Anyone who is new to business financing might wonder why there are currently so many options for small business loans. Yes, having more options to choose from can make this process very stressful and confusing. But it’s important to understand that a great deal of them exist for the same reason. As popular and advantageous as bank loans are, they only serve a very specific type of customer. Banks were failing to meet the needs of a growing amount of business owners. One of those needs was short-term business financing, as opposed to the lengthy terms and large borrowing amounts associated with the traditional bank loan. The result was an influx of business financing companies specializing in short-term financing. Among the more prominent examples is LoanBuilder.
LoanBuilder was originally a product launched by a business financing company called Swift Capital in 2006. About eleven years later, Swift Capital was acquired by PayPal, which now markets the LoanBuilder product as “PayPal Business Loans.” But unlike PayPal Working Capital, you don’t have to be a PayPal user to be approved for LoanBuilder products.
A short-term business loan, the terms for LoanBuilder range from 13 to 52 weeks, and you can borrow $5,000 to $500,000. Payments are automatically deducted from your checking account on a weekly basis. Rather than a traditional interest system, LoanBuilder charges a fixed fee based on the loan amount, the borrower’s personal credit score, and the business’s creditworthiness. Since the fee is fixed, the cost of the business loan is the same, even if you pay it off much quicker than expected. There are no additional fees or penalties for early repayment. The APR for the average LoanBuilder business loan is not clear on their website, but rates can reportedly be as high as 20.49%.
Eligibility is determined by a questionnaire that takes approximately 5-10 minutes to fill out. Once you are pre-approved, you can customize certain features such as the loan amount and term length (hence the name “LoanBuilder”), which in turn affects the fee and size of weekly payments. When you have settled on a loan amount, term length, fee amount and weekly payment size, you can move on to the full application. Funds are usually approved and distributed in 24-48 hours.
On the surface, business loans from LoanBuilder appear to be very accessible. Your business’s annual revenue can be as little as $42,000, your credit score can be as low as 550, and you can be in business for as little as nine months. Required documentation is not clear but often consists of just 4 months of bank statements. But due to the very nature of alternative business financing, it’s entirely possible for the owner of a thriving small business to be denied funding from LoanBuilder.
For one thing, the entire business loan must be paid back in a maximum of 12 months. Since this term length is likely only reserved for the most qualified customers, you can imagine that a great deal of customers are assigned shorter terms. That means larger weekly payments. So, if your credit score or cash flow is less than perfect (and your business isn’t heavily capitalized), LoanBuilder might conclude that you are not capable of making fixed weekly payments for the duration of the business loan. Most borrowers likely had to prove that their cash flow was strong enough to pay off a substantial portion of the business loan within a relatively small time frame.
Another plausible explanation for an unexpected rejection is the notorious customer service associated with big businesses. LoanBuilder applicants are encouraged to speak to a representative on the phone for information that isn’t available on the website. Frequently asked questions are likely related to the factors that determine terms and the cost of the loan. If LoanBuilder’s customer service is anything like that of PayPal Working Capital, miscommunications or misleading information might not be uncommon. Some of these instances likely stem from the fact that LoanBuilder apparently judges different businesses by different criteria. Though this is marketed as an advantage, it also suggests discrimination against certain industries or capitalization taking precedent over cash flow.
Being declined by LoanBuilder does not mean you will never qualify for affordable short-term financing. At United Capital Source, we frequently approve applicants who were declined by online business lenders like Kabbage, Square Capital, and PayPal Working Capital. These applicants tend to have an easier time working with us for a number of reasons. Our application process and approval criteria are much more straightforward so applicants are never caught off guard by a rejection or the cost of their loan. Before applying, you’ll know exactly what you need to get the borrowing amount and terms you have in mind. And when we say our application only takes a few minutes to fill out, we’re not secretly just referring to the “pre-approval” stage.
LoanBuilder also offers only weekly payments, compared to the various UCS products in which payments can be made monthly, bi-weekly, or whichever frequency makes sense for the borrower’s finances. This allows us to work with a myriad of industries, some of which are naturally subjected to unique and essentially uncontrollable cash flow issues. As for short-term options, our more popular products include a business line of credit and bad credit business loans. Neither option strictly requires weekly payments or a flawless credit score. And if you thought LoanBuilder was the only company that lets you customize terms, think again. The terms for UCS products are always negotiable, especially for borrowers prone to occasional dips in revenue.
Arguably the biggest difference, however, between UCS and LoanBuilder is customer service. We pride ourselves on being up front and honest with all clients, even if that means telling them that their desired product isn’t right for them. If we believe your company is not able to take on additional debt at this time, we won’t tell you to work with us just so we can make more money. The advice we offer is completely non-biased.
Our success is directly linked to the success of our clients, so we’re clearly not looking to draw a quick profit. True success is only possible with long-term growth. We simply can’t afford to disappoint so many people in order to keep cash flowing in.
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