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After conducting much research and analysis, we recommend Accion as our 2018 pick for the best alternative lender for startup loans. To understand how we selected our best picks, you can find our methodology, as well as a comprehensive list of alternative lenders, on our best picks page.
Accion is one of only a few alternative lenders to offer affordable loans to startup businesses, and its customer service was among the best we found. Here is a breakdown of why it's our best pick.
Whereas most alternative lenders don't work with startup businesses, Accion, a nonprofit microlender, has a loan program specifically for businesses that have been open for less than six months. Most of the other lenders we analyzed require businesses to be open for more than a year to even be considered for a loan.
Because startups don't have an established track record for lenders to evaluate, Accion assesses both business and personal finances. The company considers the business's cash flow, as well as personal income from your job if you have one, when determining whether to approve you for a loan. The lender needs to see proof that one of those two streams will allow you to repay the borrowed money.
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Accion is unique in that it evaluates businesses differently based on geographic location. Each state has a different set of minimum requirements for applicants to be considered for a startup loan. These are some of the more common requirements:
Remember that these are only minimum requirements. Each business and owner has a different financial makeup, so it's impossible for us to say exactly which businesses will qualify.
Application and Approval Process
Because startup loans are riskier than those for established businesses, there is an extensive application and approval process. You start by filling out an online application, which asks a variety of questions about you and your business, including the following:
Accion has a fairly extensive online application that asks a variety of questions about yourself and your business. It takes roughly 15 minutes to complete. After you are finished, a loan officer will contact you to walk you through the rest of the process.
An Accion loan officer reviews the application to determine if you're a good loan candidate. If you get initial approval, you'll then need to provide proof of the information submitted in your application, such as revenue, your business plan and cash-flow projections.
The loan officers review all of these documents to make a final determination on whether to approve you for a loan and, if so, for how much. Those who aren't approved are given specific reasons why, along with advice on what they can do to improve their chances in the future. Typically, you're eligible to reapply within six months.
In all, the loan application and approval process takes an average of about one month. Although this is much longer than many other alternative lenders' processes, it is still shorter than the traditional bank loan process.
In addition to the minimum requirements, Accion loans carry different terms based on location. Each state has a different maximum startup loan amount, ranging from $10,000 to $100,000. Arizona, Colorado, Nevada, New Mexico and Texas have a $100,000 limit, while Illinois and Indiana have a $20,000 limit. Every other state has a $10,000 limit.
Although these amounts vary greatly, all are more than the amount that many of the other alternative lenders we examined offer to startup businesses. Most of the other lenders we looked into that work with new businesses offer loans of just a few thousand dollars.
There is a lot of flexibility in possible uses for Accion startup loans. While the lender does want to know what you will use the money for before approving you, there are no set restrictions on those uses. The loans can be used to purchase inventory, buy or lease equipment, hire employees, pay for professional expenses, or finance any other startup costs.
Although the interest rates may vary, most of Accion's startup loans have annual percentage rates starting at 10.99 percent. This is significantly lower than the APRs on loans from many of the other lenders we considered, which have starting rates between 20 and 30 percent.
In addition to the interest rate, a few other fees may apply, depending on the state in which you live. These fees include closing costs of 3 to 5 percent and a $135 processing fee that's applied only to closed loans. One big difference between Accion and other lenders is that with this loan, you also need to put up collateral, which is typically real estate, a vehicle or other business assets.
Loans are repaid on a monthly basis over the length of the loan, which can range from six to 60 months. To help ensure that you pay on time, Accion gives you the option of having the money automatically debited from your account.
We were incredibly impressed with the level of customer service we received from Accion. To test the level of support, we called the company several times, posing as a business owner interested in a startup loan. Most of the time, our call was answered immediately by a representative ready to answer our questions. There was one time when we had to leave a voice message for someone to call us back.
Overall, the Accion representatives were much more attentive to our needs than many of the other lenders we examined. Instead of focusing on determining whether we were a good loan candidate, like most of the lenders we contacted did, Accion listened to our questions and answered them thoroughly.
By the end of our calls, we had a clear understanding of how Accion startup loans work, including available loan amounts, the minimum requirements to be considered for a loan, the type of collateral needed, how the application process works, how long it takes to be approved and how you pay back the loan.
It was obvious from our calls that Accion places a big emphasis on helping small businesses. It was refreshing to speak with a lender that seemed more interested in our well-being than in how much money it could make off of us.
We were also pleased with the amount of detailed and helpful information on Accion's website. You can select the state you live in to see the exact loan types and terms available in your area. There is a comprehensive FAQs section, as well as a library of tips, articles and videos to help you grow your business.
Accion has an entire resources section devoted to helping small business grow and succeed. The section includes a variety of tips, articles and videos.
Accion representatives are available by phone or email Monday through Friday from 9 a.m. to 5 p.m.
Accion's biggest downside is that the application and approval process is significantly more detailed than those of many other alternative lenders. The application is more comprehensive, borrowers need to provide more physical documents, and the entire process is much longer. While it typically takes at least a month to get your loan with Accion, many other lenders we investigated provide funds in less than five days. The collateral for Accion's loans could also be a problem for some businesses.
If you want a simpler and faster application process, we would encourage you to consider our second-place winner in this category, CAN Capital. This lender provides loans to businesses that have been open for at least two months, doesn't require any collateral, has an easy online application and makes funds available in as little as two days. However, to qualify, your business must have a yearly gross revenue of at least $150,000. In addition, with CAN Capital, you must be prepared for higher interest rates and smaller loan amounts.
Another potential negative of Accion is that its startup loan programs differ by state, which could be confusing and frustrating for businesses that could qualify for loans in some states but not the state in which they are located. Another downside is the added fees. Although most lenders have an origination fee, they don't charge borrowers just for filling out an application, as Accion does.
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