Business Finance FAQ

Worker at Tuckerman's Brewery in Conway, N.H.

How much can I borrow?
What will I be charged?
How do you decide whether to finance a business?
What types of business do you finance?
I am looking to start a new business and am looking for a loan. Can you help?
Are there other businesses you would not finance?
Would you finance a business that is part of a franchise?
How long does your decision process typically take?

Why do you ask whether applicants have sought bank financing?
What if I can’t afford the business education you recommend?
How do you secure your loans and investments?
What is the difference between Business Builder and Vested for Growth?
Royalty financing seems expensive. Is it worth it?
Can you help me restructure my long-term debt?
Can you help me restructure my short-term/credit card debt?
Do you provide lines of credit?


Q: How much can I borrow?

Our business financing ranges from $1,000 to $1 million. Request the amount that is most strategic for your business. In making our decision, we take into account a number of factors that other lenders can’t or won't consider in reviewing an application.

If your business needs more than $1 million, we may be able to draw upon up to $2 million from other lending partners. The availability of those funds depends on the particular nature of your company and the loan/investment opportunity.

Q: What will I be charged?

Business Builder loan interest rates are generally between 8 and 12%. In addition, a 2% origination fee, plus our out-of-pocket expenses including the UCC filing, are charged at closing.

Vested for Growth investments are more expensive than debt but less than equity. In addition, a 1% origination fee, plus our out-of-pocket expenses including the UCC filing and our attorney fees, are charged at closing.

Q: How do you decide whether to finance a business?

We take time to understand where your business is going and what lessons you have learned. We focus more on the present and future than on the past. We look for creative ways to lessen factors that other lenders might see as risk. One way we do this is by referring the business owner with a performance coach.

Even if we can’t approve your loan request, we will refer you to loan and business education resources customized to your business’s needs and stage of development.

Q: What types of business do you finance?

We will finance a wide variety of businesses.

Q: I am looking to start a new business and am looking for a loan. Can you help?

We finance only to companies that have been in business for a year. This reflects a practical desire to walk before we run as the Community Loan Fund expands our business financing, as well as recognition that startups need more-intensive support than we can provide.

The one exception is if the assets/guarantees to collateralize the financing (another existing business or co-signer) are sufficient to cover all debts.

We define a startup as:

  • A businesses with less than 12 months in operations , or
  • A business that relocates to a location where it will not retain its existing customer base

We may lend to startups in the future. In the meantime, we value your new business and want it to succeed. So we have compiled a list of resources for you.

Q: Are there other businesses you would not finance?

We will not supply financing for the purposes of:

  • Paying payroll taxes or other benefits which are in arrears
  • Paying delinquent business or personal taxes.
  • Purchasing or improving residential property or other real estate not used by the owner's business
  • Owners' salaries, draws or equity distribution

We also will not finance fraternal organizations or businesses that are engaged in pyramid or networking schemes or pornography.

Q: Would you finance a businesss that is part of a franchise?

We would first need to underwrite the franchise and review the franchise agreement. If the franchise was approved, we would analyze whether the applicant is a good franchisee. We would consider an applicant who had not previously owned this franchise a startup and would decline the loan on that basis.

Q: How long does your decision process typically take?

You work hard to be responsive to your customers and need a finance partner who will do the same on your behalf. We will respond to your inquiry within 24 hours (during the business week) and make a decision within 30 days of a completed application.

Q: Why do you ask whether applicants have sought bank financing?

Banks offer lower interest rates than ours, so many businesses request loans there first. If a bank has denied your request, knowing the reasons why allows us to move quickly from issue-discovery to problem-solving.

Q: What if I can’t afford the business education you recommend?

Our goal is to recommend both volunteer and paid consultants but, depending on your need and/or geographic location, options may be scarce. We also try to recommend more than one resource so you can factor cost into your choice.

Whoever you choose, you’re free to negotiate a price that fits within your budget. Scholarship funds may be available in some areas to defray the cost. Alternatively, if you apply for financing, you can ask that the price of the consultant be added to your request, to allow you to spread the cost over a longer period of time.

Q: How do you secure your loans and investments?

We secure our loans and investments with collateral that includes a personal guarantee, a Uniform Commercial Code (UCC) filing on all of the business’s assets and a lien on mortgages. However, financing will not be denied solely for lack of collateral.

A lack of collateral will affect the pricing of a Vested for Growth investment. A business owner who cannot present collateral, or an alternate way to repay the investment if the business fails, represents a higher risk. We will try to offset that risk with the possibility of a higher return.

Q: What is the difference between Business Builder and Vested for Growth?

Most businesses will be served by our Business Builder loans, which offer loans from $1,000 to $1 million at fixed interest rates (usually 10%).

If there is more risk associated with your loan, but your business has a strong growth proposition, management team and gross profit margins above 25%, Vested for Growth may provide an additional option. VFG investments begin at $100,000 and feature structures such as royalty financing, in which the borrower pays a percentage of future gross revenue. This approach allows us to “price to risk” and partner with businesses that we would otherwise have to reject.

Q: Royalty financing seems expensive. Is it worth it?

The pricing of royalty (or mezzanine) financing can vary significantly, although it will always be more expensive than debt and less expensive than equity.

The key question is how much profit the business will generate with the royalty capital. If a royalty financing offer seems expensive relative to what the business can accomplish with the money, it may not be the most strategic option. This is why VFG requires that a business have a gross profit margin of at least 25% before we’ll consider offering royalty financing.

Beyond the total cost of royalty financing, it’s important to understand how these deals are structured. What a company pays is tied directly to its gross sales – more when it does well and less when it doesn’t. This approach builds a cushion that covers the losses that come with making riskier loans.

Royalty also allows the business owner(s) to retain 100% ownership and decision-making over the company’s future.

Q: Can you help me restructure my long-term debt?

If your reason for restructuring is more than just wanting to lowering the interest rate, we might be able to help. For example, if refinancing would free cash flow to promote growth or add employees, we would consider itg. Certainly, a small portion of a loan or investment can be used for refinancing.

Q: Can you help me restructure my short-term/credit card debt?

Replacing short-term debt, including from credit cards, with long-term capital may not be strategic unless the business owner has other access to short-term money. In some cases, refinancing with long-term capital simply allows the borrower to slip back into the non-strategic practice of using the credit card debt.

Q: Do you provide lines of credit?

Yes. Here is a general set of parameters, but individual terms may differ:

Dollar amount
  • $1,000 to $500,000 (term loans are available for less than $10,000).
  • Formula-based lines generally use 50% of account receivables and 25% of “finished goods” inventory.
  • Non-formula-based lines are available if other available assets provide 100% collateral coverage.
Interest rate

Typically 10%, but can range from 8% to 12%

Fees

2% origination fee at closing and an annual renewal fee of 1% (minimum renewal fee $100, maximum renewal fee $500).

Security
  • First lien position on all business assets
  • Personal guarantee(s)
Structure
  • Annual renewal
  • Clean-up provision, requiring borrower to reduce the balance to zero for a period of time customized to your business.