Secured Business Advances | Yieldi Collateralized Advances | Yieldi.com
Investor Starter Toolkits
News

Secured Business Advances

James Crandall

March 22, 2020 · 8 min read

Through its Secured Business Advance, Yieldi offers a quick and simple way for business owners to use the value that they have in their home or investment property to receive funding for their business. We can provide funding from $20,000 to $500,000 within 5 business days. your approval amount will be based primarily on a risk assessment of your business and based on the average monthly and annual revenue that you deposit into your business bank account.

The Yieldi Difference

The key difference between our Secured Business Advance product and what you may be familiar with from other short-term business lenders or merchant cash advance lenders is that we can offer better rates and longer expected payback schedules since we have some collateral in your real estate holdings. Even if you have an existing mortgage or loan on your property, we can still provide your business with an advance against that property, as long as there is sufficient equity.

Deeper Dive

Here's an example to illustrate a hypothetical Secured Business Advance: ‘Bob’ owns an HVAC repair business called ‘Bob's HVAC LLC’ that he started 18 months ago. The business on average earns revenue of $30,000 per month. He is looking for $55,000 in funding to use for working capital and to purchase parts.

Bob owns his home. He looks up what it is worth on Zillow and the Zestimate is $200,000. He has an existing mortgage on his home with a balance of approx $75,000. Therefore, he has $125,000 in equity in his home. (In other words, if he sold his home today, he would pay off the $75,000 mortgage and receive $125,000; so his “Loan to Value” is currently $75,000 / $200,000 = 37.5%)

Bob has sacrificed a lot getting his business started and it had some negative effects on his credit score. His FICO is now 585. (Note: While we do review owner’s personal credit score, we are not overly concerned and don’t have a hard minimum required cutoff score)

Since Bob has $125,000 in equity in his home, and since Bob's business has fairly predictable monthly revenue, we determine, even with the low FICO, that we can offer Bob's HVAC LLC a $55,000 advance.

The amount that Bob’s HVAC must pay back after receiving the $55,000 advance is determined by what is called the Factor Rate. The Payback Amount is calculated by taking the advanced amount and multiplying it by the Factor Rate. (See below in the FAQ for more info on Factor Rates.) In this hypothetical example, let’s assume the factor rate is 1.39 and the payback amount is $75,350.

Bob really wants to keep his payment as low as possible so the payment doesn’t cause strain on the cash flow of his business. He prefers smaller daily or weekly payments so that he doesn’t have to plan for a large monthly payment coming out of his bank account. Since we are providing an “advance” and not technically a “loan”, we provide an estimated payback period of 14 months given his profile. Therefore, Bob’s payment to pay back this hypothetical advance would be a daily ACH of $256.29 (or once a week ACH of $1281). This payment amount could be adjusted in the event that Bob’s revenues decline during any month.

A lien on Bob’s home is recorded until the Secured Business Advance is paid off.

What’s Needed to Apply

Fill in our quick-start online application Here, we will be asking you for a few pertinent pieces of information:

  • Last 4 Months Business Bank Statements
  • Property that you would use for Collateral
  • Approx Value (as determined by Zillow or Trulia if possible)
  • Amount of your existing loan on property
  • Brief summary of amount of money seeking and how you plan on using funds for your business

Frequently Asked Questions

Question: Can you help me if my credit score is poor?

Answer: We work with business owners with all ranges of credit scores and do NOT have a minimum credit score cutoff. Personal credit is a factor in the underwriting process but only one of many decision points.

Question: I have a business that I have just started and it’s less than 1 year old. Can my business still qualify for a Secured Business Advance?

Answer: We can still take a look at your situation. We prefer it if you have owned and operated your business for 1 year or more. But we will still consider your application even if it is a business less than 1 year old.

Question: I see this is called an “advance” and not a “loan”. What’s the difference?

Answer: From a practical standpoint, there is not much difference. Whether you receive a $50,000 business advance or a $50,000 business loan, your business in both cases gets cash and, in exchange, must pay back that original funded amount + some additional amount. With an advance, the extra part that is paid back is the “fee” or what is sometimes called the “forwarding fee.” With a loan, the extra part that is paid back is the “interest.” From a legal standpoint, the Secured Business Advance is not technically a loan. Instead, with a Secured Business Advance, you are selling us part of your business’s future revenue in exchange for a lump sum of working capital. The repayment amounts are a factor--or fixed percentage-of your future sales. In effect, after we provide the advance, we own a portion of your future sales, and we therefore collect a percentage from these sales until you've paid off the balance and the initial forwarding fee.

Question: I own my home but have a mortgage. Can I still use my home as collateral?

Answer: Yes, provided that you are current on your primary mortgage and that you have enough equity in your property, then we will consider taking a 2nd lien position.

Question: Can I use other real estate outside of my home to secure the advance?

Answer: Yes, we will look at any property as collateral, as long as there is enough equity to provide coverage.

Question: Do you record a lien against my property if my business receives a Secured Business Advance?

Answer: Yes, the lien is recorded at closing and dropped upon payoff of the advance.

Question: I own my business with a business partner in an LLC or Corp. I own no property but my partner has a house with a mortgage, can we still apply?

Answer: Yes, as long as the partner with property is OK with a lien recorded to grow your business. In this case, you should still be able to be funded.

Question: What is Factor Rate?

Answer: We use Factor Rate to inform you of the cost of the funds that we are providing. You can think of it as the cost per dollar that you must pay back. For example, if you were to receive $1 at a factor rate of 1.25, you must pay back $1.25. You pay back the $1 that was originally funded and 25 cents is the fee for getting the $1. It is NOT the same thing as APR but provides a simple way for you to understand how much you have to pay back.

Question: Why don’t I just get a Home Equity Line of Credit (HELOC)? How is this different?

Answer: Business Owners use the Secured Business Advance because they don’t have the time or credit score that is required to get approved for a HELOC. It can take a month or more to get a HELOC approved and funded where our process typically can be completed in 5 to 8 business days after the funding contract is signed. Also, we understand that your credit may be over extended and we can still approve your business for the advance. Because the Secured Business Advance is not a traditional real estate loan, you do not have to go through traditional bank underwriting.

Question: Why is a Secured Business Advance better in most cases than a typical short-term business loan or merchant cash advance?

Answer: The Secured Business Advance can typically provide MORE funds since there is collateral securing the advance. Short-term business loans and merchant cash advances usually provide funds that are in the amount of 75% to 100% average monthly revenue. Our product can provide 100% to 200% of average monthly revenue. And, the Secured Business Advance usually allows you to pay back your funds over a longer expected time period. Many typical advances and short-term loans have pay back periods of 6 months to 12 months. As an example, say you can receive $100,000 business loan at a factor rate of 1.35 with a 9-mo term. Or, that same $100,000 secured business advance at the same factor rate with a 16-mo term. With the business loan, you would make a daily ACH payment of $714 (or weekly of $2857). With the secured business advance, your estimated daily ACH payment would be $401 (or weekly of $1,607).

Question: What if I have another short-term business loan or merchant cash advance? Can you still provide a Secured Business Advance?

Answer: In some cases, yes. We evaluate this on a case by case basis. We typically will NOT pay off other short-term loans or advances.

Borrowers, Investors, News
The Role of Government Policies in Shaping Real Estate Markets

Government policies play a crucial role in shaping real estate markets, influencing everything from property values and investment opportunities to...

Read More
Borrowers, Investors, News
How Much Debt Does the Average American Owe in 2024?

Understanding the financial landscape of the average American household is crucial, especially in a time when debt levels continue to...

Read More

Ready to start investing?

Schedule a Call
Borrowers, Investors, News
How Much Debt Does the Average American Owe in 2024?

Understanding the financial landscape of the average American household is crucial, especially in a time when debt levels continue to...

Read More
Borrowers, News
Private Lender Portal Success Stories: Real-World Examples

In the rapidly evolving world of real estate investment, technology plays a critical role in enhancing efficiency, transparency, and profitability....

Read More
News
Atlanta Inno: How Atlanta Investors Can Shop for Real Estate Deals

The platform brings together the founders’ separate areas of expertise. Ashkouti has family experience in real estate development, while Lloyd...

Read More
Read Full Disclosure
THIS PRESENTATION FOR YIELDI, LLC (THE “FUND”) AND ANY APPENDICES OR EXHIBITS IS PROVIDED TO YOU ON A CONFIDENTIAL BASIS AT YOUR REQUEST FOR INFORMATIONAL PURPOSES ONLY AND IS NOT, AND MAY NOT BE RELIED ON IN ANY MANNER AS, LEGAL, TAX OR INVESTMENT ADVICE OR AS AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY AN INTEREST IN THE FUND. THIS PRESENTATION IS CONFIDENTIAL AND IS ONLY BEING PROVIDED TO “ACCREDITED INVESTORS” WITHIN THE MEANING OF THE SECURITIES ACT OF 1933, AS AMENDED. RECIPIENTS OF THIS PRESENTATION MAY NOT REPRODUCE, REDISTRIBUTE OR PASS ON, IN WHOLE OR IN PART, IN WRITING OR ORALLY OR IN ANY OTHER WAY OR FORM, THIS PRESENTATION OR ANY OF THE INFORMATION SET OUT HEREIN. A
private offering of Borrower Payment Dependent Notes (“Notes” or “Note”) will only be made pursuant to a confidential private placement memorandum (the “Offering Memorandum”), each specific Note, and the Fund’s subscription documents, which will be furnished to qualified investors on a confidential basis at their request for their consideration in connection with such offering. This document does not purport to contain all the information that may be required to evaluate an investment in a Note and is subject to completion and amendment. Any prospective investor is advised to carefully review all of the Offering Memorandum, the Note, and the Fund’s subscription documents. Certain factual information has been obtained from third-party sources believed to be reliable but has not been independently verified. The Fund may change some terms of the Offering prior to finalization of the Memorandum. The information contained herein will be superseded by, and is qualified in its entirety by reference to, the Offering Memorandum, which contains additional information about the investment objective, terms and conditions of an investment in a Note or Notes and also contains tax information, information regarding conflicts of interest and risk disclosures that are important to any investment decision regarding a Note or Notes. No person has been authorized to make any statement concerning the Fund other than as set forth in the Offering Memorandum and a Note, and any such statements, if made, may not be relied upon. The information contained herein must be kept strictly confidential and may not be reproduced, redistributed or otherwise used without Yieldi, LLC’s express written approval. Each recipient, by accepting these materials, is deemed to agree to the foregoing, and to agree to return these materials promptly upon request. An investment in a Note or Notes of the Fund is highly speculative and involves significant risks, including potential loss of the entire investment. Before deciding to invest in a Note or Notes, prospective investors should pay particular attention to the risk factors contained in the Offering Memorandum. Investors should also have the financial ability and willingness to accept the risk characteristics of a Fund Note or Notes according to their terms.  An investment in a Note or Notes is not suitable or desirable for all investors and only qualified eligible investors may invest in the Fund. Past performance is not indicative of future returns or Fund results. The views expressed herein represent the opinions of the Fund and are not intended as a forecast or guarantee of future results. Individual investment performance, examples provided and/or case studies are not indicative of overall returns of a Fund Note. In addition, there can be no guarantee of deal flow in the future. Some of the statements in this Presentation, including those using words such as “targets,” “believes,” “expects,” “intends,” “estimates,” “projects,” “predicts,” “anticipates,” “plans,” “pro forma,” and “seeks” and other comparable or similar terms are forward-looking statements. Forward looking statements are not statements of historical fact and reflect Fund’s views and assumptions as of the date of the Presentation regarding future events and performance. All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are important factors that could cause a Note or Notes actual results to differ materially from those indicated in these statements. The Fund believes that these factors include, but are not limited to, those described in the “Risk Factors” section of Fund’s Memorandum. The performance figures set forth in this document are provided to you with the understanding that, as a sophisticated investor, you understand the inherent limitation of such illustrations, will not rely on them in making any investment decision, and will use them only for the purpose of evaluating your preliminary interest in investing in a Note or Notes of the Fund. Any performance data represents past performance. Any performance information included in this document is for information purposes only. The Fund makes no guarantee that it will be able to achieve similar results. Targets are objectives and should not be construed as providing any assurance as to the results that may be realized in the future from investments in a Note or Notes of the Fund. HISTORICAL PERFORMANCE IS NOT AN INDICATOR OR GUARANTEE OF FUTURE RESULTS. No representation or guarantee is made that the Fund will or is likely to achieve its investment objectives or be able to avoid losses This document contains selected information regarding transactions entered into by the Fund on behalf of other accounts and clients. The purpose of any historical information is to provide prospective investors with examples of investments the Fund has made in the market in which the Fund expects to invest and illustrate the types of investments that may be targeted by the Fund. Prospective investors should not rely on this information in making an investment decision, as the investments of the Fund in the past and the investments made in the future may be materially different from any historical investments. In view of the foregoing,  there can be no assurance the Fund will make investments similar to those that may be described herein or be able to achieve comparable results or avoid losses. The Fund has not filed, nor does it currently intend to file, a prospectus or similar document with any securities regulatory authority. No securities regulatory authority has passed upon the value of an investment in a Note or Notes of the Fund, made any recommendations as to a purchase of any securities of the Fund, approved or disapproved of the offering of any securities of the Fund, or passed upon the adequacy or accuracy of this document. Any representation to the contrary is unlawful. This document does not constitute an offer or a solicitation in any jurisdiction to any person or entity to which it is unlawful to make such offer or solicitation in such jurisdiction. Prospective investors should make their own investigations and evaluations of the information contained herein. Prior to the closing of a private offering of a Note or Notes of the Fund, the Manager of the Fund will give investors the opportunity to ask questions and receive additional information concerning the terms and conditions of such offering and other relevant matters. Each prospective investor should consult its own attorney, business adviser, and tax adviser as to legal, business, tax and related matters concerning the information contained herein and such offering. Except where otherwise indicated herein, the information provided herein is based on matters as they exist as of the date of preparation and not as of any future date, and will not be updated or otherwise revised to reflect information that subsequently becomes available, or circumstances existing or changes occurring after the date hereof. AN INVESTMENT IN THE FUND INVOLVES RISK, AND NUMEROUS FACTORS COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF FUND TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS THAT MAY BE EXPRESSED OR IMPLIED BY STATEMENTS AND INFORMATION IN THIS PRESENTATION. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE DESCRIBED IN THIS PRESENTATION.