Personal guarantees are meant to protect the lender. Similar to a co-sign, personal guarantors are individuals who sign on to a loan with a business, and if the business can’t pay back the loan, the guarantor is personally responsible. This means that a lender can require cash payment, or they can seize personal assets, depending on the type of guarantee. It’s a legal clause, and is a way to make sure the lender gets their money no matter what. A guarantor can be you, as a business owner and individual, or it can be someone else not directly associated with your business – this is called a co-signer.

Getting a loan is stressful, no doubt. Especially when you throw in all the clauses and jargon, it can be a complicated process. In this post, we’re going to break down what personal guarantees are, and what you should know about them. 

Personal Risks

Personal guarantees aren’t that uncommon, and some lenders require them. They’re also used for those with less-than-stellar credit or those who don’t bring in enough income or revenue to theoretically make the payments. You should be careful, though, if you’re asked to be a guarantor – it puts your personal finances at risk if the business you’re signing for defaults on their payments. 

This would also mean it affects your personal credit score, so it’s important to make sure that the business you’re signing for – be it your own or your business partner’s – will be worth this personal risk. Because ultimately, it is a risk for you, and a form of risk management for a lender. It’s advised you consult with a legal professional before signing anything, but especially if a business loan includes a personal guarantee. There are several different forms and executions of personal guarantees, so it’s important to read between the lines.

The Lender’s Perspective

Lenders are running a business, too. From their point of view, they are trying to minimize their losses and maximize their returns. The only way for them to do that is to get their money back, and by making you sign a personal guarantee, this increases the chance they’ll get paid back. It’s like a back-up plan.

Limited Personal Guarantees

Limited personal guarantees have a set dollar amount on what can be charged to the borrower if they default on their loan. These are usually used when multiple business partners are personally guaranteeing a loan, and they define each individual’s piece of debt if the business fails to repay. 

There are two types of limited personal guarantees you need to be aware of, and it’s advised you look over agreements carefully to distinguish which you’re dealing with. 

  1. Several guarantee – each individual knows at the beginning of an agreement the maximum they might owe, represented as a percentage of the loan. 
  2. Joint and several guarantee – this differs from a several guarantee in the sense that the percentages aren’t predetermined, and the lender can go after any individual guarantor to collect the full amount. This is especially dangerous because if your partner goes MIA after a business fails, you could be responsible for all repaying every penny. 

Unlimited Personal Guarantees

Unlimited personal guarantees mean that you’re agreeing to let your lender recover all of the loan in addition to any other fees associated with the loan, such as legal fees should the lender have to take legal action against you.

Unlimited personal guarantees offer the borrower, and thus the guarantor, essentially no financial protection if the business in question fails. 

SBA Loans

The SBA actually requires personal guarantees for their loans, but they call them “unconditional guarantees.” They require that individuals who have at least 20% equity in a company have to provide a personal guarantor, and they provide a form that details the stipulations of their unconditional guarantee. The SBA also warns that selling your company doesn’t get rid of your guarantee, and recommends waiting to sell your interest until you’ve fulfilled your guarantee, or your loan is paid off.  

Personal guarantees aren’t anything to be afraid of, but you should be aware of them. Like any loan, there will be risks, so it’s best to know about all your options. FaaSfunds can help with that – we’re here to show you the best loans for your financial needs, and to connect you with an advisor to help you make financing decisions. Sign up today.

Do you know about your business credit score?

Most people know about their personal credit and why it’s important, but many business owners don’t know about their business credit score. Your business generates credit, too, and it’s important to know and understand it because it can affect your likelihood of receiving funding in the future on behalf of your business. 

Why Do You Need Business Credit?

Your business credit signifies your business’s trustworthiness with business finances specifically, separate from your personal score. In the same way you need personal credit to secure personal loans and credit cards, you’ll need business credit to secure the same things for your business.  If you can manage to keep your business credit up, it can be incredibly beneficial to your business in the future, in terms of borrowing and credit card benefits. 

Establishing business credit is also important if you want to keep your personal and business finances separate. Not having these intertwined can help when you come to do your taxes, and in turn, make sure you’re keeping laws and regulations straight. 

Diving further into this – if your business is registered as a corporation, it’s a separate legal entity. If it’s registered as a sole proprietorship, there’s not a legal distinction between you and your business. This means that all of the business finances are tied to you, the business owner. This makes it even more important to keep the sole proprietorship finances separate from your own. If you get audited by the IRS, it could leave you digging through documents trying to decern which ones were personal and which were for business. Keeping everything separate could save you time, money, legal liability, and the treat of getting fined. 

How Do You Build Business Credit?

  1. First, establish it. If you establish an EIN (Employee Identification Number, like a Social Security number for your business) first thing, this is often the best way to separate your personal and business credit. This makes sure that you can start establishing your business credit because it acts just like your personal Social Security number would. 
  2. Build it. Once you establish your EIN, you should report a few financial products within your business to Dunn & Bradstreet, Experian or other credit institutions. Then, the most important part is to pay for everything when it’s due. One of the most influential parts of your credit report is whether or not you’re paying your credit and loan bills on time. If you don’t, it will significantly lower your chances of getting a loan with good rates in the future. It’s normal to take out a personal loan to start your business, because most lenders won’t lend to newer businesses. But once you have the initial money and revenue, take out a business credit card or line of credit. You can use these forms of funding to invest in your business, and payback on a regular schedule. This way, you can establish your credit, build your score, and get other forms of funding later on.
  1. Experian, one of the top credit bureaus that report business and consumer credit, says that checking your business credit regularly and making sure the information is correct and current is important in improving it. You should also dispute your score if you think it’s inaccurate. 

Along these lines, you should make sure you know exactly what factors are influencing your business credit. They’re calculated differently than personal scores and scale from 0 to 100. Directly from Experian, they’re based on:

  • Number of trade experiences
  • Outstanding balances
  • Payment habits
  • Credit utilization 
  • Trends over time
  • Public record recency, frequency and dollar amount
  • Demographics – like years on file, Standard Industrial Classification codes and business size. 

If you know what’s going into your score, you’ll understand how to get the most out of it. Pay attention to these factors and monitor them closely through a business credit checker.

Keeping Track of Business Credit

Figuring out your business credit can be complicated, and keeping up with it can be stressful. It’s another number you have to worry about, on top of all the other numbers involved with your business. So, why not let FaaSfunds help you out? That’s the whole purpose of the FaaSfunds platform – we offer several different types of business loans and lines of credit in our marketplace, but we also help you monitor your business credit and figure out how to improve it. Even after you’ve been funded, we’ll help figure out what to do after. Click the button below to get started, and make your business credit easier to deal with. 

When you choose to refinance something, you usually decide to do it because it makes your previous financing options or purchases more affordable. What exactly does it mean to refinance? Fundamentally, it’s when you decide to revise the terms of a previous credit agreement. Most often, you’ll refinance when nationally-set interest rates go down and can result in savings on monthly payments with a new agreement.

How Does Refinancing Work?

Refinancing is essentially just getting a new loan to replace an old one. The main motivation for refinancing is dependent on the market and the current interest rate environment, but if your business credit has improved, that’s also a reason to refinance a loan. Typically, during times of slow economic growth, interest rates will be lower to stimulate spending and investment. During times of expansion, however, interest rates will be higher.

Different Types of Refinancing

  1. Rate-and-term refinancing: when a borrower directly replaces the existing loan with one with a lower rate.
  2. Cash-out refinancing: when a borrower takes out a loan for more than they owe on the previous loan, so they can use the extra cash to pay off other debts.
  3. Cash-in refinancing: when a borrower pays cash for some of the remaining loans, in order to lower the loan-to-value ratio or get smaller monthly payments. 
  4. Consolidation refinancing: when a borrower takes out one, lower-interest loan to pay off several, higher-interest debts. 

The Best Strategies

How do you know when the best time to refinance is, or if you should refinance at all? First, calculate it (this one is specifically for mortgages, but the results are easily transferable to other loans), then, consider these factors:

Falling Interest Rates

The best strategy for loan refinancing is to pay attention to national interest rates. Interest rates fluctuate based on policy, global factors and the economy. If national interest rates fall, and you can get a new loan at one to two percent below your current rate, then it’s reasonable to consider refinancing in order to secure that lower rate and save money. This is an example of rate-and-term refinancing, where the existing loan is paid and replaced with one with a lower rate. 

Increase in Value

If the thing you used the loan to purchase – property, equipment, etc. – increases in its value (this will usually only happen with property because most equipment depreciates in value), that could be a reason to refinance. This idea works well with cash-out refinancing. With this, you take out more than your current loan amount left to pay and use the extra cash to pay off other debts. If your property has increased in value, you’re more likely to be able to take out more money than what you owe.

Credit Improvement 

The better your credit, the better your rates and terms on loans usually are. If your credit score and financial health have increased significantly, refinancing could save you money because it can lower your interest rates.

Consolidating Debt

The technique of consolidating debt means that a borrower takes out a lower-interest loan to pay off one or several higher-interest debts. This is a refinancing technique used with things like credit card debts – if you have several different credit card debts, it might be beneficial to take out a single loan to pay them all off, so you can only have one payment at a single, lower interest rate.

Things to Look Out For

Closing costs – Some new loans may have closing costs, which are usually based on a percentage. Make sure you calculate in the closing costs when you’re trying to figure out if the refinancing will save you money, because you could end up paying more even if the interest rate is lower. 

Prepayment penalties – Make sure the loans you’re paying off in full don’t have prepayment penalties for paying them off earlier than the agreed-upon term. If they do have prepayment penalties, make sure you calculate to check that their cost doesn’t outweigh the lower interest rates in the long run. 

Keep in mind – It often makes more sense to refinance early in a mortgage or loan repayment because you don’t own as much equity in the thing your financing (like property). Most loans amortize, and therefore most early payments go more toward the interest than the cost of the actual purchase. Later-on in a loan, you’re making more payments toward the actual purchase, so you own more equity in the purchase. When you refinance, you’re essentially starting over by taking out a new loan, and it will take you even longer to build up equity.

There are also things you shouldn’t do. Just because refinancing can lower the total cost of a loan doesn’t mean it’s always the best idea in the long-run. When you refinance unsecured debts with a secured loan, it can be a risk – which is sometimes the case when consolidating debts. This is because you risk putting assets – like your home or car – at risk for repossession or foreclosure. Another risk could be that you end up paying more because you extend the loan, as opposed to paying more per month but for a shorter period of time. If you start a new 30-year loan when you only have 10 years left on the original loan, it could add up to paying more, even if the interest is less.

Confused by all these options? If you’re looking to refinance debts, reach out to us at FaaSfunds. We have business financial experts that can help you make all the right choices for your business. Click the button below to get started today!

Grants are a small business’s dream. They are, are, after all, free money.

Business loans have to be paid back, but business grants do not. Certain entities will grant small businesses and startups money to achieve their goals. These entities include larger, international corporations (like FedEx or Visa), angel funds and government sectors. There are a TON of grants available, and countless funds set up to give them out. 

Most of the time, these grants are reserved for specific types of businesses. The EPA gives out business grants, but only to companies looking to advance gree technology. Visa grants to startups with innovative fixes. Huggies grants money to “mompreneurs.” You get the drift. Usually, you have to meet specific criteria for grants, but sometimes there are grants for those who just want to start a business. FedEx awards $25,000 to 10 small businesses nationwide, and they’ve funded anything from skateboards to coffee shops. 

Is there a Downside?

There aren’t really any negatives to small business grants. There are, however, some stipulations. In the same way that the government will grant money to universities for specific medical research, those who give out small business grants will usually be pretty picky about what you spend the money on. If you’re starting a food truck that is all about sustainably-raised and locally-sourced food, chances are you’ll only be allowed to spend the grant money on free-range chicken and local vegetables, not on gas for your truck. 

They also often have strict criteria they require to qualify for the grant. Because many grants tend to be given out by specific agencies or foundations, or have social causes in mind, they’ll often require that your business be centered around a certain industry or cause, or be founded by an underprivileged social group. This isn’t always the case, but this is part of what makes them a grant. It’s much like a college scholarship – if you’re underprivileged or want to focus on something specific, you’re more likely to be given money to help you out. 

How Do You Get A Small Business Grant?

The process of getting a small business grant is different depending on which one you’re applying to. For most grants, you’ll be competing against several different companies, so often they’re competitive and difficult to get. First and foremost, you’ll have to apply. Some grants involve pitch competitions or video submissions, while some are solely based off of an online application. 

On the upside, there are a TON of grants available. Grants given out by the government can be found and searched via their grants.gov website. 

As for private and corporate grants, there’s not a searchable database. You’ll have to do a little bit of research to figure out whet’s available to you and what you’ll qualify for. However, Value Penguin created a list of 18 popular and beneficial grant programs to consider applying to, and the criteria required. 

There are also local grants available to businesses. In order to keep money within communities, many local cities offer grants, as do local businesses or universities. Like The Lumpkin Family Foundation, which offers grants to businesses in East Central Illinois only. There are programs and foundations that are founded specifically for granting money to budding businesses, such as NC IDEA in Durham, N.C. 

Essentially, grants are available everywhere and can be a very useful tool when you’re trying to start a business or gain traction as a small business owner. They’re not a loan and they don’t have to be paid back – which makes them massively appealing, albeit competitive.

They aren’t for everyone, though. Due to their strict criteria and longer application process, they require a lot of planning and commitment. If you’re looking for a more traditional way to fund your business that doesn’t require this process, you might want to look into other funding options, like loans or lines of credit. 

If you’re curious about other funding options, FaaSfunds is here to help you out. We offer a loan and credit marketplace to find the best option for your business, and a specialist to answer any and all of your questions. 

It’s probably true that every business wants more working capital. Working capital is exactly what it sounds like: capital that a business uses for daily operation. It’s an accounting term – it covers things like employee compensation and paying bills. It’s the money needed to meet your short-term payment goals and obligations. 

There’s a formula for it. To get your net working capital, you subtract your current liabilities from your current assets (assets – liabilities = working capital). It’s expressable as a ratio, too – just divide your current assets by your current liabilities (assets/liabilities = working capital ratio). This gives you a ratio, and usually, a healthy ratio is anything from 1.2:1 to 2:1. 

 For these calculations, it’s advised you only use short-term assets like accounts receivable and the current money in your business account, along with inventory that will become cash within the next 12 months.  Your short-term liabilities are your accounts payable, along with paychecks, taxes and other bills. 

Why Do You Need Working Capital?

Working capital is what you need, as a business, to keep operating. If you don’t have enough working capital,  you don’t have a functioning business. Working capital needs are different for different industries, especially ones that have seasonal revenue. This is why it’s important to prepare throughout the year to make sure your debts are managed, and your business has enough cash flow to operate. Bank of America gives four guidelines for figuring out if your business might need additional working capital cash flow:

  1. If your business has seasonal differences in cash flow – some businesses need extra money to prepare for a busy season, or to keep the business operating during the slow season. If you own a snow cone business, your peak season is during the late spring and summer. It’s likely you won’t have any business during the winter, so you might need extra working capital to get through it, or to prepare for the upcoming busy season.
  2. If you’re waiting for payments from customers, there are usually a few times you’ll be short cash to pay suppliers or employees. Greater working capital can fill that gap. If you’re a business that depends on accounts receivables, like a florist or caterer, working capital can help fill a gap in payment. 
  3. Extra working capital can help you take advantage of things that could help your business in the long run. If you find a really good deal on supplies, but only if you purchase them in bulk, working capital could give you the opportunity to do so.
  4. Some businesses have project-related expenses, or temporary employees or contractors. If you need to take advantage of a project venture, working capital can cover the cost.

Where Can You Get More Working Capital?

So if you don’t have enough working capital, how can you find it? 

The best way to make sure you have enough working capital is a business line of credit. These are less like a loan and more like a credit card, but not entirely. They usually have lower interest rates than a credit card, and they aren’t one giant lump sum, as a loan. With a line of credit, you can take out a credit limit, but only use what you need when you need it, without collecting interest on the entire limit. This makes it similar to a credit card. It’s great for working capital because it’s there right when you need it, if you take it out in advance, and it doesn’t gather interest if you’re not yet using it. 

There are also working capital loans, which aren’t as ideal as a line of credit but can come in handy when and if there’s an immediate need for working capital.

Working capital can signify a measure of a business’s efficiency, liquidity and short-term health. If you need help meeting your working capital needs, contact FaaSfunds today and we can help you figure out a working capital solution.

Capital One, Chase, American Express – these are all credit cards on the market. You can use them for your personal finances, but you can also use them for your business finances. 

What Is a Business Credit Card?

To go back to the basics, a credit card itself gives you a credit limit, usually based on your credit history, and you’re able to spend any amount up to that limit. By using a credit card, you don’t spend your actual money until you go to pay it off, usually monthly. The amount you spend, however, acquires interest. Most business credit cards currently have an average interest rate of around 18.31%, according to  Wallet Hub. 

As for the business side of having a credit card, this gives you the ability to separate personal and business finances. It also gives your business a way to use credit for short-term expenses. If you have employees who regularly do work outside the business, take clients to lunch, or do handy work, having a business card can eliminate the need to compensate them for spending their personal money, making things easier as a business owner.

Why Do You Need a Business Credit Card?

Getting a business credit card can help build a profile and improve your chances of getting credit or loans in the future, along with helping you to get better borrowing terms. Just like a personal credit card, you can use it to buy short-term needs or provide a cushion for emergencies. It’s also usually a good idea to keep your business and personal finances separate, so using a company credit card is ideal if you want to separate the two for tax and legal purposes. This way, you don’t mix up your business debt with your personal ones, and you can keep organized.

And, as mentioned before, if you’re going to be doing a lot of client meetings or relying on employees to buy supplies, giving them a business credit card can save time and paperwork. If you own a small restaurant but rely on a manager to keep the place running, giving that manager access to a business card to make purchases on behalf of the business makes operations easier. If a light fixture needs replacing, or a window needs repair, having a business card can cover those costs all while making their purchase simpler. 

How Do You Get One?

Most lending institutions offer business credit cards, and the process is similar to the application for a personal credit card. Sometimes, you’ll have to back the business credit card with a personal guarantee, which is similar to a guarantor agreement or a collateral agreement. This will hold the individual applying for the card liable if the business defaults on payments, and could affect your personal credit score if that’s the case.  

You can get a business credit card using your personal Social Security number if your business doesn’t yet have an employer identification number. Card issuers will underwrite the application using the same process as they would for a personal credit card application.

As with most credit cards, they’ll have higher interest rates than other types of borrowing. Lines of credit will have lower interest rates but are very similar to credit cards. Definitely explore your options if you have a different type of spending in mind.

Which Business Credit Card Should You Get?

The type of card you should get depends on your business needs, your credit history, and several other factors. Your best options will vary, but Nerd Wallet’s top four business credit card recommendations are American Express’s SimplyCash Plus, Capital One’s Spark Cash for Business, Chase’s Ink Business Preferred and American Express’s Blue Business Plus.

These are just suggestions, and your best options will vary depending on the factors mentioned above. 

Keep In Mind

Every business should probably have some sort of business credit card, but remember that it’s suited best for certain kinds of purchases. Credit cards have higher interest rates than other forms of debt, so they should usually only be used for small purchases. Lines of credit are another good option that’s very similar to a credit card but with lower interest rates. They aren’t as easy to qualify for, but can provide a good working capital cushion if that’s what your business needs. 

Business credit cards are great ways to build credit, however. If you have a newer company and want to qualify for loans in the future, a credit card is an easy way to use small purchases to build credit. 

Never use a credit card for what a loan should be used for. If you’re looking to invest in a large purchase, such as for equipment or real estate, consider a business loan like a term loan or an SBA loan.  

Start your path to financial literacy and begin making better business financing decisions. It’s free to register, just click the link below.

That’s Business

Every business sector has its flaws, and finance is no exception. There’s always a catch when you’re dealing with money, and at FaaSfunds, we’re here to make sure it’s not a Catch-22. With so much to understand and be careful of dealing with business funding, we’ve made a guide to help you make smart financial decisions.

There will never be free money. Even if you apply for grants or seek investments from angel funds, there’s always going to be requirements and paybacks that not everyone can meet. Loans aren’t free money, either, and there are several things you should be aware of before you apply. Since money is a business itself, lenders are out to make a profit off of your debt, so it’s good to be aware of their practices.

According to Harvard Business School, small businesses are the driving force of American job creation. In the 15 years leading up to the 2010 census, small and new firms were responsible for creating two out of every three new jobs. Small businesses are obviously vital to the American economy, so why is having one so hard? In order to have a successful small business, it’s important to understand every aspect of your finances and maintain your debt. Here, we’ll explain the good and bad sides to maintaining business finances and getting funding.

Business Debt

Debt isn’t technically a bad thing, as long as you know how to use it. According to the Federal Reserves Small Busines Credit Report for 2018, 70% of businesses have outstanding debt. But the thing is, lenders are going to let you acquire new debt if they trust you to pay them back, and the only way to do that is to have a proven track record or repayment.  

The Bad News

According to Steve Goodrich, managing partner of North End Financial, in an article for Fundera, the single best predictor for paying off debt is the number of years a company has been in business. Roughly 50% of companies survive past the five-year mark, and if they can make it past that, it’s a pretty good indicator that they’ll succeed in the long run. After that five year mark, it’s significantly easier to get funding. 

But what about in the meantime? That’s the catch with getting a business loan – if you’re a new business and don’t have a track record yet, it’s a lot harder to get a loan. The odds are seemingly stacked because already established businesses that turn a profit are usually the only ones likely to get funding. Startups are hard to get business funding because there’s no way to evaluate them.

This is where personal credit comes in. Often, when a business is just starting, owners and founders have to get funding based on their personal credit score. This can be good and bad. If you’re just starting a business, it’s a good idea to try and build up your personal credit first.

The Good News

The good thing about trying to find business funding as a new business is that there are options, albeit they’re rarer. How does any business get started, then, if it’s so hard? The answer lies in raising capital. For more technology/online-based, scalable businesses, they’ll often go to venture capitalists and investment funds. For more concrete, community-based businesses, options can be more limited.

Grants are hard to acquire, but finding investors can be a little easier if you have a solid business plan. There are sites specific for pledge crowdfunding (Kickstarter, Indiegogo), and even newer sites popping up for something called equity crowdfunding – where accredited (and according to some state laws, non-accredited) investors can give money to companies and instead of receiving a product or swag, they receive a stake in the business.

There are also loans structured specifically for startups. The Small Business Administration has a microloan program, which gives small loan amounts to budding businesses at very reasonable rates.

If you’re looking for a traditional loan, or feel it would work best, people were the least dissatisfied in 2018 getting financing from a small bank, according to the Federal Reserve. Of those who got small bank loans last year, only 46% reported facing challenges, as opposed to 53% with large bank loans, and 63% with online lenders. 

Within those numbers, however, the reasons for being dissatisfied varied. The most cited issues with small banks were their waiting times for approval and funding, and the most cited issue with online lenders were their high-interest rates and unfavorable repayment terms. 

But then there’s the logistics of getting business funding, like how much of a credit risk your business is. Small banks only approve 47% of those considered “high credit risk,” as opposed to 76% for online lenders.

These are all the things you’ll have to take into account when trying to get business funding. If you have bad or little business credit, an online lender might be your best option, even though they have higher interest rates.

Do Lenders Want You To Succeed? 

The world of finance isn’t really structured to help small businesses succeed. It’s more or less structured to keep big businesses successful. Just remember, lending is a business too. If you can’t pay or keep up with their terms, they’ll do whatever they can to get money from you. If you’re starting a new business, there are some things you should keep in mind that will not only set you up for success but also help you make a case to get funded. 

Tech market intelligence platform CB Insights compiled a list of the top reasons that startup businesses don’t make it. At the top of the list was a lack of market need – of the failed businesses included in the research, 42% of them failed because they didn’t fill a market void, or there wasn’t a demand for their product. It’s important to analyze the market you’re looking to enter – whether it be a tech market or a retail market – to make sure that there’s an actual need for your product. You wouldn’t make a lemonade stand in the middle of the winter in Minnesota, would you?

The next most popular reason businesses fail, unsurprisingly, was running out of cash. 29% of failed startups cited this as the reason they didn’t make it. Next came not having the right team, getting outcompeted, and then finally, pricing and cost issues. Most businesses surveyed were within tech-related fields, but even if you’re not a tech startup, there are valuable lessons to be learned from the failure of other businesses.

So What Does All This Mean?

When you want to get your business funded, there are a lot of obstacles you’ll have to face. That’s the ugly side of business financing – it’s like a game of blackjack, and you have to play your cards right in order to guarantee you’ll come out of it successfully. Some of it is luck, and a lot of it is skill.

If you want help, though, that’s why FaaSfunds is here. If you’re starting a business and want to build your business credit, or you’re looking for funding options, or you’ve been around for a while and want to know what your next move should be – FaaSfunds is your go-to business finance tracker and funding advisor. We’ll match you up with the funding that best fits your business, no matter your credit score or financial history. If you want to know what FaaSfunds can do for you, click the button below to get started today.

Let’s break it down: what do you get at FaaSfunds that you don’t get with a traditional loan broker?

FaaSfunds is similar to a loan broker in the sense that we facilitate and consult business loan deals. We connect businesses that need funding to lenders. We have a marketplace of dozens of lenders ready to work with businesses to finance their purchases. Through this service, we open up business loan options to businesses who need funding. This relationship between us, business and lender are mutually beneficial – every party benefits and we pride ourselves in being able to provide the best deal, every single time.

With FaaSfunds, you’re able to get several key things you don’t get with a loan broker:

  • Faster service
  • Greater efficiency with our smart application
  • No “shotgun approach” to running credit
  • Decision-making control
  • Transparency

Faster Service

We get you the best deal without hesitation. Once you enter your credit information, you’ll know your options almost immediately. FaaSfunds, though our unrivaled software, is able to compare your financial information with data points from lenders, giving you your best chance of approval and best rates all at once. With a loan broker, you have to wait quite a while for them to apply your information to lenders, and even longer to hear back.

Efficiency

Our application is smart, and that makes it easy. This streamlined application process means you only have to enter your information once, and you’re immediately connected with the business loan options you need. This saves you time, and it saves you labor. Instead of having to apply to several loans, and instead of having to wait for a broker to do their thing, you’re able to do it for yourself almost immediately. That way, you can stress less and spend more effort on running your business.

We Don’t take a “Shotgun Approach”

Generally, a “shotgun approach” is a strategy used by loan brokers to shop your business loan in a way that applies you to several loans at once, and in turn, this runs your credit multiple times. Multiple inquiries into your credit can sometimes affect your credit score, bringing it down. At FaasFunds, we don’t apply you to several loans at once, we only show you the loans you’re most likely to qualify for and their rates, putting the best rates first. That way, you can choose which funding option you want, and only have one credit inquiry at a time.

Business Loan Flexibility

We offer flexible control of the decision-making process. Since you can fill out everything on your own and immediately see your options, this gives you the power to decide what you want. We won’t pressure you to choose something you don’t want, we’re only here to help you make decisions and figure out what’s best for your business. You can change your mind without getting trapped. Since you get to see what you’re options are, and you have the power to decide what you want, we just give you the tools and information to make informed decisions.

Business Loan Transparency

You’re able to see every step of the process. You can see where your application is in the funding process, and this means you’ll be informed every step of the way. There’s no more guesswork, now you can see what’s going on for yourself. We offer this open and transparent application process to make sure you know what’s going on, and you can know all your options.

To get you the best deal, we offer you all these things a loan broker doesn’t. At FaaSfunds, we’re changing the funding game but helping you to make informed financial decisions while still giving you control and transparency in the funding process. A loan broker is no longer the only one who can help you make business loan decisions, and even though FaaSfunds is via online software, we’re still a team of real people who care about your financial health. That’s why you’ll have a funding specialist readily available to answer any and all of your financial questions. We’ll help you monitor your business credit, and even after you receive a loan, we’ll be there to help you take a plan of action to improve your credit in the future.

Contact us today to find out what we can do for your business finances, and how we can help you get funded.

What are Broker Fees?

Often, when you make purchases online, you’ll notice a fee tacked on to your total when you check out your shopping cart. These are transaction fees. Whether it be concert tickets, a hotel or an Airbnb, there are included fees that cover the site’s facilitation of your sale. They’re connecting you with a seller (Ticketmaster, for example, sells tickets for an artist or a venue), and naturally, they’re going to charge you for that connection.

In this same way, broker fees are service charges by brokers for executing transactions. Brokers are intermediaries between a sale and a purchase, so their fees cover their facilitation services – they help buyers make informed purchases. It’s usually a buyer that pays them, not a seller.

What services do brokers provide? Usually, they’re responsible for consultations, negotiations and carrying through the actual sale. That’s what they’re being paid for – facilitating a sale, and providing this service to buyers and sellers.

In the equipment industry, equipment leasing brokers are connectors. They match businesses that can’t afford to buy equipment outright with lenders, and also with equipment dealers. Lenders finance the transaction, and the equipment dealers complete a sale. When it comes to getting business loans, commercial loan brokers connect you with commercial loans. They’ll take your business information and apply to different small business loans in order to find you the best rate and deal.

Often, if you end up using a loan broker’s services, the fees will either be paid to them directly or included in the cost of the loan. Depending on the broker, they’ll only charge you if you get the loan, but some will charge you even if you don’t. In most cases, unless you possess a significant amount of knowledge about the financial industry surrounding loans, a broker can save you a lot of time and stress – they do a lot of the heavy work for you.  

What are Brokers Good For?

Commercial loan brokers save time. If you’re wanting to go directly to a lender, they’re not going to tell you all of your options – they’ll only tell you their option. Doing this individually for each lender takes a lot of time, so a broker does all that work for you.

Loan brokers usually get you a better loan rate than you could get on your own because they go to multiple lenders. Not to mention, they have experience in the industry – they know a lot about what they’re doing and they have established relationships with different lenders. They can interpret the terms and financial jargon, and help to clear things up for you if you’re not used to the complicated language.

But How Much Do They Cost?

Loan brokers are relatively unregulated. “Small business owners are increasingly likely to encounter brokers who are out for themselves,” said Brayden McCarthy for Forbes. “In fact, unscrupulous players have emerged like wolves in sheep’s clothing, and are deliberately building tricks and traps into the loan process to pad their pockets and ensnare borrowers in a cycle of high-cost debt.”

This leaves a lot of room for the business owner to get taken advantage of by predatory broker practices. It will take time and effort to research and choose a broker, and you’ll have to make sure you ask them all your fee-related questions upfront. The cheapest loan brokers will be those working with community banks and credit unions, and those helping to secure SBA loans. Their commission usually ranges from 1%-3%, but this is often only for small banks, and those types of loans are the hardest to secure, especially SBA loans.

Other loan broker fees range in price. Often, lenders will pay brokers compensation for referral, but that doesn’t mean that the broker will pass that on to you by making you pay less. Brokers can charge up to 25%-30% in commission on the loan you receive, which can be pretty steep, especially if you’re borrowing a larger amount.

What Does FaaSfunds Offer?

You should always be cautious about where you’re putting your money when it comes to loan brokers. If you’re iffy on the whole concept, FaaSfunds offers an alternative to brokers. We facilitate a loan just like a broker, but we use a much more efficient approach. Using an automated process, we instantly let you know the lender who will give you the best rates and terms, much faster than a broker can.

We don’t run your credit multiple times, either. FaaSfunds doesn’t apply you to the loans (also known as a “shotgun approach”), we only compare your financial information with data points from lenders, letting you know what you’re most likely to get approved for and which places will give you the lowest interest rates. By leveraging technology instead of human brokers, we’re able to offer funding with lower fees, as low as 2.9%.

We want to help businesses make informed funding decisions, sans the broker. We also offer consultation and advice, and when you sign up, we’ll give you access to a knowledgable advisor. We’ll answer any and all questions you have – we just want to help you make the best decisions possible for your business.