Securing business financing can be a daunting prospect: First, there’s the task of researching and vetting potential lenders, which now extend far beyond brick-and-mortar banks to include online lenders, as well. And then, of course, you’ll need to qualify for a business loan, which often requires healthy credit, years of experience, and demonstrably strong cash flow. Too often, business owners who don’t meet these rigorous standards are turned down for financing, or are offered loans with sky-high interest rates and hidden costs. This is where platforms like Connect2Capital can come in handy.
Connect2Capital, a new initiative by CRF and U.S. Bank, is a technology-driven platform that connects small business owners with a network of nonprofit CDFI lenders that aim especially to provide funding for business owners in disadvantaged communities.
In this review, we’ll tell you what you need to know about Connect2Capital and, if you’re interested in this service, how to apply for a loan within the network. If you decide that Connect2Capital isn’t the right service for you, we’ll also share a few responsible alternative lenders for you to consider, all of which boast equally streamlined online applications.
What Is Connect2Capital?
Connect2Capital is a technology-driven platform developed by CRF (Community Reinvestment Fund), a Minneapolis-based nonprofit CDFI (community development financial institution), in partnership with U.S. Bank. This platform connects small business owners with community lenders and other CDFIs to meet their financing needs.
As a reminder, CDFIs like CRF are financial institutions that don’t operate with the motive to generate profit; rather, their foremost mission is to make financial products and services more accessible to more people and businesses. CDFIs focus especially on financially aiding individuals and businesses that live or operate in low-income or underserved areas in order to encourage economic growth in these communities.
To clarify, Connect2Capital is not a direct lender; it’s a marketplace for small business loans available through CDFI lenders. Connect2Capital’s lending partners (some of which include Excelsior Growth Fund, LiftFund, MoFi, and Accion) can offer loans as little as $500 or as much as $4 million. These loans can help business owners fund a number of projects, like starting a business, expanding operations, buying equipment and inventory, acquiring a business, refinancing debt, and purchasing real estate. In addition to matching business owners with lenders, Connect2Capital can also direct entrepreneurs to resources for other needs, like business plan creation and general management.
To find out if you prequalify for a loan through Connect2Capital, you’ll fill out a short online application answering the following questions:
- How much capital you’d like to borrow
- How you intend to use your loan funds
- How quickly you need financing
- Whether you have a business plan
- Whether you have collateral to secure your business loan (and, if so, the type of collateral)
Then, you’ll supply some basic information about your business, including:
- Name
- Address
- Time in business
- Number of employees
- Industry
- Type of business
- Last year’s revenue
- Projected revenue this year
- Whether your business is profitable
From there, Connect2Capital will determine whether your business is eligible for funding through any of their partner lenders.
Top Alternatives to a Connect2Capital Loan
Connect2Capital doesn’t provide a ton of information about their services, and other than the testimonials provided on their website, user reviews of this new platform are hard to come by—so we can’t judge the quality of Connect2Capital’s loans, customer service, or overall customer experience.
That doesn’t mean you shouldn’t apply for a loan through Connect2Capital, or at least see if you qualify for one. CRF is a highly reputable CDFI, and the Connect2Capital application is quick and free.
But we can say with certainty that the following lenders are reliable and responsible. Since they’re in the Fundera network, we’ve personally vetted all of these lenders and work with them regularly to provide our small business clients with the most accessible, lowest-cost financing that they can qualify for. So if you’re seeking a line of credit, term loan, SBA loan, an equipment lease, consider the following lenders:
Term Loan Through Fundation
Small business owners seeking traditional, lump-sum financing should consider Fundation, as this premium online lender can provide qualified applicants with term loans of up to $500,000.
The best uses of Fundation term loans tend to be for larger projects, like purchasing equipment or renovating your business property. If you’re in need of general working capital or a means of smoothing cash-flow gaps, look into Fundation’s line of credit product (or a line of credit from another lender, like Kabbage, which we’ll tell you more about next).
Fundation takes a number of your credentials into consideration when determining the cost of your loan, including the stability of your business, your cash flow, and your credit history. Typically, however, you can expect that your Fundation APR will range between 7.9% and 28.9%. You’ll repay your Fundation term loan with bimonthly payments for up to four years. And if you’re able, you can repay your loan early without incurring a prepayment penalty.
Fundation’s application process is completely online, though the platform’s team of underwriters consider your applications manually. And as long as you provide all the proper documentation, they may be able to return to you with a loan decision in as little as 24 hours. (Also note that business owners seeking loans greater than $100,000 will receive a call from a Fundation representative after submitting your online application.)
If you’re looking for a Fundation term loan under $100,000, you’ll need an annual revenue of $100,000, a year in business, and a 660 personal credit score, at a minimum, for your application to be eligible.
Line of Credit Through Kabbage
Plenty of online lenders offer business lines of credit, but we often refer small business customers seeking these flexible loans to Kabbage for their streamlined application process and quick time-to-funding windows—if your application is approved, you’ll have access to your line of credit funds in your bank account pretty much instantly. Plus, Kabbage doesn’t consider applicants’ credit scores as heavily as other lenders do, so business owners who’ve been turned down for loans through conventional lenders might have a better shot at securing a Kabbage loan.
Now, onto the details: Kabbage can provide short-term lines of credit between $1,000 and $250,000, with repayment terms lasting either six or 12 months. Kabbage will automatically pull repayments from your bank account once a month for as long as your term lasts. Their interest payments are a little unique, however—your rate will land between 1.25% and 10%, but interest is frontloaded for the first few months of your loan. After those first few months, your interest rate will drop for the remainder of your loan.
To qualify for a Kabbage loan under $100,000, you need at a minimum $50,000 in annual revenue, a year in business, and a 550 personal credit score (but again, Kabbage doesn’t weigh credit scores as heavily as other lenders do). Business owners seeking larger lines of credit will need to present stronger numbers.
SBA Loan Through Fundera
In the world of small business financing, SBA loans are often considered the best of the best. Intermediary lenders (like banks and CDFIs) disburse SBA loan funds, but the U.S. Small Business Administration guarantees up to 85% of the loan. That means if a borrower defaults, then the lender is guaranteed to recoup up to 85% of the missing amount. And with that added security, lenders can offer borrowers ideal terms, like high loan amounts and long repayment terms. Plus, the SBA sets a maximum interest rate that lender’s can’t exceed, which means the cost of your SBA loan is guaranteed to be as low as possible.
Just a heads up: SBA loan eligibility standards can be tough to meet. But if you think you have a shot at approval for an SBA loan, consider working with Fundera. We’re not a direct lender, but our team of in-house SBA specialists will help you package and submit your application to our network of partner lenders; and by leveraging our tech-forward solutions, we’ll guarantee that your application and credit decision goes through as quickly as possible.
Equipment Financing Through Balboa Capital
If you’re seeking a loan to help fund the expensive equipment your business needs to operate—like heavy machinery, software, or office furniture—look into Balboa Capital’s equipment financing programs.
Balboa Capital can provide business owners with up to $500,000 to lease their required equipment, which you’ll then pay back over a term ranging between 24 and 72 months. Balboa doesn’t require specific collateral to secure their equipment leases, and they’ll take all credit scores into consideration, making these loans much easier to qualify for than others. At a minimum, though, you will need to generate at least $300,000 in annual revenue and have a year in business under your belt in order for your Balboa Capital application to be considered.
Bear in mind that Balboa Capital offers equipment leasing programs, rather than equipment loans. Technically, Balboa Capital retains the title of the equipment, and you’ll pay for the use of that equipment over the life of your loan. At the end of your remittance schedule, you’ll have the option of purchasing that equipment for a low cost.
Like the other lenders we’ve recommended, Balboa Capital uses technology to make the application process as simple and fast as possible—in fact, after you’ve sent in your application, you may receive a credit decision in as little as an hour.
The Bottom Line on Connect2Capital
Connect2Capital may be an especially appealing service for small business owners operating in underserved communities, as the platform’s network of fellow CDFI lenders are dedicated toward providing just such businesses with financing and guidance. And although Connect2Capital doesn’t currently offer much in the way of testimonials, information, or marketing material explaining their services, it’s worth mentioning that CRF recently received a $2.7 million Activator Grant from the Wells Fargo Foundation. That certainly speaks to CRF’s legitimacy, as well as Connect2Capital’s potential growth.
Do know, however, that Connect2Capital’s lender network is not the only available option for business owners seeking financing. If you’ve been turned down for conventional financing, you can also consider a loan or lease through online lenders whose laxer eligibility standards allow for a more diverse pool of business owners to secure financing.
The post Connect2Capital Review 2019: Is It Right for Your Business? appeared first on Fundera Ledger.
from Fundera Ledger https://www.fundera.com/blog/connect2capital/
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