Not all small business owners are newbies who need to “settle” for whatever financial help they can get. For those owners with good (but not necessarily great) credit, getting a loan is possible – but not always with the best repayment options. Your credit may not meet the requirements for a Small Business Administration (SBA) loan that usually offers the best terms, but you may have a solid enough credit history to willingly accept what some would consider usurious rates of interest charged by some alternative lenders. Nearly two decades ago, some lenders saw the opportunity to create a perfect niche, one for those borrowers whose credit sits somewhere in the middle between great and dismal. Credibly is one of those lenders.
With relatively relaxed financial requirements for the business and owner (compared to traditional and other alternative lenders), Credibly might be a good fit for a small business which hasn’t been able to obtain financing anywhere else. It should be noted that while the company does say that they can help newly established small businesses, their monthly revenue requirement of $10,000 may, in fact, be beyond the reach of a newcomer. Nonetheless, with three financing options to choose from, plus a referral to a Credibly external partner if those choices don’t work for you, Credibly stands ready to assist in a market that is still under-served by mainstream lenders. Credibly can offer its customers either a short-term, working capital loan, an expansion loan or a merchant cash advance.If a line of credit is desired, Credibly will refer you to one of their many external partners.
There are certain industries that Credibly will not fund, including; adult entertainment, casinos and gambling, weapons dealers, cannabis dealers, dating or escort services. Moreover, many financial service sector industries are excluded, including brokerage firms, insurance agencies, financial institutions, payday loan purveyors, consumer credit agencies and warranty companies. Airlines, used car dealerships and non-profit organizations round out the exclusionary list.
While Credibly’s loan offerings don’t necessarily make them a standout in the field, what does set them apart from most other alternative lenders – and not necessarily in a good way – is the flat origination fee of 2.5% charged for every loan that they book. The origination fee is essentially the upfront cost that a lender charges its customers for processing the loan. Most other lenders, if they do charge an origination fee, charge a rate that is dependent upon each individual situation and borrower. In some cases, those fees may be zero, but they can reach as high as 9% and more. Nonetheless, for a borrower who qualifies for a Credibly loan when no one else would approve them, that 2.5% fee is simply the cost of doing business. That fee is deducted from the initial loan proceeds, so a borrower needing a specific amount of capital should bear that in mind.
Credibly has been in business since 2010 when it began operations in Michigan. Today, it has offices in Michigan, Arizona and New York. Since 2013, with their scoring model known as ReCap, they have been striving to evaluate the overall health of a business, beyond the traditional metrics used by traditional lenders. To date, Credibly has provided more than $1 billion in loans to 19,000 small businesses throughout the United States. The company feels that it fills a gap between borrowers with excellent credit and those with poor credit, because those in-between were often left with poor options.
|Interest Rate||Origination Fee||Repayment Terms||Collateral Required|
|Working Capital Loan||$5,000||$250,000||Factor rate; ranging from 1.15x to 1.49x||2.5%||6 to 17 monthsPaid Daily or Weekly||UCC-1 Lien for loans over $100,000Personal Guaranty|
|Business Expansion Loan||$10,000||$250,000||Fixed APR; ranging from 7.4% to 36%||2.5%||Up to 24 monthsPaid Weekly||UCC-1 Lien for loans over $100,000Personal Guaranty|
|Merchant Cash Advance||$10,000||$100,000||Factor rate; ranging from 1.11x to 1.49x||None||3 to 14 monthsPaid Daily or Weekly||Not required|
The borrower requirement for each loan type is different:
*The borrower also has the option to take advantage of “split funding” which would effectively reduce the average daily balance requirement in the business account. With split funding, you essentially agree to use the lender's preferred credit card processor, rather than one of your own choosing. The benefit of it is that, under split funding, the amount just needs to be greater than zero for the past three months. Split funding allows the borrower to make payments through Credibly's recommended credit card processor which makes the process of receiving repayment simpler.
Use of Credibly's split funding element does have some of its own requirements:
Generally, Credibly has the ability to meet most small business borrower's funding needs internally. If they can’t help for some reason, they may be able to point you to one of their external partners. Credibly says that in some cases, they are able to turnaround an application very quickly, with funding taking place in as little as 24 hours from initial inquiry.
All of Credibly's loans are of a short-term nature, with a minimum of three months (for a merchant cash advance), out to the maximum repayment period of 24 months (for the business expansion loan). Given the relatively short-term nature of all of their loans, that is an indication that the interest rates will generally be higher. In the lending world, interest rates and repayments terms have an inverse relationship; the fact that loans at Credibly are all of a short-term nature means the rates charged to the borrower are on the higher end. In some cases, then, it might be in a borrower's best financial interest to look for a longer-term loan with a smaller interest rate which might not have a pre-payment penalty attached.
Credibly's merchant cash advance and working capital loans will bear rates known as factors. These types of loans don't accrue interest over the period; rather, they are “front loaded” as a flat fee. That fee is known as the factor rate, and while on its face it looks pretty attractive (say, at 1.1x), the reality is far from it. To determine the true cost of the loan, you need to multiply that rate by the amount of the loan. So, for example, a $5,000 loan at 1.1x is going to cost you $5,500; that means you will pay back $500 more. At 1.49x, that $5,000 loan will cost you $7,450 – a whopping $2,450 more! These two types of loans will have either daily or weekly repayments, usually automatically from the checking account you have provided.
A more conventional way of assessing fees is the method used with Credibly's expansion loan; in that case, Credibly will assign a fixed rate to the loan which will be expressed as APR or Annual Percentage Rate. Credibly's expansion loans are fully amortized and will carry an APR which will range from 7.4% to 34% (depending on the borrower's creditworthiness, of course). Remember, none of Credibly's loans are considered long-term, so even the expansion loan with a fixed rate will be relatively more expensive.
Credibly also charges an origination fee for each loan at a rate of 2.5%. That, in and of itself, differentiates Credibly from other similar lenders who have origination fees that are based on the merits of each individual borrower. Some other lenders, in fact, do not have an origination fee at all. The origination fee is deducted from the proceeds upon the first disbursement.
How Credibly handles late payments and penalties is not clear from their website. However, one account representative said that they are willing to work with clients on an as-needed basis to tackle the issue of a borrower struggling to make a payment. While no definitive plan of action was ascertained, it appears that can be flexible provided the client acts quickly when a problem arises.
Last but not least, Credibly will charge $25 for each payment that is returned for non-sufficient funds; as these payments are taken out on a daily or weekly basis, it is important that the borrower ensure that funds are readily available to satisfy the loan repayment.
Credibly points out that it does work with startups, even entities which have only been in operation for six months. However, the somewhat onerous monthly revenue requirement of $10,000 will preclude all but the most profitable startups from being able to obtain a loan from them.
At a minimum, a business owner must have a FICO score of 500 plus have been in business for six months in order to qualify for a working capital loan or a merchant credit advance. The requirement for a business expansion loan is higher at 650, with a minimum of three years in operation. As previously stated, there are some industry exclusions that won't be able to work with Credibly. Also, a business operating in certain states which have more stringent rules and regulations regarding working capital loans will not be able to work with Credibly; unfortunately, they do not list that information on their website or disclose it anywhere online, so the only way you will know is by completing an online application with them.
The Credibly application process begins with a fairly basic online form. The borrower will need to provide both personal and business information. That data will include loan amount required, personal credit score, length of time in business, industry, average volume of monthly credit, and the average monthly deposits into business account. Once the application is submitted online, if your business is deemed eligible for a loan, a representative of Credibly will reach out to you to discuss your options. At that time, you will have the opportunity to get answers to your own questions, and to provide clarification of your earlier self-reported responses in the application.
There are a number of documents you will need to gather in this process; they include:
Government issued ID (driver's license, passport, etc.)
Social Security number
Lease or mortgage paperwork
Bank statements for business checking account (last three months)
Federal tax returns for the business (most recent, for loans in excess of $100,00)
Once these documents have been received by Credibly, they will do a hard pull on your credit history (which will impact your credit score). If the application is approved, a formal offer will be extended. To that end, you will be required to sign a loan agreement, after which the loan can be funded (minus the origination fee). Though they can fund within 48 hours in some cases, the average time to funding is between three and five days.
Credibly employs more than 120 people across four states, and their customer service and account representatives can be reached either via email or phone. For questions or issues that are not account specific, they can be reached via Facebook or Twitter; their FAQ page is also a good source of general information. According to reviews by existing clients, when an account rep is not readily available, they will usually get a call back within an acceptable length of time.
The Credibly website has some interesting information for small business owners considering expanding or venturing into a new industry. With information obtained from the US Small Business Administration and the United States Census Bureau, they can help borrowers who might be considering relocating, expanding or even moving to a different location within the United States.
Trustpilot is a well-known website which allows customers, clients and users to leave reviews and ratings of the companies it does business with. In their category of non-bank finance, Credibly ranks 89 out of 287 other companies, with 206 reviews for which 85% of the respondents gave Credibly a 5-star rating. Primarily, reviewers have expressed appreciation for Credibly's customer service team and account reps. To a lesser extent, there were some expressions of gratitude for a streamlined process and assistance whenever questions arose. Of the 1-star reviews (and there were only nine of them, in total), most had to do with early payment discount agreements not being honored by Credibly. To give Credibly its due, it responded to every complaint and, in several instances, researched the facts of the matter.
Credibly states on its home page that it has an A+ ranking with the Better Business Bureau. However, as of this review, the Better Business Bureau reported that Credibly's information was being updated and unavailable.
Credibly has found a niche in providing several different types of small business loans for clients who fall in the gap between excellent credit and poor credit. However, despite the financial assistance, their rates remain high compared to other lenders. Moreover, the fact that they only provide short-term funding, i.e. loans for only 24 months, could be problematic for some borrowers. Even “happy” customers admit that Credibly fills a need, albeit at a cost. If a borrower has a fairly good credit history, it couldn't hurt to shop around for better interest rates, especially if a short-term loan falls short of ideal.