Best Small Business Loans Speaks to Credibly
Best Small Business Loans is a website that educates people on the details of small business loans to help them choose the best option for their needs. We asked Shirley Zhao from Credibly about their company, the business loans offers, and services.
How long has Credibly been on the market? Can you tell us about the idea behind Credibly?
Credibly has been in operation since 2010, soon after the 2008 financial crisis. It was founded by Ryan Rosett and Edan King, out of the realization that small- and medium-sized businesses (SMBs) are underserved as it relates to receiving business credit. SMBs have always been left with limited options and complicated application processes, making it difficult to be approved for and receive business financing. Additionally, they are far more sensitive to external market conditions and have fewer cash reserves, making their need for financing critical and urgent.
Nowhere was the need for funding as great as during the pandemic last year. Many lenders could not adapt their funding practices to help merchants in need while also generating revenue for themselves. Ryan, Edan, and the rest of the Credibly executive team accomplished what others could not. Credibly pivoted by quickly relocating staff, analyzing new and historical data trends, and rolled out ways to refine their operations processes throughout the pandemic. As a result, Credibly was able to fund merchants every single day throughout the pandemic.
Who is the typical Credibly client? For example, how long have they been in business, what industries are they in?
The typical Credibly client has a business that is at least 2-3 years old with average monthly revenues of $15K+. Credibly’s most successful industries are restaurants, general contractors, trucking businesses, general automotive repair shops, plumbing, heating, air-conditioning businesses, beauty shops, and offices and clinics of doctors of medicine.
How do small business owners usually use Credibly Merchant cash advances (MCAs) and business line of credit Loans?
MCAs - perfect for businesses with fluctuating revenues and lower credit scores. With a merchant cash advance, a business owner sells a portion of their future credit and debit card sales for money they can use right away. The provider of the advance then collects a percentage of the business’s daily credit card sales until the amount of the advance, plus the factor rate, has been collected. Funds from merchant cash advances can be used for many different purposes, but since it is a type of short-term funding, an MCA is best used for covering temporary cash flow shortfalls. Business owners often use merchant cash advances for things like buying inventory, paying employees, making emergency repairs, marketing expenses, purchasing equipment and other short-term expansion projects.
Business line of credit - Unforeseen expenses can happen to any business and a business line of credit can give you the peace of mind of knowing you’ll have an extra source of funding ready anytime you need it. A business line of credit can be used for a wide variety of purposes, including buying equipment, emergency repairs, renovating a storefront, purchasing inventory, and paying employees.
Business lines of credit can be particularly helpful for businesses that need some level of flexibility. They can be great for businesses in industries that face seasonal fluctuations and may occasionally need extra money to stock up on inventory or hire extra employees ahead of a busy time of year. If you’re planning a series of projects that would require extra funding now and then, you might like the flexibility a line of credit can offer.
Borrowers may not use their business line of credit for personal use. A financial penalty may result in the event that your lender finds you using your business line of credit to cover personal expenses.
How would you recommend small business owners choose between a business line of credit and a regular business loan?
The main difference between a term loan and a line of credit is how you receive the money and the repayment terms. Term loans provide a specific sum of money that is repaid over a fixed period of time, otherwise known as the loan term. Lines of credit, on the other hand, provide a revolving account that allows borrowers to draw up to a certain loan amount, repay the amount borrowed, and redraw up to the amount of the credit limit to receive additional funds. Unlike keeping up with the fixed payments of a term loan, you will be required to pay interest on borrowed balance while the credit line remains open. In many cases line of credit, borrowers are required to meet a minimum monthly payment to avoid additional fees or penalties.
Business lines of credit also come in different term lengths: short term and medium term. Unlike with loans, term lengths have nothing to do with how long you have to make payments on it or how long it’s available to you. Instead, the different terms indicate things like interest rates and spending limits. For example, a short-term line of credit has higher interest rates, lower limits, and lower revenue requirements, similar to short-term loans. Conversely, medium-term lines of credit have lower interest rates and higher borrowing limits, much like a medium-term loan does.
- It can be difficult to increase your credit limit, meaning that lines of credit may not be the best solution for growing companies looking to continuously finance new initiatives
- Lines of credit often have lower borrowing limits and fees and additional charges can add up if used incorrectly
- Business lines of credit can be more difficult to qualify for than other financing options
What requirements for loan applicants does Credibly use?
- Minimum time in business = 6+ months
- Average monthly revenues = $15K
- Minimum credit score = 600+
What advice would you offer to anyone considering taking a small business loan?
Before applying for a small business loan, you should first consider whether the capital will help your business grow or help your business survive a crisis. If you don’t have a good reason for a business loan, the fees and interest can really add up. However, if a business loan will help you buy new equipment, hire needed staff, or survive a crisis like the COVID-19 pandemic, then you should consider each of the following questions when reviewing the loan.
- How much capital does my business need?
- How much is the interest rate and APR for this loan?
- What are the fees or prepayment penalties for this loan?
- How are monthly payment amounts determined (installments, percentage remittances)
Are there any other points of wisdom that you would like to share with our audience?
There are many types of small business loans out there and it can seem daunting to figure out which makes sense for you. The most important thing is to work with a lender who understands your business needs and takes the time to walk you through intricacies. You should never feel pressured or rushed into taking financing.