An adjustable rate loan or variable-rate loan is a loan with an interest rate that varies with time or market conditions. Adjustable rates rely on the prime rate set by the Federal Reserve, as well as the health of the business. The benefit of relying on prime is that if the Federal Reserve decreases rates, the adjustment made to the loan decrease the interest rate. However, if prime increases, so does the interest rate. The interest rate of a loan can affect the overall cost of the loan.
Typically adjustable rate loans have initial teaser rates that can lead to lower payments initially, which then increase a certain amount on an agreed term. Most adjustable rate loans have a maximum adjustable interest amount, often to evaluate that scenario.
Compared to fixed rate loans, which have interest rates set for the term of the loan, adjustable rate loans have initial teaser rates in the beginning of their term.
Adjustable rate loans can be beneficial if the business is anticipating increased revenue and cash flow, or plan to pay the loan back prior to the adjustment (assuming there is no prepayment penalty).
A business loan is a financing option whereby the business receives capital from a lender and in return agrees to repay the lender. The repayment terms may include terms that include the period of time in which the loan is due and an interest rate that is charged on the capital borrowed.
The terms of the loan are based on a few factors, such as a business owners credit score, the business’s asset value, and the business’s revenue streams. This is utilized to calculate the risk the lender will take on and will typically be conveyed by the interest rate of the loan.
The benefit of having a business loan varies on the stage of the company, as well as the goals for the company. Typically, loans are utilized for growth, such as purchasing additional inventory or equipment. However, loans can be utilized to manage operations where by the current working capital funds available aren’t enough to meet the capital expenditures associated with the business, including payroll, equipment purchases, and other regular and irregular business expenses.
Rapid Funders is dedicated to helping the small business owner thrive with the right business loan, helping good businesses with the business loans they need to become great. Apply now to see how we can help.
The definition of a small business varies depending on the industry. There are two ways to be labeled as a small business according to the SBA: average annual receipts and average number of employees. Due to the nature of small businesses, raising capital on behalf of the business is difficult. Typically, small businesses raise capital from personal funds, friends, family, and private equity groups. Traditional funding options are available via SBA loans, which helps to reduce risk for lenders.
Rapid Funders was created by owners of small businesses who understand the goals and aspirations of founders. We can help you evaluate your circumstance and provide you a loan option that can help your business grow with funds. As with any loan, it’s best to do your due diligence before selecting an option.
Unsecured Business Loans
Unsecured business loans is a financing option that allows you to obtain capital without collateral, which is in the form of an asset that the business owns (e.g. machinery, property). Since collateral is not a criteria in which the borrower is evaluated, it is a faster method in which to qualify for capital than traditional bank loans.
Since collateral is not involved, unsecured business loans typically carry a higher interest rate to denote the additional risk. In addition, the lack of collateral does not imply that the lender may not ask you to personally guarantee the loan. As with any financing option, it is ideal to evaluate your scenario and options to find the loan that is best for you.
Rapid Funders provides unsecured loans to small businesses that have opportunity and require short term capital. Our term loans are transparent and provide easy remittance. To learn more, apply now to see determine the funding amount for your business.
Small business finance describes the many options available to obtain capital for a new or a current business. From traditional bank loans, alternative funding, to services we provide such as capital business loans, there’s a solution to meet your business’s needs.
Capital can be derived from either taking on debt (e.g. loan) or credit (e.g. credit card). Rapid Funders can provide loans to ensure that your business can access working capital in a timely manner.
Cash flow is the most essential performance indicator assessing the health of a business. This is calculated by taking a business’s gross revenue and subtracting expenses. While the math is simple, the timing of each part of the equation can create volatility, whether you are awaiting receivables or need to purchase inventory to meet demand.
Maintaining a steady rate of cash flow is vital for growth and opportunity. It is required to make capital expenditures, which provides you the efficiencies and advantages you need in a competitive business environment. Just as importantly, cash flow is one of the methods lenders utilize to evaluate debt servicing ability.
Capital business loans by Rapid Funders can help address and smooth out this volatility with a business capital loan. In cases where the business is waiting to collect revenue, our loans can deliver the capital you need to pay for expenses such as payroll and inventory. In cases where the business requires cash to increase inventory, Rapid Funders can provide capital to fulfill inventory requirements of a growth business.
Traditional Bank Loans
Traditional banks are the biggest lenders to small businesses. They tend to have lower rates than the competition. However, qualifying for a traditional business loan is difficult, as their criteria to issue a loan is rather extensive. In addition to the business having solid financials, and its principal guarantor having excellent credit, traditional banks may often require collateral, personal guarantees, strong cash flow, and credit score evaluations. This process requires a substantial amount of paperwork and can take up to three months for a bank to reach a consensus.
Even after meeting the risk criteria, traditional banks may often require a working relationship with them in the form of an account or merchant services. The cost of these services needs to be evaluated prior to obtaining a traditional business loan, as banks tend to require these services for the term of the loan.
Rapid Funders understands that your time is more valuable and provides working capital loans in weeks, not months. For business owners, the difference in approval times can impact future orders and purchasing seasonal inventory. Apply now to see how Rapid Funders can help your business.
Working capital is another factor that lenders assess when providing capital to the borrower. Though it may seem similar to cash flow, working capital takes the current assets subtracted by current liabilities over the year (including long term debts).
This methodology gives us an indicator of the long term health of a company. The more positive the value (greater assets) the more likely it is for the business to pay off any short term obligations (e.g. inventory). If the value is closer to zero the business’s viability may be at risk due to long term debt obligations or being over leveraged in the short term.
Rapid Funders can provide working capital loans that can free up cash that can act as a contingency (liquidity). The working capital ratio can vary from industry to industry so it is wise to assess all your business finance options before choosing one. To evaluate the approved funding amount for your business, apply now.