Kabbage Review 2023 –  Easy Approval for Small Business Loans

Kabbage logo

Kabbage from American Express is an online lending platform for small businesses. It offers a range of financial solutions for small businesses including Kabbage Funding, Checking, and Payments. In this Kabbage review, we’ll cover its business bank account and business lines of credit for small businesses.

Kabbage offers business lines of credit from $2,000 to $250,000 for borrowers with FICO scores of 640 and above. We will also briefly review its online business checking account and payment processing services in this all-inclusive read. 

Our Verdict

Kabbage logo

Kabbage

Visit

Kabbage Funding has straightforward eligibility requirements and has a very simple application process requiring minimal documentation. With an estimated annual percentage rate of 9-36%, Kabbage loans are a great option for small business owners who have a credit score of 640 or higher. 

It offers you quick access to funds as application approval may take only a few minutes and the funds get deposited into your account within three business days. Its drawbacks include a complex monthly fee structure, which has different rates for 6,12, or 18-month repayment terms. Loans here also require a personal guarantee and aren’t the best option for new businesses.

  • Simple application process
  • Application approval may take only a few minutes
  • Reasonable eligibility requirements
  • Complex monthly fee structure
  • No long-term repayment options
  • Requires personal guarantee

Kabbage Funding, Checking & Payments at a Glance

Kabbage from American Express Logo

Kabbage was founded in 2008 and acquired by American Express in 2020. The financial technology company is best known for its small business loan services but offers other financial solutions too. The business checking account is the first checking service by American Express offering an APY of 1.1%.

Kabbage Payments makes it easier and more affordable for you to get paid with transaction fees as low as 2.25%. This suite of services makes this an all-in-one solution for your small businesses’ financial needs.

With Kabbage Funding, you can get business lines of credit ranging from $2,000 to $250,000 with refinancing terms of 6, 12, or 18 months. The lender doesn’t charge conventional interest. Instead, it charges a monthly fee of 0.25-3.5% depending on the repayment term you opt for. This ultimately results in 9-36% APR. 

When it comes to funding speed, Kabbage doesn’t guarantee same-day funding but its service is as fast as that. Loan application approval usually doesn’t take more than a few minutes and funds are always accessible within three business days. This is also why we’ve ranked Kabbage loans as one of the best small business loans for ease of approval.

Why Kabbage
Source: Kabbage

Who Kabbage Funding is Best For

Getting a small business loan from this is a great option for you if you’ve got less than a perfect credit score, and want fast access to working capital. It doesn’t pay a lot of attention to traditional financial history, so getting your loan approved might be easier if you’ve got a weak credit report.

That said, Kabbage loans aren’t best for new businesses and those that don’t have a business checking account. You need to open a business bank account to be eligible for a loan from this lender. Plus, if you’re looking for longer repayment terms, you’re better off looking elsewhere as the longest repayment period offers is 18 months. 

Kabbage Loan Details That You Need to Know

Here’s a summary of Kabbage’s business lines of credit, the amount you can borrow, for how long, and what you have to pay to the lender. 

Loan Details

Pricing

Loan amount

$2000 – $250,000

Repayment terms

6,12 and 18 months

Monthly Fee

  • 6-month term: 0.25-3.5%
  • 12-month term: 0.25-2.75%
  • 18-month term: 0.25-2.5%

Estimated APR

9.00-36.00%

Repayment Schedule

Monthly

Other charges

  • No application fees, origination fees, annual fees, or account maintenance fees
  • No prepayment penalty
  • Late payment or unsuccessful payment fees may apply

Accessibility

Available in all 50 states

Funding Speed

Approval may take only a few minutes. Funds are deposited within three business days

Kabbage doesn’t use traditional interest rates to calculate what you have to pay for its lending services. This means understanding the fees is not as straightforward as it is for other lenders. We’ve mentioned what percentage of your loan amount you may expect to pay as a monthly fee along with the repayment amount. The exact percentage depends on the repayment term you choose, your credit score, and a few other factors. 

If you are interested in opening a fee-free business account, here is a detailed Bank of America Review, NBKC Bank Account Review, and Novo Review packed with information about the pros, cons, and alternatives.

Kabbage Funding Features

Kabbage’s business line of credit is only one part of its services. The online lending platform also offers business checking account services that are considered one of the best small business bank accounts. Not to mention its payment processing services that make Kabbage a versatile financial toolset. Let’s talk about some of the best features it has to offer. 

Screenshot of Kabbage homescreen
Source: Kabbage

Fast Access and Approval to Working Capital For Expedited Loan

If you’re looking for expedited loan approval, need access to funds fast and are willing to pay extra for quick service, Kabbage Funding is a great option for you. It doesn’t offer same-day business loans but its services are as fast as that. Approval only takes a few minutes, and you’ll rarely have to wait for more than that. Once your loan application is approved, the lender guarantees funds will be available to you within three business days. 

Kabbage Loan Eligibility Requirements

Kabbage Funding has fairly straightforward loan eligibility and approval requirements. To be able to apply for a loan, you must fulfill three basic requirements:

  • A personal credit score of 640 and above
  • Be in business for at least 12 months
  • Disclose annual revenue (at least $50,000)
  • Have a valid business checking account

Kabbage doesn’t publish the exact annual revenue you need to be eligible, but $50,000 is a good ballpark figure. However, it does mention that your annual business revenue impacts the credit limit you qualify for. 

Note that fulfilling these requirements does not guarantee loan approval. But you can say that meeting or exceeding these criteria increases the likelihood of you acquiring funding from Kabbage. 

Simple Application Process of Kabbage

Kabbage offers a fast and easy loan application process that you can complete online. You can either use the Kabbage site or mobile application to submit your application and the whole process won’t take you more than 10 minutes. 

All you need to do is create an account on Kabbage, connect your business checking account to it, and provide some basic information. Before you submit your application, the lender will ask for your consent to access your credit history. Once done and Kabbage is able to verify all the information needed, you should get a decision within a few minutes. 

In case of a hiccup or if your application needs further review, you might have to wait for four to seven business days. If you’re approved, Kabbage will send you a loan agreement that lays out all important aspects including the line of credit amount, repayment term, and monthly fees. Once you sign it, you can expect the funds to land in your business account within three business days.  

Sales & Advertising Transparency of Kabbage

The lender discloses all figures and fees on its homepage, making it easier for you to have a clear overview of what its lending service will cost you. The application procedures and terms of service are easily accessible on the Kabbage website which means it does a great job when it comes to sales and advertising transparency. 

Kabbage’s resource center does a great job of answering any questions you may have about its services. Getting your head around its complicated monthly fee structure is a bit tough, but it’s the only drawback we can identify. 

Kabbage Customer Reviews

Kabbage used to have pretty impressive customer reviews with an A+ rating on BBB, but not anymore. As of now, it has average customer ratings of almost 3.5/5 on leading review sites like Trustpilot and BBB. 

Screenshot of Kabbage reviews on Trustpilot

Positive reviews here are dominated by customers’ remarks on Kabbage’s easy application process and fast funding. The negative reviews, on the other hand, talk about its low borrowing limits, short repayment terms, and slow customer support. 

The Alternatives Sites to Kabbage 

While Kabbage has a simple application process and offers fast funding, its repayment terms and low borrowing limit may not suit your business.  If you think Kabbage isn’t the best option to get your business line of credit, there are quite a few alternatives you should explore.

Compared to Kabbage Funding, Fundbox offers a wider range of financing options, including business lines of credit and term business loans. This lending service doesn’t rely on your personal or business credit scores only to approve your application. 

Fundbox and Stripe have joined forces to provide businesses with even more access to working capital through Stripe Apps. Stripe customers can now access a Fundbox Line of Credit directly from their Stripe dashboard.

Fundbox offers fast, easy access to working capital and spend management solutions for small businesses. After installing the Fundbox app for Stripe, you can complete easy, paperless application directly from your Stripe Dashboard and you can get a credit decision in as little as 3 minutes. If approved, funds can be available as soon as the next business day—with weekly payments, flexible repayment terms, and no prepayment penalties.

It has no minimum credit requirement which makes it a great option for borrowers with poor credit but a strong standing in other departments. Compared to Kabbage’s APR of 9.00-36.00%, FundBox’s APR starts at 8.33% for a 24-week repayment option and 18.00% for a 52-week term.

  • Quick approval
  • May be able to get a second loan without reapplying
  • Auto-payments available
  • Term loans in beta
  • Automatic weekly repayment schedule debited to a bank account
  • Short repayment terms

BlueVine’s line of credit service is similar to Kabbage Funding in quite a few ways. It offers a similar borrowing limit of $250,000 and can approve loan applications within a few minutes. 

With Bluevine, you get one do-it-all business operating account that doesn’t charge you monthly fees and lets you qualify to earn interest like a business savings account.

It offers an impressive 1.5% interest on balances up to $100,000 and is among the highest on the market. Fees do bubble up periodically for things like outgoing wire transfers and cash deposits.

BlueVine offers repayment two repayment terms, six and 12 months. The interest rates on its lines of credit can range between 15% and 78% APR. However, unlike Kabbage, BlueVine accepts businesses with only six months in business. To learn more about its services and pricing, read our complete review on BlueVine.

  • Multiple financing options 
  • Fast access to short-term funding
  • Simple application process
  • Short repayment terms
  • Line of credit has a draw fee
  • Personal guarantee required

OnDeck is a great option if you need quick funding. But it’s not for you if you have bad credit or want a bad credit loan. It offers same-day funding but the interest rate and fees are one of the highest out there. Plus, the business loan agreement comes with several benefits including opportunities to wipe out interest and save money.

Just like Kabbage, OnDeck offers a very simple application process. Its business lines of credit go up to $100,000 whereas term loans can go up to $250,000. If you go for OnDeck’s lines of credit, you will need to make weekly repayments. On the other hand, Kabbage requires monthly repayments.

Depending on the state where your business is located and other attributes of your business and the loan, your business loan may be issued by a member of the OnDeck family of companies or by Celtic Bank, a Utah-Chartered Industrial Bank, Member FDIC. Your loan agreement will identify the lender prior to your signing. Loans subject to lender approval.

  • Prepay and remaining interest waived
  • Loyalty program – take out a new loan and existing interest waived
  • Consistent payment amounts
  • Personal credit score, annual revenue, and other loan requirements
  • Weekly repayment

Needs good credit score

Frequently Asked Questions (FAQs) for Kabbage Review

Here are some of the most frequently asked questions about Kabbage Funding. Go through this section to find answers to some of your unresolved questions. 

Bottom Line on Kabbage Review

Kabbage Funding can be a relatively expensive option, so we recommend it only if you’re looking for fast financing. We advise you to fully understand all associated fees and the total amount you’d be paying before you sign the loan agreement.

Kabbage only offers six, 12, and 18-month repayment options so if you want refinancing time more than that, you might be better off looking somewhere else. That said, Kabbage is still a very good option if it meets your funding needs. Not to mention its business checking and payment services that make it a versatile financial service provider. 

Best Business Bank Accounts by State

Below you will find an interactive U.S map that can help you locate and compare different banks and financial institutions that offer business accounts in your area.

AL AK AZ AR CA CO CT DE FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY DC

What Is a Business Line of Credit & How Does it Work?

A credit card on a bluish tech background

Lack of capital is a leading reason many small businesses fail in their first year or soon after. Fortunately, the right business financing option can help your startup survive cash flow hiccups. A business line of credit is the ideal solution.

What is a business line of credit, and why should you consider it as a financing option? Read on to find out.

What Is a Business Line of Credit?

A business line of credit is a revolving financing option you can draw from whenever you need money for business expenses. However, a line of credit has a fixed limit for the amount of money you can withdraw.

Once you get a line of credit, you can make multiple withdrawals until you reach the limit. There will be a stipulated repayment period which you should honor to avoid higher interest or having your line terminated.

Types of Business Lines of Credit

There are two main types of credit business lines: secured and unsecured credit lines.

Secured Line of Credit

A secured line of credit is where the lender requires collateral to approve your loan request. Collateral can be assets such as property, business inventory, or accounts receivable.

Most lines of credits offering higher amounts of money are usually secured. Many lenders are reluctant to give unsecured loans to newer businesses, so keep this in mind when applying for a line of credit.

Unsecured Line of Credit

An unsecured business line of credit is when you don’t need to give any collateral to qualify for a loan. Instead, your lender will need proof of good personal and business credit rating and financial statements showing annual revenue and profits to help them gauge risk.

Also, they’ll impose higher interest rates on an unsecured line of credit than on a secured one. An unsecured business line will typically offer lower credit limits than secured types.

Requirements for a Business Line of Credit

Before a lender can consider you for a line of credit, they’ll need to access your business to determine your risk.

Many of the requirements for a business line of credit go towards proving your business’s financial health and your ability to make payments. How well you meet the requirements will determine the limit your lender gives you.

Here are some of the things lenders check before approving credit requests.

Financial Statements and Reports

About 50% of startups fail in the first five years of operation. Hence, creditors need financial statements and tax reports to decide whether to give you a line of credit. With these, they can determine whether you’re generating enough revenue to support your line of credit payments.

Operating Time

Most lenders require you to have been in business for at least a year to consider you for a line of credit. Large banks will often only approve you if you’ve been in operation for at least two years.

Being in operation for a more extended period with sound financial health is proof that your business is making good revenue, which presents less risk to the creditor.

When you’ve not been in business for very long, you may have difficulty accessing a line of credit. If a lender does approve you, they’ll probably impose a high-interest rate and require collateral.

Credit Score

Some lenders have a set minimum credit score that small business owners must meet before they can approve requests for a small business line of credit. The higher the amount of credit you want, the higher the minimum credit score you’ll need to meet.

Note that lenders will need to see your business credit score besides your individual one, so open a business bank account to start building your score.

If you have a poor personal or business credit score, you might want to check out the best bad credit business loans available today.

Collateral

To get a secured business line of credit, you’ll need to provide collateral. Collateral could be anything from business assets to real estate equity. Banks are more likely to give you lines of credit if you can provide qualifying collateral.

Personal Guarantee

What happens if you cannot pay back your used credit amount? Your bank may require you to provide a personal guarantee as the business owner. A personal guarantee allows them to hold you individually responsible if you cannot repay the small business loan. In such a case, they may take your personal assets as collateral.

When Should You Get a Business Line of Credit?

Different types of small business loans come in handy when your business fails to generate enough capital. However, it’s best not to wait until you’re in financial trouble to apply for a business line of credit.

The best time to get a credit business line is when your business is doing well.

One reason is that when your company has good financial health, lenders will be willing to lend you higher amounts at lower interests.

Secondly, applying for a line of credit can take time, which is inconvenient when you need immediate funding. Having a line of credit on standby means that you can access it immediately when you need money.

Reasons To Get a Business Line of Credit

As a small business owner, you’ll need funding at different times for various reasons. To keep from getting into debt trouble, it’s crucial to get the right loan for the correct purpose. A business line of credit could be your best option to:

  • Get working capital.
  • Buy new equipment.
  • Acquire extra inventory for a busy season.
  • Hire new staff.
  • Take advantage of time-limited opportunities.

To Get Working Capital

Many startups lack working capital for daily business expenses for reasons such as delayed payments by clients or seasonal cash flow gaps. Both are temporary setbacks that you should not allow to run your business into the ground.

A business credit loan can provide you with the working capital you need while waiting for clients to fulfill your accounts receivables or for sales to pick up again. Since both scenarios may be repetitive over the years, a line of credit with a fixed amount you can draw from regularly is more suitable than a term loan that only gives you a lump sum amount once. You can also read here the best banks for startups to get more information.

New Equipment Purchase

As your business grows, you may need to buy new equipment to expand operations and meet rising demand. Having a line of credit available to you allows you to draw funds to buy the new equipment immediately.

Acquiring Extra Inventory for a Busier Season

Various industries have business seasons with higher demand than the rest of the year. You’ll need extra inventory to take maximum advantage of the increased activity when this time comes.

Since this increases your expenses, it might be challenging to pay for the new inventory with your usual cash flow. Drawing from a line of credit comes in handy at such a time.

Also, due to the guaranteed higher returns from a busier season, you’re more assured of making enough profits to pay back your drawn amount in the provided repayment period.

Hiring New Staff

Sometimes, hiring new staff is necessary to keep up with a growing business. Before your revenue can support the added payroll expense, a business line of credit will help you successfully manage cash flow shortage.

To Seize Time-Limited Business Opportunities

It’s possible to receive an opportunity to grow your business, such as acquiring a new high-paying client, when you don’t have enough resources to deliver the required services. Getting a line of credit allows you to cover any capital shortage to take on new opportunities and grow your business.

How Can You Benefit From a Business Line of Credit?

Having a line of credit brings many benefits to your small business, including:

  • Flexibility.
  • Lower costs.
  • Accessibility.
  • Credit score improvement.

Flexibility

Flexibility is the most significant benefit small business owners get from business lines of credit. A line of credit allows you to withdraw funds multiple times as long as you don’t exceed the total credit limit and pay back the cash you’ve used.

You also don’t need to apply for access each time you need money. All you have to do is withdraw cash, then ensure to repay it within the provided repayment window. In a way, it’s similar to having a savings account you can access at any time.

Lower Costs

Generally, business lines of credit are less costly than a traditional small business term loan. First, you’ll be paying interest only for the amount of money you withdraw. For instance, if you draw $30,000 from a business line of credit with a $50,000 limit, you’ll only be required to pay interest on the $30,000 you’ve used.

Second, most lines of credit don’t have early repayment penalties compared to traditional loans. This allows you to pay back used funds as soon as possible without worrying about penalties and get access to more cash.

However, note that the costs associated with your credit line mainly depend on the lender you use. Costs you may need to cover include origination fees on application, a monthly maintenance fee, inactivity, and draw fees. When looking for a line of credit, consider one that doesn’t have a lot of charges.

Another important thing to remember is that your credit line costs will increase sharply if you’re late for payment or withdraw beyond the agreed credit limit. To avoid these scenarios, apply for a line of credit that gives you an ample limit and only withdraw funds you can repay within the provided payment period.

Accessibility

For many businesses with bad credit, a credit line is easier to access than a traditional (bad credit) term loan. This is partly because you can get the lowest limits with a line of credit, and some lenders will be willing to give you one if your cash flow is healthy despite having bad credit.

Credit Score Improvement

Many small businesses struggle paying monthly payments on high-interest loans that they receive as a lump sum, affecting their credit scores. A line of credit allows you the flexibility to withdraw small amounts of cash you can pay quickly, multiple times, which works to build business credit score.

Pros & Cons of Business Line of Credit

Like every other business loan, a small business line of credit has pros and cons. When seeking a credit loan, it’s vital to weigh both the advantages and disadvantages to determine whether it’s the best option for you.

Pros

  • Lower interest rates than other business loans.
  • Provides revolving credit; no need for repeat applications.
  • An excellent way to build your business credit score.
  • Suitable for businesses with bad credit.

Cons

  • May require collateral for approval.
  • Some lenders require updated financial statements after each draw.

Where Can You Get a Business Line of Credit?

You can get a credit line from major banks, credit unions, community banks, commercial banks, or online lenders. Traditional banks typically offer higher limits but have more stringent requirements.

You’re more likely to find a lower limit line of credit from smaller banks, credit unions, or online banks. Also, most traditional lenders are reluctant to give unsecured business lines, while other lenders readily approve credit without collateral.

An online lender is an excellent option if you’re looking for unsecured lines with less stringent requirements. Fundbox is one of the most trusted online lenders you can consider, and it offers lines of credit up to $150,000. Its requirements include 6+ months in business and a 600+personal FICO score.

When choosing lenders, it will help to consider SBA-approved institutions. Lenders are more likely to give you higher limit credit through the Small Business Administration (SBA) because it’s guaranteed by the government.

What’s the Difference Between Business Lines of Credit & Business Credit Cards?

It’s easy to confuse a business line of credit with a business credit card because they’re both revolving loan options. However, several differences distinguish the two.

First of all, business lines of credit give you cheaper access to cash, while withdrawing cash from a credit card comes with hefty fees. Business credit cards are more suitable for paying for purchases electronically. On the other hand, a line of credit is more economical for withdrawing cash to use for various purposes.

Secondly, business credit cards carry higher interest rates than lines of credit. A business credit card will also have higher maintenance fees than a line of credit.

Frequently Asked Questions (FAQs) for Business Line of Credit

Final Thoughts on Business Line of Credit

A business line of credit is one of the most flexible financing options you can get to help you bridge cash flow gaps. It also allows you to seize growth opportunities, translating to better revenue generation in the future. When looking for a business credit line, go for a lender with the most favorable conditions to your company.

The Best Bad Credit Business Loans You Can Apply For Online

Bad credit business loans concept

Keeping a business open these days is liable to leave you with both a need for extra funds and less than stellar credit. Unfortunately, it’s a truism that banks only lend to people who are already pretty financially healthy. The good news is that there are many options for bad credit business loans out there, including a variety of online and alternative lenders. 

Quick View

Lender

Interest Rates

Pre-pay penalties

Term Length

Loan Fees

Application Process

Starting at 7.99%

None

12 to 36 months

Variable fees

Create online profile, funding within 48 hours

8.33%

None

24 or 52 weeks

No application or origination fee

Soft credit pull, receive money in days

Starting at 35%

None

Up to 24 months

Origination fee, late payment fee, returned payment fee, monthly maintenance fees

Apply online for same day decision

Factor rate: 1.15

APR: 9.99%

No info

6 to 18 months

2.5% origination fee and more

Meet requirements, apply online, receive funds same day

Factor rates: 1.10

Early pay-off discounts

4 to 15 months

2.5% origination fee

Apply online and receive funding in 72 hours

Pegged to prime rate

Up to 5% of prepayment

Long term

Varies

Find a local lender, can take months

Quick Verdict

Best Overall – Biz2Credit. While they don’t necessarily specialize in bad credit borrowers, they can find terms to meet most needs.

The Best Bad Credit Business Loans 

Find out more about the best business loans for bad credit available. We found the easiest, most convenient business financing options you can apply for online. With a range of term lengths, interest rates, and more, you’ll be able to find the financing option to match your needs.

Biz2Credit logo

Biz2Credit

Starts at 7.99%

4.6

Biz2Credit asks a lot from their customers, including a higher minimum credit score for a business loan. Small business owners may find it easier to get a working capital loan, which is paid back according to the business’s receipts.

Note that terms start at one year, while other lenders on this list usually offer shorter-term loans. It may be a little harder to qualify for Biz2Credit, but the benefits are better rates and longer terms.

Application process: 

  • Create profile
  • Submit application, including bank statements
  • Decision within 24 hours
  • Funding within 48 hours
  • Working capital and term business loans
  • Longer term loans
  • Weekly or biweekly payments
  • Requires 660 personal credit score, $250k annual revenue
FundBox logo

FundBox

Starts at 8.33%

4.2

Fundbox offers several different financing options, including term business loans and business lines of credit. The service requires you to link accounting software and other information to assess your business. This means they aren’t relying solely on a personal or business credit score, so there’s no minimum credit score requirement to meet and a poor credit score won’t interrupt your cash flow.

While Fundbox has a lot to offer, there are a couple of things to be aware of. First, their term loans are still in “beta,” a term borrowed from software developers for something that’s not 100% ready. 

Also, be aware that Fundbox’s auto-payment always withdraws on Wednesdays. Even if you pay off the loan early, you’ll still have to wait for the next Wednesday payment to roll around.  Fundbox assesses your business’s health, rather than credit score, when deciding to extend a small business loan.

Application process: 

  • Connect accounting software and checking account to assess business health
  • Soft credit pull
  • Select terms
  • Receive money in days
  • Quick approval
  • May be able to get a second loan without reapplying
  • Auto-payments available
  • Term loans in beta
OnDeck logo

OnDeck

Starts at 35%

3.6

OnDeck doesn’t specialize in offering a small business loan with bad credit. There’s also a minimum personal credit rating you’ll need, so a bad credit score may put this option out of reach. However, a term loan with OnDeck offers one big advantage for business loans.

If you need cash flow quickly, OnDeck provides funds as soon as the same day you apply. While the interest rate and fees may make your eyes pop, there may be circumstances when fast financing is worth it. Additionally, the business loan agreement includes a number of benefits, including opportunities to wipe out interest and save some money.

Application process: 

  • Apply online
  • Requires bank statements, annual revenue
  • Receive same-day decision and funds
  • Prepay and remaining interest waived
  • Loyalty program – take out a new loan and existing interest waived
  • Consistent payment amounts
  • Personal credit score, annual revenue, and other loan requirements
Credibly logo

Credibly

Starts at 9.99%

3.5

You can have a fairly low credit score and still be eligible for business loans with Credibly. Poor credit history may impact the interest rates that are offered to you, however. While you may be able to get a business loan with bad credit, Credibly may not be a great option for startup business loans. Your business needs at least a few months of revenue history to qualify. 

Application process: 

  • Provide bank statements, cash flow, and credit information–min. personal score 500
  • Receive funding same day
  • Several business financing options
  • Quick turnaround times
  • Quick Draw funding allows additional loans
  • Requires at least 6 months in business
Fora Financial logo

Fora Financial

Starts at 1.10%

3.2

With terms as short as 4 months, Fora Financial is a great option if you need some additional funds, but only for a little while. Early pay-off discounts make Fora an even more attractive choice for short-term financing.

Business lenders typically take bad personal credit into account. However, Fora has a minimum credit score of 500, which is fairly deep in “bad” territory. As a result, if your business can meet requirements in sales and a few other areas, you may be able to get a business loan matched to your needs. Secured loans and other options for bad credit are also available.

SBA loans can help those with a poor personal credit score get long-term financing.

Application process: 

  • One-page application
  • Provide 3 months of bank statements
  • Funding in as little  as  72 hours
  • Tailored amounts and terms
  • Unsecured and secured business loans are available
  • Open to applications 24 hours
  • Requires 6 months of operation, $12,000 in monthly sales, and no bankruptcies
US SBA Loans

US SBA Loan

Starts at 5%

3.0

One requirement for SBA loans is that every other business financing option has been denied, so in some ways, it’s the last resort option for small business loans. The SBA  arranges and guarantees the loans, giving traditional banks additional confidence in businesses looking for money. Some requirements, like minimum credit score and the length of the term loan, depending on the specific lender.

Interest rates are limited, usually pegged to the prime rate. There are also a range of other protections for borrowers required by the SBA. SBA loans can help those with a poor personal credit score get long-term financing.

Application process: 

  • Find a local lender working with Small Business Administration
  • Gather business documents
  • Can take months
  • Loan partly guaranteed by SBA
  • SBA matches you to interested lenders
  • Fixed and variable rate loans
  • Through traditional bank
  • Can take several months

Choosing the Best Bad Credit Business Loan

You may need to get a business loan to keep your doors open and make enough to pay your debts. Unfortunately, bad credit scores can make getting a small business loan from a traditional bank very difficult, dooming businesses that might have built back to great success. 

Luckily, there are now other options where businesses can get a term loan, merchant advance or other types of financing. These alternative lenders take other factors into account, offer shorter terms, and provide other options that can keep your business operating despite bad credit history.

Interest Rate and APR

Many alternative and online lenders will offer a range of loan options, which allows a business owner to select financing options that best fit their needs. An important factor in that decision is the interest rates on offer, which will determine the bulk of the loan’s overall cost.

Most lenders consider a credit score when determining the rates they offer, including both personal and business credit scores. Small business loans for bad credit scores usually come with a higher rate to compensate for the perceived higher risk. You can expect the loan to end up costing more overall as a result. 

Note that interest rate and annual percentage rate (APR) aren’t the same things, as APR includes some fees. Additionally, some options may not ask you to pay interest, for example, you may be able to find a business line of credit that only charges fees. 

Term Length and Penalties

Most loan options will come with a term length, penalties for non-payment, and a range of other terms. Obviously, it’s important to review them thoroughly as they determine how and when repayment is due, as well as what happens if the loan isn’t repaid. 

Term loans are one particular type of small business loan, one that you’ll commonly find offered by online lenders and which matches most people’s idea of “how a loan works.” A term loan can be particularly difficult to get with bad credit, however. There are other options,  like merchant lines of credit or invoice factoring, that might be easier to obtain. We delve into those options more below.

Loan Purpose

The reason you’re seeking a business loan may actually impact your approval odds. When small businesses are seeking money to expand or grow, approval may be more likely even with a less than perfect credit score. 

Additionally, loans for things like buying new equipment may be easier to get with a poor credit score, as the piece of equipment itself can act as collateral for the loan. The minimum credit score required for different types of financing can also vary, so you may be able to find a lender even with poor personal credit scores.

Loan Requirements

Before paperwork is examined or your business plan reviewed, there are some minimum requirements that may have to be met for loan approval. The requirements can include a specific credit score, though others regarding a business’s health can’t be found on a credit report.

A business loan offered for small businesses might require an open business bank account, a minimum business cash flow, and at least a few months of operation. Some loans might require a personal guarantee from the owner, particularly if the business has bad credit. 

Additionally, some financing options may have specific requirements, like a down payment for buying new equipment or assessing outstanding accounts for invoice financing. 

Alternatives

The financing option most people are familiar with are personal loans structured as a term loan, with interest on the principal being repaid over a specified timeline. Whether it’s an unsecured or secured loan, these loan options can be particularly difficult to obtain with a poor credit score. Small business owners have a wider range of options available to them, however:

  • Equipment financing: Similar to a car loan, the new equipment being purchased acts as collateral for the loan.
  • Invoice financing: Money is borrowed against unpaid customer invoices, allowing you to access some of that money immediately. Invoice factoring is a similar option. 
  • Merchant cash advance: Merchant cash advances involve borrowing money in return for a share of future profits from credit card sales, something that should perhaps be done cautiously.
  • Working capital loans: Short-term loans used to fund day-to-day operations. 
  • Business credit cards: A business credit card functions more or less the same as a personal one. Can be difficult to obtain with bad credit.
  • Business credit line: Business lines of credit are somewhat similar to credit cards, in which you have a running balance you can pay down, with an overall credit limit. The difference is you can borrow and pay back cash, rather than being limited to a card.

In addition to different types of loans, there are other things you can do to improve your odds of getting bad credit business loans. Some online lenders have more generous requirements. Another option may be to sign a personal guarantee, making you personally liable for the loan.

Frequently Asked Questions (FAQs) for Bad Credit Business Loans

Final Thoughts on Bad Credit Business Loans

It’s not impossible to get a business loan with bad credit. However, you may need to do some homework and find the option that best meets your needs and budget. With the mix of traditional and innovative lenders available today, there are options to meet almost every need.

Initial Public Offerings

Stock exchange financial graph and IPO concepts on a plain background

Initial Public Offerings

© Copyright Carter McNamara, MBA, PhD, Authenticity Consulting, LLC.

Initial Public Offerings


Also consider
Related Library Topics

Learn More in the Library’s Blogs Related to This Topic

In addition to the articles on this current page, also see the following blogs that have posts related to this topic. Scan
down the blog’s page to see various posts. Also see the section “Recent Blog Posts” in the sidebar of the blog or click
on “next” near the bottom of a post in the blog. The blog also links to numerous free related resources.


›Return to All About Boards of Directors



(adsbygoogle = window.adsbygoogle || []).push({});


For the Category of Boards of Directors:

To round out your knowledge of this Library topic, you may want to review some related topics, available from the link below. Each of the related topics includes free, online resources.

Also, scan the Recommended Books listed below. They have been selected for their relevance and highly practical nature.

Related Library Topics

Recommended Books


The 6 Best Startup Business Loans & Lenders for 2023

Approved loan application form

Your small business or startup idea could change your life as well as the lives of your customers – but you need the capital to get it off the ground. Small business loans are vital if you want to effectively develop a new business idea or expand an existing firm.

But with so many different small business loan providers and types of loans, it can be exceptionally challenging to choose the right one. Knowing the differences between the various types of loans and lenders is an important part of making the best choice for your business when borrowing money.

Best Small Business Loans

  • LendingTree – Best Startup Business Loan Overall
  • BlueVine – Best  Startup Business Loan for Accessible Credit Lines
  • Lendio – Best  Startup Business Loan for Lender Comparison 
  • Credible – Best  Startup Business Loan for Flexible Options
  • AmOne – Best  Startup Business Loan for Fast Approvals
  • Fundera by NerdWallet – Best SBA Startup Business Loan

Lender

Type of Loan

Loan Limits

Interest Rate

Term length

Personal Credit Score Requirements

Business History Requirements

All types

Up to $2 million

Varies based on lender

Varies based on lender

Varies based on lender

Varies based on lender

Line of Credit

$5,000 to $250,000

Starting at 4.8%

6-12 months

600

6 months

All types

$25,000 to $500,000

Starting at 4.5%

Varies based on lender

Varies based on lender

Varies based on lender

All types

$600 to $100,000

3.99% to 35.99%

Varies based on lender

Varies based on lender

Varies based on lender

All types

$1,000 to $100,000

Varies based on lender

Varies based on lender

Varies based on lender

Varies based on lender

SBA loans, term loans, lines of credit and more

Up to $5,000,000

Starting at 7.75%

Varies based on offer

650

4 months

LendingTree logo

LendingTree: Best Startup Business Loan Overall

4.95

LendingTree is an online lending platform that connects businesses to an extensive range of lending partners. Therefore, LendingTree does not actually originate any loans. Instead, LendingTree matches you with the best lending partner based on your application. LendingTree offers SBA loans, short-term loans, business lines of credit, equipment financing, and invoice factoring.

Why we chose it: LendingTree offers the best small startup business loans because this company matches you with multiple potential lenders. Therefore, you can easily find a loan offer with reasonable terms once you complete the application.

  • Reasonable borrower qualifications
  • Multiple types of financing are available
  • Quick and easy application process
  • You may be subject to additional fees
  • Uninformative website advertising
  • Pushy customer service

Pricing 

The terms and fees for your startup business loan depend on the specific loan offer’s rates. Check out your pricing by filling out the quick LendingTree online application.

Application Process

LendingTree’s quick and simple application process is one of the primary reasons it’s the best startup business loan platform. Since the application is online, you can complete it within 10 minutes. The application asks for your business’s classification, credit score, profitability, and time in business. After you complete the application, LendingTree will show you your startup business loan offers within two minutes.

Borrower Qualifications

The great part about LendingTree is that it’s inclusive of most businesses. Rather than having specific criteria to rule out potential borrowers, LendingTree uses your credit score, annual revenue, and profitability to find a lender willing to work with your business.

Loan Limits

Your specific loan limits depend on which lending partner LendingTree matches you with. That being said, you can ask to borrow up to $2 million on the LendingTree application. 

Terms and Fees

Since LendingTree works with several lending partners, your terms and fees depend on your specific loan offer. For this reason, reading through the entire loan offer is essential. This is the only way to determine if the terms and fees are reasonable for your business to pay off.

BlueVine logo

BlueVine: Best Startup Business Loan for Accessible Credit Lines

4.90

BlueVine is an established online lending platform that provides short-term business lines of credit between $5,000 and $250,000. You can choose from Flex 6 or Flex 12 lines of credit, designed around six and 12-month repayment periods. Therefore, BlueVine is an excellent choice for small business owners that need short-term working capital or startup business loans. 

Why we chose it: BlueVine is the best online lending platform for flexible credit lines because you can finish your application and receive a decision on the same day. This lending platform also considers borrowers with poor credit and six or more months in business. 

  • Funding within one business day
  • Multiple term lengths
  • Low minimum credit score requirements
  • You may be subject to weekly repayments
  • Requires a personal guarantee
  • Unavailable in North Dakota, South Dakota, and Nevada

Pricing

The terms and fees for your startup business loan depend on the specific loan offer’s rates. Check out your pricing by filling out the quick BlueVine online application.

Application Process

BlueVine stands out as one of the best startup business loan providers with a simple and fast application process. You can complete the online application in under 10 minutes. Furthermore, you will receive your loan offers within a few minutes and funding within one business day. 

Borrower Qualifications

BlueVine features more lenient borrower qualifications than other online and traditional lending platforms. However, BlueVine focuses on your business’s cash flow, time in business, and credit score.

Furthermore, BlueVine is one of the best small business loans for startups. This is because BlueVine considers borrowers with just six or more months in business.

Loan Limits

You can access a line of credit and borrow between $5,000 and $250,000 from BlueVine. 

Terms and Fees

BlueVine offers two different payment structures: Flex 6 and Flex 12. Borrowers who choose Flex 6 are subject to weekly payments over 26 weeks. On the other hand, Flex 12 borrowers make monthly payments over 12 months. Furthermore, you can expect interest rates ranging from 15% to 78%. 

Lendio logo

Lendio: Best Startup Business Loan for Lender Comparison

4.82

Similar to LendingTree, Lendio is another loan platform with an extensive lender marketplace. In fact, Lendio lets you compare startup business loan options from more than 75 direct lenders. In addition, your loan can be deposited into your bank account as quickly as 24 hours. Therefore, Lendio is an excellent option for small business owners who need fast cash.

Why we chose it: Lendio is the best startup business loan provider for finding quick and comprehensive loan offers because it provides over 75 loan options once you complete the application. Therefore, you can use Lendio to find the best rates and terms you can possibly qualify for. 

  • Compare loans from over 75 lenders
  • Rapid funding time
  • Can borrow up to $500,000
  • Not a direct lending platform
  • Borrower requirements vary by lender

Pricing 

The terms and pricing for each startup business loan from Lendio depend on which lender it matches you with and your business’s financial situation.

Application Process

Lendio has a 15-minute online application process. Once you finish the application, you receive your decision on the same business day. Therefore, Lendio is a fantastic choice for small business owners who need a quick list of startup business loan options to compare. 

Borrower Qualifications

Since Lendio isn’t a direct lending platform, the borrower qualifications vary depending on which lender it matches you with. It depends on your business’s annual revenue, time in business, and your personal credit score.

Loan Limits

In terms of Lendio’s small business loan limits, you can borrow between $25,000 and $500,000. Furthermore, you can repay the loan over a one to five-year time period.

Terms and Fees

Although your terms and fees depend on your specific loan offers, your APR can be as low as 4.5%. However, your specific terms and fees are based on your credit score, time in business, and several other financial factors. 

Credible logo

Credible: Best Startup Business Loan for Flexible Options

4.73

Credible is another online lending platform that shows you real prequalified rates for loans without impacting your credit score. Therefore, Credible is similar to the two options above and not a direct lender. Instead, Credible matches you with the best potential lenders in its network based on your application and business information. 

Why we chose it: Credible is one of the best lending platforms for startup business loan options because you can check rates from multiple lenders. This lending platform is free to use, and you can see prequalified rates in only two minutes. 

  • Easy prequalification process
  • Multiple lenders
  • Additional financial products
  • You may be subject to origination fees
  • High APR for borrowers with poor credit

Pricing 

The specific rates and terms for your small business loan from Credible depend on various factors, such as your credit score and business financials. 

Application Process

Credible is a customer-focused online lending platform. Therefore, Credible simplifies the loan application process and lets you quickly compare rates from multiple lenders.

Borrower Qualifications

The borrower’s qualifications vary from lender to lender. However, lenders typically view your credit score, proof of income, and debt-to-income ratio to see the type of loan offer they can present. 

Loan Limits

You can borrow anywhere from $600 to $100,000 for a startup business loan from Credible.

Terms and Fees

The interest rate for your Credible loan range from 3.99% to 35.99%. Luckily, you can find your specific terms and fees in just two minutes through the online application process.

AmOne logo

AmOne: Best Startup Business Loan for Fast Approvals

4.67

AmOne is another loan marketplace that matches borrowers with the best potential lender based on personal and business details. AmOne’s lending partners include Marcus, SoFi, Best Egg, Prosper, LendingPoint, and Avant. In addition, AmOne matches you with a list of loan offers within minutes. This lending platform doesn’t require a minimum credit score.

Why we chose it: AmOne offers the best startup business loans with fast approvals since this lending platform doesn’t require a minimum credit score. You can view your loan offers within minutes after completing your application.

  • Simple application process and fast turnaround time
  • No credit score check
  • Range of loan terms
  • Lenders may call you to specify loan terms
  • Must provide personal info
  • Rates by lender

Pricing 

Your loan terms and interest rates depend on your application and business details. 

Application Process

AmOne has a quick application process. You must provide simple information in your application, such as your name, address, income, and date of birth. However, AmOne does not ask for your Social Security number or conduct a hard credit check. AmOne will display your list of loan offers within 45 seconds after submitting your startup business loan application.

Borrower Qualifications

AmOne has a wide range of lending and financial partners that cover the entire range of American consumers. Therefore, approval requirements are determined by each lender themselves. 

Loan Limits

You can borrow $1,000 to $100,000 with your AmOne startup business loan. Although AmOne offers small business loans, you can also take out unsecured personal loans for debt consolidation or home improvement and secured loans to purchase boats or vehicles. 

Terms and Fees

AmOne welcomes borrowers with a wide range of credit histories and business financials. Therefore, your specific rates and terms depend on your application and business financials.

Fundera by Nerdwallet logo

Fundera by NerdWallet: Best SBA Startup Business Loans

4.57

Fundera is a unique alternative lender that acts as both a direct lender and loan marketplace. For this reason, Fundera can fund the entire loan. However, Fundera may also choose to match you with several lenders in its network. This provides the flexibility and speeds small business owners need. Furthermore, Fundera can help business owners with low credit scores. 

Why we chose it: Fundera by Nerdwallet offers the best SBA loans because it offers loans from Cadence Bank and BayFirst. Fundera also offers multiple SBA loan types, including the 7(a) Program, CDC/504 Program, and Microloan Program.

  • Extensive lender marketplace
  • Competitive interest rates
  • Soft credit check
  • Potentially long turnaround time
  • Unclear borrow qualifications

Pricing 

Your Fundera startup business loan’s pricing depends on your specific loan offers and the terms they present. You should compare your options and choose the one with the most reasonable payback terms. 

Application Process

Fundera offers an easy application process and access to SBA 7(a) loans, term loans, invoice factoring, and more. Furthermore, you can receive funding faster than you would at your local bank. 

Borrower Qualifications

The borrower qualifications for a Fundera loan depend on each specific lender. They will look at relevant details such as your credit score and business financials. 

Loan Limits

You can borrow up to $5,000,000 from Fundera with an SBA 7(a) loan. However, you need a minimum credit score of 650. This program includes lenders such as Live Oak Bank and Wells Fargo. 

Terms and Fees

Your interest rate will range from 7.75% to 10.25% for your SBA loan from Fundera. However, you can expect higher interest rates for small business loans, online term loans, and online lines of credit.

Choosing the Best Small Business Loan

Choosing a small business loan can be a daunting task. Not only are there different types of loans available, you’ll also have to choose between different providers that have various advantages and drawbacks. There are significant differences between banks and various alternative lenders. Plus, you may want to choose one of two popular kinds of small business loans: term loans or lines of credit. There are also other credit products like equipment financing and working capital loans.

Loan Provider Options

The first thing to consider is where you go to get your loan. The traditional place for small businesses or startup to get a loan is to apply at a bank. If you don’t think you’ll qualify for a bank loan, either because of poor credit, lack of business history, or other factors like a previous bankruptcy, then you should take a look at alternative lenders, which include what are commonly called marketplace lenders. 

Traditional Banks

There are variety of banks for startups nowadays. You’ll generally receive the best rates, fewer fees, longer repayment terms, and more flexible pay back options with a business term loan from a bank. However, qualifying for these kinds of loans is difficult and you’ll need good credit and a track record of profitable business in order to be accepted.

Marketplace Lenders

Marketplace lending is broadly defined to include any practice of pairing borrowers and lenders through the use of an online platform without a traditional bank intermediary. These are non-bank entities that make a variety of different types of loans to small businesses, such as term loans, merchant cash advances, and business lines of credit. They source their funding from lenders who have a higher risk tolerance than other lenders and can operate without the same legal restrictions that deposit-taking banks must follow.

As a result, it’s often easier to qualify for a loan from an alternative provider and quicker to source funds from them. The trade-off is that you’ll pay higher interest rates, fees, and have shorter repayment terms. Alternative lenders also might have onerous repayment schedules, with payments due as frequently as daily or weekly.

If you are in a position where you don’t qualify for a traditional bank, then you should consider one of the best bad credit business lenders. You might also find that even if you do qualify for a loan from a bank, a shorter-term loan from an alternative lender is more suitable for your situation. This could be because having quick access to cash is more important than securing a low interest rate, for example.

Type of Loan: Term Loan or Line of Credit?

The next thing to consider is the type of loan you want. There are a variety of term loans, usually based on term length, and lines of credit, which may be secured or unsecured. Each type of small business loan has its pros and cons. 

Term Loans

Term loans provide borrowers with a lump sum cash payment up front that must be repaid on a set schedule. You’ll be able to use the loan for operational expenses like marketing, hiring, buying new equipment, or to refinance existing business debt not secured by real estate, such as cash advances, business loans, and equipment leases. You’ll generally have a set interest rate and pre-arranged regular repayment schedule. Depending on the terms, you may or may not be able to pay it back early and avoid interest charges.

One common type of small business term loan is an SBA loan, which is backed by the Small Business Administration, a U.S. federal government entity whose purpose is to support entrepreneurs and small businesses. These loans generally have better rates than non-SBA loans.

Lines of Credit

The other main type of business loan is a line of credit, which is a flexible loan that works like a credit card. You can draw money from a line of credit up to your limit. Interest is only paid on the amount of money that you borrow, making it less costly than term loans and useful for dealing with unforeseen cash flow challenges or unexpected purchases. The money can usually be accessed via a business checking account or credit card. 

Lines of credit can be secured, meaning the credit is guaranteed with property that can be seized by the lender if you fail to repay, or unsecured. Secured lines of credit tend to be easier to obtain and have lower interest rates.

Whether a term loan or a line of credit is the right choice will depend on your circumstances. If you’re unsure, speak with a small business advisor or a lending provider.

Other Types of Small Business Loans

In addition to term loans and lines of credit, there are other types of loans not considered in this article, but which may be valuable to you depending on your circumstances. These include:

  • Working capital loans: Short-term loans used to fund day-to-day operations that paid back from business receipts.
  • Equipment financing: Similar to a car loan, the new equipment being purchased acts as collateral for the loan.
  • Invoice financing: Money is borrowed against unpaid customer invoices, allowing you to access some of that money immediately. Invoice factoring is a similar option.
  • Merchant cash advance: Merchant cash advances involve borrowing money in return for a share of future profits from credit card sales.
  • Business credit cards: A business credit card functions more or less the same as a personal one. Can be difficult to obtain with bad credit.

Methodology for the Best Small Business Loan

The small business loan products in this guide are designed to help you find the loan that is the best fit for your business. Since every situation is different, here are the criteria upon which we based our rankings. Note that while we didn’t directly judge the products based on the type of loan or the provider itself, but rather on criteria that we applied equally to all products.

  • Interest rate and fees: When available, we looked at the interest rates and fees of the loan products.
  • Ease of application: We considered the complexity of the loan application as well as how long it normally takes to complete.
  • Speed of approval: We looked at how long the loan approval process, after the application is complete.
  • Ease for approval: We considered the requirements that the lenders have for their loans, such as minimum credit scores or business history requirements
  • Repayment terms: We looked at the loan term length, payment frequency, and any distinctive features, such as payment by invoices or business receipts.

Frequently Asked Questions (FAQs) for Small Business Loans

Bottom Line on Small Business Loans

Getting a small business loan can make all the difference in the success of your enterprise. Understanding what kind of loan you need is the first step to getting a loan that will help propel your business forward. BlueVine is one of the best lenders for a small business loan because of its flexible loan options, quick approval process, and easy application process.

Show Me … Don’t Tell Me: Say It With Video

A young woman making a video for business

Share your message in an effective medium. Allow video to be used to get your message out there. How else can you let your audience in on the amazing things your organization does on a daily basis?

Let people know all about who you are, the impact you have on our world and the way you touch people’s lives. Show them – with personal stories from people on whom you’ve had a lasting effect; and, with images of what you do, everyday, to effect change in our world.

Use the technology to present your vision to groups or individuals, to share where their money is being used – in a direct and impactful way.

Thank your donors for providing the funds for the work you do everyday. Set the stage for a future ask and solicitation.

Videos can be shared in a multitude of ways – sent on DVD, emailed with a link, shared on YouTube, Facebook, etc. These videos can be used at events, conferences, and small meetings. You can use a video to introduce a new project, a new hire, and a new resource.

Videos can be produced with a low budget and a lot of creativity.

If you have questions as to how video can work for your fundraising efforts, donor appreciation, or to enhance your upcoming national meeting … just ask !!

=-=-=-=-=-=-=-=-=-=-=-=-=-=

The first posting of this Fundraising Blog was back in March of 2010. This is the five-hundredth posting; and, to avoid repeating what we’ve already posted and what we’ve included in The Fundraising Series of Ebooks, this will be our last scheduled posting.

We will be responding to questions and comments; and, if you’ve found value in our postings and would like to receive any future postings, go to Sign Up For Email and enter your email address. Any other questions, please see the links below.

=-=-=-=-=-=-=-=-=-=-=-=-=-=
Want to learn more about how a video can help your nonprofit?
Have a comment or a question about starting, evaluating
or expanding your fundraising program?
AskHank

=-=-=-=-=-=-=-=-=-=-=-=-=-=
Have you heard about
The Fundraising Series of ebooks?
They’re easy to read, to the point, and inexpensive ($1.99-$4.99)

=-=-=-=-=-=-=-=-=-=-=-=-=-=
We welcome your questions/problems —
they are likely to engender further discussion.
Look forward to hearing from you.
Comments & Questions

=-=-=-=-=-=-=-=-=-=-=-=-=-=

Video – An Often Overlooked Development Tool

Young entrepreneur filming himself

When was the last time you watched something that really moved you? Brought you to tears? Evoked the warm-and-fuzzies? Took you back to a life changing experience? Made you feel differently about an issue, an organization, a person or group of people? Last week’s posting discussed a vivid example of video as a development tool.

In this day, an age of abundant technology, social media and communication, the video is the best tool out there … to engage an audience; to educate your (potential) constituents and the media; to demonstrate the success of your programs; to show your potential donors how they can make a difference; and, to show your current donors the impact that their gifts have made and will continue to make.

Whether your audience is the hundreds/thousands of attendees at a special event or a conference, a single individual viewing your video on a large screen, on your website or from a DVD, or any size group in-between, they will SEE how they can have, and have had, a significant impact on the people your organization serves.

And, since honorees are a major draw for an event, and a stimulus to giving, the use of a video to highlight their lives and their service to the community, can show everyone why they are so deserving of their award, and how they have made a direct impact on the people you serve.

The time commitment required of an organization’s staff and board members is minimal. You would work with a “Producer” who, based on discussions with you, will put together a budget, timeline and an outline of what the content of the video could include – whether it will tell the story of your organization’s service to the community, provide a portrait of one-or-more individuals, say “thank you” to your donors and/or show potential donors how they can be recognized.

Your Producer can put together some storyboards and sample sound bytes, and will work with you to create interview questions. They will work with you to identify the individuals (board members, staff, constituents, honorees and their friends, family and colleagues, etc.) who should be interviewed.

The typical video created for your event or conference should run (a maximum of) two minutes, and the total “footage” (including what was gathered-but-not-used in the final version) can be used to make other videos for other purposes – a 30 or 60 second spot (public service announcement) about a particular program that you want to highlight; a series of videos that answer FAQ’s about who you are and what you do; or, a 10 minute (warm-and-fuzzy) piece that a donor will want to watch over and over again. You are limited only by your imagination and the creativity and experience of your Producer.

=-=-=-=-=-=-=-=-=-=-=-=-=-=
Want to learn more about how a video can help your nonprofit?
Have a comment or a question about starting, evaluating
or expanding your fundraising program?
AskHank

=-=-=-=-=-=-=-=-=-=-=-=-=-=
Have you heard about
The Fundraising Series of ebooks?
They’re easy to read, to the point, and inexpensive ($1.99-$4.99)

=-=-=-=-=-=-=-=-=-=-=-=-=-=
We welcome your questions/problems —
they are likely to engender further discussion.
Look forward to hearing from you.
Comments & Questions

=-=-=-=-=-=-=-=-=-=-=-=-=-=

Using Video in the Development Process … And Increasing Dollars

An accountant counting banknotes

A number of years ago, we used a video recording as part of the capital campaign solicitation of 14,000 prospects for a 1,200 student (150 year old) college. The “footage” was shot at various times during the school year and edited for various uses.

One application was as an introduction in the face-to-face solicitation of major gift prospects.

A second application was an 18-minute video that accompanied a pre-call letter for the solicitation of the majority of the (“lower-rated”) prospects of the school.

In that second application, 12,000 videos were sent to parents and alumni as part of that pre-call package — which was followed, within 4-5 days by a solicitation phone call from a student.

The students, with the support of the pre-call package, raised $6,000,000 in pledges.

It is interesting that, in conjunction with a capital campaign ten years earlier — at the same school, student callers (with the same training and supervision, but without the video) “only” raised $5,000,000 from the same number of parents and alumni.

The video was so successful that major gift prospects who had not yet been visited, and (therefore) had not yet seen/received their own video but had heard about it from classmates, demanded to get their copy.

The mass produced video was designed as a “warm and fuzzy.” It was narrated, both on and off screen, by a hollywood star who had attended the college. There was, of course, some discussion of the capital campaign — about 3 minutes of the 18, but most of the footage “took the alumni (and parents) back” to when they (or their children) experienced what was displayed on the screen — in chronological order — from the first day at school through graduation.

I must emphasize, however, that a video will be of little value in a capital campaign if it isn’t used properly: if the solicitors (face-to-face or otherwise) don’t know how to conduct The Ask — including the handling of prospect concerns and objections.

Where a video, by itself, can’t raise significant dollars, it can be a great adjunct to the process. People-asking-people is still the most effective solicitation technique; and, prefacing The Ask with a creatively produced video can significantly increase contributed income.

BTW. The third use of the video footage was an edited version for the admissions office.

=-=-=-=-=-=-=-=-=-=-=-=-=-=
We continue the discussion of
Video in Development
in next week’s posting.

=-=-=-=-=-=-=-=-=-=-=-=-=-=
Have you heard about
The Fundraising Series of ebooks?
They’re easy to read, to the point, and inexpensive ($1.99-$4.99)
This posting is a sample of what’s addressed in the series.

=-=-=-=-=-=-=-=-=-=-=-=-=-=
Have a comment or a question about starting, evaluating
or expanding your fundraising program?
AskHank

=-=-=-=-=-=-=-=-=-=-=-=-=-=
We’ve been posting these pieces for the last five years,
and we welcome your questions/problems.
They are likely to engender further discussion.
Look forward to hearing from you.
Comments & Questions

=-=-=-=-=-=-=-=-=-=-=-=-=-=

Corporation Solicitation Programs: Not For Every Nonprofit

Someone handing out a donation box

In considering the creation of a Corporate Solicitation Program (a CSP), the first questions I’d ask of a nonprofit is whether they realize that only five-percent of all “charitable” giving to nonprofits comes from corporations, and (considering “return-on-investment”) how much of their time, energy and assets do they want to dedicate to this effort? That means that you cannot try to get funding from every corporation that comes to mind.

Whether the NPO does or does not deal with that basic concept, the major issue in creating a CSP is evaluating whether the NPO can do it successfully.

The planning process begins with the questions: How do corporations view your organization? Do they see a history of good service to the community and good fiscal management? Do they see a history of other corporations supporting your NPO and getting the “quid pro quo” that they want? How do they know they’ll get what they want if they support you? Do you have a mission/program/service that dovetails with a corporation’s mission and/or product/service line?

Corporate fundraising is about the needs of the corporation, and a corporation’s needs are pretty much about their bottom line – many have stockholders they must satisfy.

If supporting an NPO gives them good visibility and good credibility, that would likely result in increased sales of their products/services. A corporation might give to be a good member of the community, or just to appear to be a good member of the community. But a corporation would certainly not give, if giving would hurt their bottom line.

Corporate fundraising is also about the needs of the corporate officers and board members – what will they (personally) get out of having their corporation support you!! That becomes more of an issue of individual cultivation – getting one or more of those people to see how supporting you will benefit them, and getting them, therefore, to become your advocate within the corporation.

So, the first step in the process is determining if a CSP can/would work for your NPO.
Once you’ve done the study to determine that, you’ll have a better idea of the kind of help you might need to implement/expand your Corporate Solicitation Program.

So, to begin the process, make a (wish) list of all those potential corporate donors, and then gather the material you need to determine which corporations are real prospects.

Some Corporate Annual Reports list the amount(s) they’ve given to nonprofit organizations, and often list those NPOs. Check to see if they give to organizations that do what you do. Look to see if there’s a statement of policy as to the types/locations of NPOs they support. Some corps give only to NPOs that their employees support – check that out.

Check to see if the corporation has an office/department/division of charitable giving … or whatever they may call it. Call them; ask for a copy of the corporation’s giving guidelines. Talk with a corporate giving officer, if they have such, and (come right out and) ask what you have to do to get the corporation to add you to their list of nonprofits they support. FYI, corporate giving officers are there to work with you to see if there’s a match – and sometimes work with you to create a match — between what you can do for them and what they can do for you.

Make a list of the officers and directors of the corporations and circulate that list to your board members, volunteers and major donors to see if anyone you know has a personal connection with a corporate board member or officer who can help you get corporate money.

That means that you must cultivate – build a relationship with – those corporate officers and directors … the same as you would with a prospective major donor.

Most corporations have been asked before. Don’t be bashful.

Sometimes the Ask can be as simple as a conversation with the right person, and sometimes as formal as a grant proposal to a foundation. You’ll find out which when you do your research.

=-=-=-=-=-=-=-=-=-=-=-=-=-=
Have you heard about
The Fundraising Series of ebooks?
They’re easy to read, to the point, and inexpensive ($1.99-$4.99)

=-=-=-=-=-=-=-=-=-=-=-=-=-=
Have a comment or a question about starting, evaluating
or expanding your fundraising program?
AskHank

=-=-=-=-=-=-=-=-=-=-=-=-=-=
We welcome your questions/problems —
they are likely to engender further discussion.
Look forward to hearing from you.
Comments & Questions

=-=-=-=-=-=-=-=-=-=-=-=-=-=

The Gift Table: An Essential Fundraising Tool

A table filled with donation boxes

Gift Tables/Pyramids are great fundraising tools, but their construction and usage are often very much misunderstood. They are most often associated with capital campaigns, but are also great tools for major gifts fundraising, for “fiscal year fundraising,” and even for major events.

Prior to the beginning of every fiscal year, an organization goes through its budgeting process and comes up with a (realistic, attainable) figure for how much money will be needed for operations/programs, and how much of that will be needed to be raised via charitable giving.

The latter figure must be based on prior experience and analysis of the likely giving of those currently in the organization’s database. If the figure obtained by that analysis is realistic, you should, then, be able to construct a comprehensive Gift Table that reflects that reality.

There is, however, no such thing as a standard gift table. You may find many examples of gift tables in texts and in articles on fundraising, but they are examples, and not to be assumed appropriate for every circumstance/situation.

An idealized Gift Table has as it’s top gift an amount that is 10-15% of the overall goal, and with the bottom gift being no less than 1% of the goal. For a million dollar goal, therefore, that’s a top gift of $100,000 to $150,000 and a bottom gift of $10,000.

BUT, what if there’s no one on your list of prospective donors who can give at the 10% (or more) level? Clearly, then, for your gift table to be a useful/useable tool, the top gift has to be less than 10%. In fact, the top gift can only be as high as the highest gift you’re likely to get when you’re working toward your fundraising goal; and, all of your fundraising efforts must be able to obtain the number of gifts specified at each level of the pyramid – and all of the levels on a Gift Table must represent reality.

So, how do you construct a realistic Gift Table?

You, and/or your (fundraising/development/major gifts/events) committee must sit down and take a serious look at all of your potential donors. Then, based on prior giving and on what other information you have about each prospect, you “attach” a dollar figure to each name on your list – said dollar figures to represent what you and the committee believes is a realistic likely gift from each listed person – assuming that each prospect is cultivated/educated/solicited “properly.”

Your Gift Table is constructed from those figures. The top and bottom numbers and the steps you pick for the various levels of your pyramid must be based on the committee’s discussions. You may wind up with a lopsided gift table but it will reflect reality.

One caution, if you can’t construct a Gift Table that will add up to your goal, it is likely that your goal isn’t realistic.

Also, having constructed your initial Gift Pyramid, you will need to update/revise it as additional information about your prospects becomes available. The Gift Table should represent the most up-to-date information/circumstances. What this suggests, then, is that the Gift Pyramid is an internal document – a tool that helps an organization stay focused on their fundraising goals, and appropriately allocate their resources (time, effort, personnel and finances).

Keeping the budgeting process in mind, you should create separate pyramids for your Major Gifts constituency and one for Special Events.

When constructed and used properly, the pyramid is a great time/effort/money saver.

=-=-=-=-=-=-=-=-=-=-=-=-=-=
Have you heard about
The Fundraising Series of ebooks?
They’re easy to read, to the point, and inexpensive ($1.99-$4.99)

=-=-=-=-=-=-=-=-=-=-=-=-=-=
Have a comment or a question about starting, evaluating
or expanding your fundraising program?
AskHank

=-=-=-=-=-=-=-=-=-=-=-=-=-=
We welcome your questions/problems —
they are likely to engender further discussion.
Look forward to hearing from you.
Comments & Questions

=-=-=-=-=-=-=-=-=-=-=-=-=-=