Pros and Cons of a Revenue Based Loan
Because of major bank loan tightening rules.. the unconventional style of lending called Revenue Based Loans are becoming more and more popular…
Reserves are being kept at the Federal Reserve rather than lending to consumers for auto loans, personal loans and/or business loans.
Without expansion from large and small businesses, the private sector growth will not happen… money trickles down and if there is no money in business… there is no money in homes…
A “large” business (Wal-Mart, GM, Exxon Mobile, Apple, Google, Amazon, etc.) can access capital at any time, they have larger reserves than some major banks and every investor in the world wants a piece of their business.
Small business have virtually no access to the capital that major businesses have… 99.7% of all businesses in the US are small business… that makes it very difficult to expand a business.
Revenue based loans are loans that small businesses can access because they are based on the revenues of the company that is healthy with good cash flow. This would allow a small business that is growing to access funds that they would not normally have access to. If a business is not in the business of growing… they probably should not be in business…
Revenue based loan programs were created by private equity capital looking to invest in small to midsized businesses.
These loan programs collateralize one thing, a company’s revenue.
To qualify a business will have to understand that revenue being generated as well as the business credit, the ownership’s personal credit and the industry the business is in will all have an impact on the underwriting decision process.
Revenue based loans have many benefits that a small business will find appealing and this is proven by the thousands of business owners across the country who use these products…
Some basic qualifications to consider…
– Must have 2 years of Federal Tax Returns or 6 months of Qualified Cash Flows
– Must have $10k in Cash Flows a month
– for RE Commercial Loans – minimum 4 units, no limit
– other qualifications may exist… please contact us for a free dialogue of your business needs… 801-404-2833
But there are Pros and Cons to any loan program and we want to show what we feel are key points…
- More Accessible Than a Bank Loan. More businesses than ever before are turning to revenue based lending.
- Minimal Credit Requirements. Revenue based loans use credit to determine terms, not eligibility. A big plus for entrepreneur’s.
- No Collateral Required. The only collateral considered is the revenue being generated by the business, such as receivables, real estate, etc.
- Simple Application Process. There is little documentation required for revenue based loans, making it a quick, simple loan process start to finish.
- Funds Quickly. Business owners can usually access cash within 48 business hours.
- Builds Business Credit. Making payments on time will always create a better business credit rating with Dunn & Bradstreet, Equifax and Experian.
- Interest and Fees are Tax Deductible. Interest and Fees become an eligible tax deduction that will offset the cost of the business loans.
- Certain Industries May Not Qualify. Some industries are considered higher risk than others, but most industries are eligible for revenue based loans.
- Could be More Costly Compared to Traditional Bank Loans. Traditional loans charge interest, revenue based loans assess a flat fee relative to the size of the loan. This style allows additional options and wider eligibility.
- Small Daily Payments. Daily ACH payments can be seen in both positive and negative ways, depending on how the company gets paid and handles their cash flow.
There are plenty of options when it comes to financing a business. Deciding which route to take comes down to determining which factors are most important to the success of the company. You can learn more about business revenue loans and other loan programs at http://bentleycapitalventures.com/2014/05/27/the-definitive-guide-to-revenue-based-loans/
– See more at: http://bentleycapitalventures.com/2014/07/02/pros-and-cons-of-a-revenue-based-loan/#sthash.Ltan9qE3.dpuf
For a free analysis and discuss with a qualified loan agent – call 801-404-2833 and leave your name, number and funding need…