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The small business loan is one of the most difficult loans to get approved for. These products can make or break your company’s success at crucial turning points. But without the history, revenue, or credit score required by many lenders, you may find yourself out of luck.
Thankfully, there are lenders like National Funding that make small business loans accessible to almost everyone. Not only does National Funding provide short-term loans to business owners who may otherwise get denied elsewhere, but it also finances and leases equipment that you might need in order to operate.
So what exactly does National Funding do? And why is it so different from many traditional small business lenders?
What Is National Funding?
Based in California, National Funding is a small business lender specializing in loans and financing for businesses that otherwise might not get approved for funding.
The company offers three different products for borrowers:
- Short-term small business loans
- Equipment financing
- Equipment leasing
National Funding has originated more than $2 billion to more than 40,000 small businesses since its founding.
These business loans are available in amounts ranging from $5,000 to $500,000, while equipment financing is available up to $150,000.
Who Is National Funding Best For?
National Funding is good option for small business owners who need working capital or equipment but who don’t qualify for business loans elsewhere.
Keep in mind that National Funding doesn’t cater just to the established small business borrower. It approves a whopping 60% of small business loan applications, including many of those from newer businesses that don’t have seven-figure revenues or whose owners might have personal credit scores less than “excellent.”
The National Funding Application Process
Applying for a small business loan or equipment funding through National Funding is fairly straightforward. However, all business loan applications require a bit more work than personal loans.
The initial online application takes only a few minutes to complete. You’ll need to provide your:
- Name and business name
- Phone number and email address
- Business address
- Time in business and annual gross sales
This initial submission won’t affect your credit in any way. However, the form won’t ask you to provide National Funding with any information about your borrowing needs (or even the type of funding you need). Nor will the company give you any sort of immediate answer.
Instead, a loan specialist will contact you in the following 24 hours to discuss your loan needs and qualifications.
If you like, you can provide additional information at this time through the site’s Prequalification Form. This form may help your loan specialist make a faster decision and speed up the underwriting once you’re approved for funding.
For this portion of the process, you’ll need to provide more in-depth information. That includes giving National Funding your:
- Home address
- Date of birth
- Social Security number
You’ll also electronically sign your prequalification form at this time.
Once a National Funding representative contacts you, you’ll be able to discuss your business’ funding needs, what you qualify to borrow, and what sort of rates you’ll be eligible to receive. Your application will be underwritten at that time, as well, assuming that you’re approved for funding.
However, don’t worry if National Funding denies your first small business loan application. You can try again in 30 days by simply resubmitting your application through National Funding. Be sure to update any information that may have changed in the time since your initial application.
National Funding Options
There are three categories of funding to choose from through National Funding. There are short-term small business loans, equipment financing, and equipment leasing options available, depending on exactly what you need.
Small Business Lending
There are many reasons for taking out a small business loan. You can use the capital to grow your company, expand your reach, buy out a competitor, or cover expenses during down seasons, among many other uses.
National Funding specializes in short-term small business loans aimed at businesses that might not have the longevity, income history, or credit score necessary to get approved for traditional bank loans. These short-term loans are available in amounts ranging from $5,000 up to $500,000, with terms from six to 15 months long.
You don’t need the best credit for one of these loans, either. You have a good chance at approval as long as:
- Your business has been around for at least a year,
- It brings in annual gross sales of at least $150,000, and
- You have a personal credit score higher than 575.
Equipment Financing and Leasing
Many small businesses need equipment in order to run successfully. Depending on your industry, this could mean everything from office computers and printers to heavy machinery (like bulldozers and forklifts), medical equipment, and even company vehicles.
If your small business is looking to take the next step, expand, or simply replace broken or worn machinery, equipment financing through National Funding can make all the difference in the world. With National Funding, you can either finance your equipment purchase with no money down or lease that equipment directly.
Equipment financing is available for up to $150,000, and you’ll find out the decision in as little as 24 hours. Rates are competitive, and the underwriters consider your equipment to be collateral. Oh, and did I mention that there’s no deposit or down payment required?
There are only a handful of things you need to qualify for either equipment financing or leasing:
- Your business needs to have been around for at least six months,
- You need to have a FICO score above 575, and
- You need to be able to provide a quote for the equipment from a licensed vendor.
What Are National Funding’s Interest Rates?
It’s not easy to find rates on National Funding’s website. Unlike many other lenders, the company doesn’t advertise its typical APR ranges, and you cannot get pre-approval for a loan product without actually submitting an application first and waiting for a loan specialist to contact you with options.
However, after searching around, we found that National Funding’s short-term small business loans are not based on APR. Rather, small business loans are available for $5,000 to $500,000, depending on your company’s needs. National Funding advertises interest as “factor rates.” These rates range from 1.17 to 1.36.
It’s easy to determine how much your loan will cost you based on the factor rate the company offers you. Simply multiply your borrowed amount by your factor rate and you’ll get your total out-of-pocket cost for the loan.
So if you’re borrowing $200,000 for your business and National Funding gives you a factor rate of 1.24, you’ll pay back a total of $248,000. The additional $48,000 includes your interest charged, origination fees, and any other applicable expenses involved with your loan.
All About Factor Rates
Unless you’ve taken out a short-term small business loan before, you might not even know what factor rates are. However, if you’re unaware of how a provider applies factor rates to your loan, you might be shocked by the total cost.
Factor rates typically include all of your loan’s expenses, such as interest and origination fees, and are applied to your total loan amount once, at origination. This rate is not compounded over the course of your repayment, which means that the interest paid each month doesn’t decrease over time.
Rather, essentially, National Funding charges you the total cost of the loan upfront. It applies your factor rate to the loan on day one. You’ll then pay off that total balance in equal payments according to your agreed schedule.
Why does this matter? Well, with a more traditional loan, an early payoff can help save you quite a bit in interest. That’s because the loan provider applies your interest rate to your principal balance at regular intervals. Paying down the principal early means paying lower interest over the life of the loan.
However, with factor rates, you’ll pay the full interest amount regardless of when you pay down the balance. Making extra principal payments doesn’t matter, either, nor will it save you any money.
The only way to save with a loan of this structure is to take advantage of an early payoff offer, such as the one provided by National Funding. As a working capital customer, you’re offered a 7% discount on the remaining balance if you pay off your loan in the first 100 days. Depending on how quickly you make that final payment and your overall loan amount, this could save you quite a bit in the end.
Is National Funding Legit?
Founded in San Diego back in 1999, National Funding has been providing loans, equipment financing, and leasing to small businesses for more than two decades. The company has supplied loans to more than 40,000 businesses in that time, to the tune of over $2 billion in funding.
National Funding Review: Pros
There are a few reasons why borrowing or leasing through National Funding might be the right move for your business.
You Don’t Need Perfect Credit
Getting a small business loan or funding your business’ equipment needs can be challenging. If your business is newer, you’ll struggle to get approved for a number of lending products due to your limited history and proof of income.
Some lenders may want to rely on your personal credit history for your business’ needs. When you’re talking about borrowing tens of thousands of dollars, however, your personal credit score might not be enough to get approved through most banks.
With National Funding, you don’t need perfect credit to qualify for business loans, equipment financing, or leasing options. The company approves up to 60% of applications and has lower underwriting requirements than traditional business lenders, bettering your odds of approval.
24-Hour Funding Available
In some cases, you may be able to get your loan request approved and money disbursed as soon as the next business day. This 24-hour funding will depend on the underwriting process, your individual paperwork, and also the processing time required by your receiving bank.
Early Payoff Discount
Equipment Finance customers will receive a 6% discount off the remaining balance if they pay off the total amount still due at any point in the contract. Obviously, the earlier you make this payoff, the more you’ll save.
If you’re a Working Capital customer, you’ll enjoy a 7% discount off of the total remaining if you pay off your balance during the first 100 days of the contract.
You Can Get Equipment for $0 Down
Whether you’re trying to expand your business or have a key piece of machinery break down, National Funding can make it easier to get the equipment you need without a down payment. The company offers up to $150,000 in funding for business equipment, with no down payment required and low payments guaranteed.
Guaranteed Lowest Rates on Leased Equipment
National Funding promises to offer you the lowest monthly payment on your leased equipment, based on 24-60 month lease terms. If you find a lower payment available for the same lease agreement, National Funding will pay you $1,000.
National Funding Review: Cons
There are a few things to keep in mind if you’re considering a short-term small business loan or equipment financing through National Funding.
You Can’t Rate-Shop Without Formally Applying
Unlike many lenders’ online platforms, you aren’t able to browse rate ranges and options with National Funding. In order to get an idea of what you’ll be paying for your small business loans or equipment financing/leasing contract, you’ll need to submit an application.
National Funding does allow you to get pre-approved without any impact on your credit score. However, you cannot rate-shop without submitting your information and waiting for a loan specialist to contact you (within 24 hours).
Borrowers With Good Credit Can Find Lower Rates Elsewhere
National Funding is a good option for owners of newer small businesses or those with less-than-ideal credit scores. This lender opens the door to funding for many who may be denied traditional bank loans.
However, if your business has a lengthy history and/or you have a great credit score, you’ll probably be better off borrowing from a traditional lender. They will likely charge significantly lower rates on your loan.
It Uses Factor Rates on Loans, not APR
National Funding charges factor rates on the initial loan total and applies them at the beginning of the loan term. This is different from a compounded interest rate, which will decrease over time, and means that an early payoff won’t necessarily save you money.
Rates Can Be Very High
According to National Funding, short-term small business loans have a factor rate between 1.17 and 1.36. This translates to a cost of around 17-36% of the total loan amount and includes a 2% origination fee. When you consider that conventional small business loans have an average interest rate between 4-6% (plus origination fees), this is a serious jump.
The average equipment financing rate with National Funding is between 8-20%, however. This is notably lower than the rates for loans (because your equipment will serve as collateral for the loan). However, this is a fairly average rate in terms of comparable equipment financing options.
Origination Fees Can Be High
At National Funding, you can expect to pay around 2% of your loan total in origination fees. While this is still within the average range, it’s not the lowest fee to be found.
Although origination fees are pretty commonplace in the world of small business loans, there are a few lenders who don’t charge them. Of those who do, they typically start at 1% or so.
The Bottom Line
If you own a small business that has been around for only a short time, have less-than-perfect credit, or need to borrow money fast, National Funding might be the right choice for you. Its short-term loans and equipment financing options are aimed at small business borrowers who may not otherwise get approved for traditional banks’ business loans, or who need capital quickly.
If you qualify with National Funding — and about 60% of applicants do — you can borrow up to $500,000 for your business.
Need equipment instead? You’re able to finance up to $150,000 worth, and the process is just as quick. No matter what you need, most answers are given within 24 hours.
National Funding isn’t the cheapest small business loan option around. It’s important to keep that in mind. Interest is also calculated on rate factors, which means that even an early payoff won’t spare you from finance charges.
However, if you’re unable to get approved for other small business loan products, this lender might still be the right choice for you.
To learn more about the company, its loan products, or to get a no-impact pre-approval, visit National Funding’s website.
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