Private Business Loans

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What is a Private Business Loan? What Is a Private Money Lender?

The Definition: A private business loan is any business financing provided by a non-bank or traditional business lending source. The private business loan comes from lenders that use all types of collateral to secure their lending, including, but not limited to, business assets, personal assets, commercial real estate to secure their business lending interests. Private finance lenders don’t typically require giving away a portion of your company’s equity in order to obtain financing.

As a small business owner, you are probably aware of various traditional business loans like a Bank loan, bank business lines of credit, and Small Business Administration (SBA) loans. You probably have also discovered some alternative business funding products as well, like short term business loans, invoice factoring, equipment leases or loans, as well as business and merchant cash advance. But, beneath all these common financing products for businesses lies private money lenders — who are lending cash through different types of private loans to help small business owners. A private lender has a lot of flexibility and attractive terms, however, they can be difficult to find for financing.

AdvancePoint Capital can provide private lending to small businesses and borrowers that need it the most. As a private lender, we’re here to offer alternative solutions to financing.

What about those lending hard money? Well, a hard money lender may also invest private capital to assist with financing a borrower. These lenders are private lenders that utilize assets, typically real estate, to secure loans. These are also considered a non-institutional private lender or lenders that far outnumber more traditional sources.

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The Truth About Private Business Loans

When looking online by doing a Google search, you will find many sources that will tell you a lot of products that are actually traditional or alternative somehow are considered private business loans just because they are not provided by an FDIC Bank or Credit Union. The bottom line is that it is just not true.

In the last ten years, with the advent of the financial technology revolution, a lot of well-established, and well-funded, private and public companies have been successfully providing loans to real estate investors and other small businesses. We would be glad to assist you in learning about private lending and how it may be able to help you.

Since business lending is not regulated as much as the consumer end, private business loans and lines of credit are initiated by individuals and small financial collectives or “family offices” that will take on greater risk than banks, credit unions, or small business lenders. These private lenders have their own set of rules that usually entail a short-term loan or line of credit with higher costs than that of common business lending options and secure with collateral.

Hard lending is very popular with businesses such as the property investor industry because they can use the collateral of real estate to secure private loans, which they love. This can serve as a type of private lender experience, as it’s coming from a private lending source. An investment property has a ton of value. It’s a hard asset that offers some real security against the capital they are lending. For those looking for an alternative route, hard lenders offer a sound solution through investment property and other hard capital solutions.

How Does Hard Money Lending Work?

Small businesses can discover hard funding through alternative online lenders such as AdvancePoint Capital. Unlike traditional loans, private loans are asset-based — which means that the asset acts a the collateral and will back the loans, mitigating some risk. Typically, real estate investors will use commercial real estate as collateral for loans, and a private lender will provide financing that can then be used for a variety of purposes. For instance, real estate investors can use these loans to fix and flip housing, develop a rental property, or secure additional estate properties for commercial purposes.

What Kind of Terms Should Be Expected for a Private Business Loan?

What Types of Private Loans Are There?

Interest Rates

Interest rates will vary greatly from private lender to private lender. Private lenders tend to charge higher interest rates than other forms of business lending.


1 to 12 months is average but up to 5 years (60 months) with the potential of extensions. This type of business funding may also be in the form of lines of credit.


Cost will vary, typically 1% to 5% Origination Fee


Monthly, Bi-weekly and in some case daily Monday through Friday

Credit Eligibility

All types of credit considered from Poor to Excellent. Business Credit requirements vary as well.


 May be required

Use of funds

A wide range of uses of funds are available

Credit Limit

As they say, the sky’s the credit limit when it comes to how much capital you can receive with a private business loan. Private lenders vary greatly in terms of private business loan amounts and how much is available to borrow.


An application as well as provide financial statements will be required at a minimum. Will depend on the purpose and use of funds.

What Are the Most Common Uses for Private Business Funding?

What’s the Best Use of Funds?

  • Cash Flow to stabilize operating bank account 
  • Emergency Payroll funding
  • Bridge  business loan
  • Fix and Flip loan
  • Emergency Cash infusions due to extenuating circumstances
  • New business funding
  • Advertising/Marketing
  • Required Repairs of existing facilities
  • New or Used Equipment loan
  • Inventory or supplies funding
  • Business Expansion funding
  • Commercial or Residential property acquisition

The Benefits of Private Business Loans

  • Private business loans offer to fund when traditional or alternative funding sources do not
  • More Flexible and creative loan structure than traditional funding
  • Allows small businesses to take advantage of unique opportunities when other funding sources do not
  • Give property investors the ability to fix and flip without worrying about funding sources

The Disadvantages of Private Business Loans

  • Costs and terms are more expensive than traditional business funding.
  • The financial stability of the private funding company providing business funding.
    (always check for positive reviews online)
  • Customer support and technology like online customer access.

Alternatives To Private Business Loans for Small Business Owners

What Are My Options?

Business Line of Credit – A business line of credit is an open revolving line. This type of funding allows business owners to draw funds when needed on-demand or make purchases—business lines of credit charge a principal & interest rate. Business lines of credit do have a credit limit (credit limit will vary based on qualifications) that cannot be exceeded without approval and are not open-ended forever and require renewal either semi-annually or annually (12 months) to be extended. Business lines of credit will require a credit history that’s good to excellent (a credit score can range from 620 and up). Business lines of credit are not term loans.

Long-Term Loans – Long term small business loans are small business term loans with a duration of greater than two years. Businesses are offered a fixed amount of upfront and charged principal & interest. Unlike a business line, a business owner cannot draw capital as you go with a long term loan. With long-term loans, your credit history will have to be good to excellent (credit score ranges from 680 and above).

Short-Term Loans -Short term small business loans are business loans with a repayment period of 6 to 18  months. Short-term loans allow for all credit types. The credit score ranges from 550 to 800.  A Short-term business loan is not a line of credit. Payments are deducted monthly, bi-monthly, weekly or in some cases Monday-Friday for higher-risk borrowers based on credit grade.

Merchant Cash Advance (MCA) – Merchant Cash Advances (also known as a Purchase of Future Sales) advance a “lump sum” of capital upfront to a business owner based on the credit card sales of the business. Merchant cash advances are repaid by future credit card sales receivables by taking a fixed percentage of those future credit card sales batches until the payback amount is paid back in full. Merchant cash advances charge a factor rate and not an interest rate. MCA’s are not term loans but are short-term in nature in that the length of time to repay is normally less than 18 months. All credit considered (Credit score range 500 and above).

Business Cash Advance (BCA) – Business Cash Advances (also known as a Purchase of Future Sales) advance a fixed “lump sum” of capital with a discounted purchase price, also known as a specified amount, to payback. The advance is repaid by taking a fixed percentage of future overall sales, unlike a merchant cash advance which takes a percentage of future credit card sales. Fixed daily payments are collected daily or weekly by deducting from a business bank account which is based on the fixed set percentage of future sales. BCA charges a factor rate and not an interest rate. BCA’s are not term loans or a line of credit.

Equipment Financing -Businesses that use equipment to operate their business often turn to equipment financing for the purchase of equipment that uses the equipment as collateral. Business owners must have very good to excellent credit, but the good news is limited paperwork is necessary. 

SBA Loans – The Small Business Administration (SBA) provides programs, guidelines, and loan guarantees to approved lenders for businesses throughout the country. SBA loans help Americans start, build, and grow their businesses successfully. The Small Business Administration (SBA) is not a lender. The Small Business Administration (SBA) provides a guarantee that gives the approved lender ability to take on the risk of business lending under Small Business Administration (SBA) terms that they would not ordinarily do so on their own.

Invoice Factoring – Invoice financing advances the outstanding balance to a business owner to increase the speed of cash flow to the business. This solution provides capital quickly and there is no need to wait for outstanding invoices to be collected and received by the client with invoice financing in place. Invoice financing is affordable with a factor rate that ranges from 1% to 2.5% off of the face value of the invoice advanced. This is not a loan with interest, but an advance with a factor rate/cost.

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Frequently Asked Questions

The short answer is yes. Finding private business lenders can be difficult. Private lenders are selective and use non-traditional methods to approve business owners. Private business lenders can also be specific industry business lenders, meaning they have specific and narrow industries they will lend to. 

A private money lender is typically an individual investor that offers a different route to funding for your company then, let’s say, the bank. It’s common for real estate investors to utilize private lenders for example. One of the main areas of confusion is the difference between private lending and hard lending. Hard lending lives in between bank lending and private lending and is an option that doesn’t require the copious amounts of hurdles to jump over. These institutions, at the very least, offer flexibility and freedom with what type of financing is available for your company and adds yet another addition to your funding repertoire.

Private Business loans are available with bad credit. Your options may be limited, and the rates, cost, and terms may be affected by how bad your credit is. However, for those with bad credit looking to fix and flip properties, this may be the only option. Also, collateral will be key for private business financing if you have bad credit for eligibility.  

First, you’ll have to learn about what type of private lender works best for you, the amount that’s right for you, and what type of funding is available. Then, you’ll need to look through and learn the various requirements necessary to obtain a certain type of loan. Finding a private lender and getting approved isn’t always the easiest task, as eligibility requirements can be stringent. For some, going with banks or other traditional financing options to borrow funding may be a better fit. With that being said, often times a private lender could be a sound alternative to banks. So, look through reviews and see what the approval requirements are to make the best possible choice.

The short answer is maybe. Typically you cannot find start-up private business loans without showing a history of revenue and your ability to manage cash flow. Former business ownership experience in prior businesses will probably be a must for private lenders. For real estate investors in the startup marketplace, fix and flip operations may be difficult to obtain private business financing without some history of success. SBA loan options may be the way to go.

When looking to discover and get approved for a small business loan for your company, there are many factors to look through. No matter the number of funds, interest rates you’re looking for, weekly or monthly terms, or the bank or lending institution options available — you’ll have to do some research. Looking through eligibility requirements and getting approved really depends on the type of loan, advance, lines of credit, or invoice financing solution you’re looking at. So, be sure to look through various application requirements and make sure that your credit score, time in business, revenue, and financials are at least up to par.

Yes, banks will give loans to start a business, but what type of financing is available depends on a wide range of factors. If you’re a day one business or don’t have any company background or history, it will be nearly impossible to get a loan from a bank. In these cases, you’ll be better off looking for different financing from another institution, like online lenders. Without being able to provide a revenue history, balance sheets, payment history with other loans, or at the very least — some type of credit balance, it will be difficult. However, that doesn’t mean you’re all out of options. Getting the funds you need to make your business a reality, means looking in a different area. Time and time again, we see business owners give up, but the funds are out there and available. So, make sure you know the amount you need, what rates you can manage, terms you can handle (monthly, or bi-monthly) — everything you’ll be required to provide to the lender and the best option for you to start your business.

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