Secured Business Advances

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.