Entrepreneur Media recently joined the ranks of online small business loan providers after announcing a new lending partnership with CAN Capital.
Entrepreneur Lending powered by CAN Capital will offer CAN Capital’s lending products to small business owners seeking financing. A press release announcing the partnership says that “merchants can use funds to open new locations, increase inventory, purchase new equipment or grow in other capacities.”
CAN Capital offers three different lending products for business owners, all of which will be available through Entrepreneur Lending. These three products are a business loan product, a TrakLoan®, and an installment loan.
| Business Term Loan | Installment Loan | TrakLoan® | |
|---|---|---|---|
| Type of Payments | Daily fixed payments | Fixed monthly payments | Daily flexible payments |
| Requirements | 1. Annual Rev: >$150,000
2. Business Age: 2+ mo 3. < $175,000 in outstanding tax liens/judgements 4. No personal or business bankruptcy that has not been discharged for 1+ years |
1. Must have good personal credit 2. 7+ years in business 3. $350,000 in annual sales 4. Located in qualified state |
1. Annual Rev: >$150,000
2. Business Age: 2+ mo 3. < $175,000 in outstanding tax liens/judgements 4. No personal or business bankruptcy that has not been discharged for 1+ years |
| Amount available | $2,500 – $150,000 per location. | $50,000 – $100,000 per location | $2,500 – $150,000 per location. |
| Cost | 1.19 – 1.45 factor rate Origination fee: 2% |
Interest rates: 12.9% to 24.9% Origination fee: 2.99% |
1.19 – 1.45 factor rate Origination fee: 2% |
| Repayment period | 3 to 36 months | 2, 3, or 4 years | 3 to 36 months |
| Time to fund | 2 or more business days | 2 or more business days | 2 or more business days |
| Collateral required? | No, but personal guarantee required | No, but personal guarantee required | No, but personal guarantee required |
What is a “factor rate”?
Factor rate is a way to express the cost of the loan, but this term can be confusing because the factor rate is not an interest rate or an annual percentage rate (APR). With APR, as you pay down your loan, interest accrues on a principal amount that continues to get smaller as you make more and more payments. With a factor rate, however, all of the interest is charged to the principal amount at the time of origination.
Here’s how it might work:
Let’s say you are seeking $10,000, and CAN Capital quotes you at a factor rate of 1.40 for a 12-month term. This means you’re paying $4,000 to get $10,000 in capital, plus a $200, or 2%, origination fee that is deducted upfront from the $10,000. Thus, you will be provided $9,800 and pay back $14,000 via either fixed daily payments or a fixed percentage of your credit and debit card sales.
TrakLoans®
TrakLoans by CAN Capital are similar to business cash advances in that your repayment schedule is structured as flexible, daily repayments based on a flat percentage of your credit and debit card sales. CAN Capital will automatically extract the fixed percentage of your sales each day, sending the rest to your bank account—there’s nothing debiting your bank account. Once the agreed upon amount is repaid, the automatic daily payments will stop.
CAN Capital advertises that this loan can be used for buying inventory, technology upgrades, expansion, and more. The best use is likely to fund a period of very high growth, an amazing deal on inventory, or for cash flow emergencies, as this is a relatively fast option. This option is more expensive than many loan options for working capital, so it’s best to calculate the cost of TrakLoan and make sure you can afford it before you sign on the dotted line.
Business Loans
CAN Capital business loans are very similar to TrakLoans, however they function more like a cash flow loan than a merchant cash advance. This means that instead of repaying the borrowed amount via a fixed percentage of your daily sales, you will repay a fixed amount daily. Thus, your payments will not fluctuate with your revenue. Businesses with tight cash flow and daily sales that fluctuate heavily should probably avoid this option as it could damage your cash flow.
Installment Loans
An installment loan from CAN Capital functions more like a traditional term loan in the sense that the repayment schedule consists of fixed monthly payments over two to four years. The rates are similar to that of other online term loan options, ranging from 12.9% to 24.9% with a 2.99% origination fee.
Let’s say you qualify for a $10,000 installment loan at a 19% rate to be repaid over three years. Using Nav’s calculator below, we can see that the APR on this loan would be 20.73% with a total financing cost just over $4,650.
CAN Capital’s installment loans have pretty strict qualification requirements—businesses must have seven years under their belts, $350,000 in annual revenue, and the owner must have good personal credit to qualify. If your business meets these requirements, you may be able to qualify for a much lower-cost option such as an SBA or bank loan.
The Bottom Line
There are tons of options that you should consider and compare with Entrepreneur Lending powered by CAN Capital before signing on the dotted line for a business financing product. Compare terms and requirements of the lending options that fit the bill for your business, and if you do consider Entrepreneur Lending, make sure you get in writing exactly what all the terms will be and the APR. (Note: If you’re working with a lender who won’t tell you what the APR of your loan will be, it’s advisable to look for another company to work with.)
Entrepreneur Lending can be a good option for business owners with poor personal credit, who should look into the business loan or TrakLoan. CAN Capital mentions that personal credit problems may not be an issue if you meet the other criteria, such as consistently bringing in over $100,000 in annual revenue. This is also a relatively fast option for businesses in a cash flow crunch, but can be an expensive option depending on your quoted rate.
Learn more about business financing options in our downloadable ebook, 11 Ways to Finance Your Business in 2016.
More answers to pressing questions:
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How Often Does My Credit Score Change?
Can I Build Business Credit Fast?
What Happens When You Default on a Loan?
This article was originally written on September 8, 2016 and updated on February 5, 2024.
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