances:
 

  • What is a merchant cash advance?

A merchant cash advance (MCA) is a lump sum of money lent against a business’s future credit card sales. This is not a “true” business loan, but rather an advance based on your future sales.

  • How long does it take to apply?

It depends on your provider, but normally around one week.

  • What does repayment look like?

Typically, it’s a fixed percentage of your daily or weekly credit card sales. The daily payment varies with your batch size. Payment is collected directly through your credit card processor.

  • How much does it cost?

It depends on your business profile and estimated term length, but normally you will pay $1.20 - $1.50 for every $1 you borrow.

  • Will it build my business credit?

No – MCA companies aren’t required to report back to the credit bureaus. OnDeck, which offers true business loans, does report repayment to the credit agencies. For more about your business credit, click here.

  • Will I need to change my credit card processor?

Maybe – it depends on your provider. Always ask before you decide to take an MCA.

  • How do I tell the difference between merchant cash advances and true business loans?

MCA providers – such as Merchant Cash and Capital, Capital Access Network (AdvanceMe), and Rapid Advance – will focus largely on your credit card sales. They will also discuss your processor and will use the term “holdback percentage” (what is held back each day from daily credit card batches). You may also be told that you will have to switch your credit card processor. 

A true business loan, such as those offered by OnDeck, will focus on the overall health of your business rather than just your credit card sales. Companies like ours also report repayment back to the credit agencies to build your business credit. 

If you have any additional questions, please leave a comment below for us. Be sure to check back next week when we explore business lines of credit.

OnDeck is a Google Ventures-backed company with an A+ Rating with the Better Business Bureau. The company offers small business loans nationwide to over 725 different industries.

 

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The Restaurant Industry is Experiencing Significant Sales Growth

The restaurant industry has experienced significant sales growth recently, which is great news for restaurant owners looking forward to a successful 2014.

Sales in the restaurant and food service industry are expected to exceed $683 billion in 2014, according to the National Restaurant Association.

That's up 3.6% from figures recorded in 2013, illustrating that this industry is thriving. Dawn Sweeney, president and CEO of the National Restaurant Association, said:

"As our nation continues its road to recovery, the restaurant industry will remain a key driver of economic growth and a leading jobs creator."

More than 40% of consumer respondents to a recent NRA poll said they do not currently go to restaurants as often as they'd like to. Compared to reports from previous years of only 25%, this spike offers a very clear sign to restaurant owners: consumers would like to be going out to eat more often than they are.

The expansion in the food and service industry, combined with a significant spike in consumers looking to frequent restaurants, points to significant growth for the restaurant industry in 2014.

Get the financing you need to grow your restaurant 
Many restaurant owners are looking to leverage the recent growth in the restaurant industry to grow their business. Small business loans, such as those offered by OnDeck, can be put toward renovation, hiring new staff, or purchasing inventory to grow your restaurant. 

OnDeck is a Google Ventures-backed company with an A+ Rating with the Better Business Bureau. The company offers small business loans nationwide to over 725 different industries

 

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