January 13, 2022 Rificapital

The Truth About Business Lending and Alternative Financing

Hello, I’m Ryan. I’m A Co-Founder and Managing Partner with Rifi Capital.

Many people search online for business loans daily to help their business in times of need or to invest in equipment, people, or other services to get a nice return on their investment. There are a lot of good loan products online but there are things you need to know so you don’t waste your time filling out countless applications just to be denied. 

Usually, there are 3 things that will determine what type of loan you qualify for or whether you qualify for a business loan at all.  Those three things include:


Time In business

Credit Score

Now I will say, you don’t need all of these three things to be perfect for you to be able to get a loan, but of course, the more better they are, the better rate you get. For example, if you have a good credit score such as  (660-680 at least) and you meet revenue requirements such as $10,000 to $15,000 a month and at least 2 years in business, 90 percent of the time, you will be able to qualify for a traditional term loan with monthly payments, longer times to pay it back, and relatively good interest rates. You could also qualify for a line of credit or equipment financing. The downside of this is that these loans usually take a week or so to get the funding in your business bank account. 

Well let’s say, your credit isn’t really stellar. It’s less than 640 or in the 500’s or even 400s.  If you meet the revenue requirements usually of ($10,000- $15,000 a month) and you have officially been in business for at least 3 months, then most likely you’d be able to qualify for a cash advance.  The upside to this is that money can be deposited into your bank account in the same day that you’re approved and usually it only takes a few hours at most to get approved after you submitted a completed application and three months of the most recent bank statements. The amount you qualify for in most cases will be 1 or 1.5 multiplied by the amount of your monthly gross revenue.  Let’s say you make $50,000 a month in gross revenue. If you’re approved and your bank statements look satisfactory (meaning a minimal amount of negative days or low balances on your bank statements}, you will most likely be approved for $50,000 to $75,000 depending on how many positions (cash advances) that you already have. 

The downside to this is, cash advances usually require a daily or weekly payback schedule.  Your best bet would be to opt in to a weekly payback schedule if that option is available to you. Also, cash advances are short term loans meaning you usually have 60 days to 12 months to pay back the loan. Many customers may be shocked at the factor rate (interest rate for those not familiar with the cash advance) industry. These rates can start in the mid 20’s and be as high as 49.  It really all depends on how much of a risk the underwriter determines that you.  The risk could be assessed by the industry your business is in, your criminal background, your credit, or your default on payment rate.  


Long Term Business Loans

Now, I’m not saying cash advances are a bad thing. In fact, they can be a good thing when you use them in the right way. If you have an emergency, where you need this capital to get things fixed quick because it’s interrupting or slowing down your ability to make money, then a cash advance could be a good option for you. Also, if there’s a product or service you want to purchase because you believe it will yield a good return on investment, a cash advance could be a good thing for you. But, if you are in a situation where you are robbing peter to pay paul, or don’t really have a plan on how to increase your revenue, you may find yourself stuck in a difficult situation.

For Start ups- Unfortunately options are very limited. If you have a good credit score (680 and above} but no revenue when you are first starting a business, business credit stacking from a trusted company may be the best or only option in the alternative lending space. But keep in mind, you may have to pay 10 percent of the funded amount upon completion of the funds approved and accepted by you. Now of course, you can find private or angel investors to help you fund your startup and if you are one of the lucky ones, you may actually get a substantial business loan from your bank but that’s a lot easier said than done. 

In conclusion, this is by far not absolutely everything that goes into the business lending process, but it’s a good baseline to know when shopping around for the deal that makes sense for yourself and your company.   

As stated before.  I’m Ryan and I’m a Co-Founder and Managing partner for Rifi Capital.  If you have any additional questions or help finding the best business loans to fit your needs, please give me a call or send a text to 844-617-8779.  You can also go to our website https://rificapital.com for more information. I don’t charge to answer questions or help find a business loan.  I look forward to speaking to you.