Businesses, startups, entrepreneurs, and small business owners need working capital to establish a foothold in their industry. The competition is tough, so earning capital for much-needed items, products, services, and staff is essential to becoming a mainstay in your niche sector.
That is why pre-approval for loans, credit cards, and services is essential. Not only do pre-approved financing options offer an immediate answer to your money woes, but often, they do not do a hard pull credit check that can make it even more difficult to secure a traditional loan in the future.
Business Loans Pre-Approval: Step One in Securing Funding
Pre-approval is the first evaluation step a lender (e.g., bank, credit union, etc.) takes to determine whether a potential borrower will be approved for a loan or credit card. Although the pre-approval process isn’t an automatic ‘okay’ for obtaining a loan, it is the first step that applicants should take to see if they have a chance at qualifying.
During the pre-approval process, the lender does an analysis of the borrower’s financials, including personal credit score, business plans, business success, financials, and balance sheets.
Once a small business owner approves a credit card or loan, they finalize the credit application, and the lender performs a hard credit pull. The hard credit pull is usually the make-or-break step in the process, as it provides the lender with deeper insight into the applicant’s finances.
Pre-Approval Options For Small Businesses
There are numerous business loan pre-approval choices for companies that don’t want to go through the tedious process of applying for traditional bank loans — and then getting denied.
These financing choices are not only faster and easier for lesser-known companies or startups, but they also have a streamlined decision-making process that provides an answer in no time, giving you the reassurance and confidence you need to move forward with your business plans.
StreetShares
StreetShares is a veteran-based service that offers lines of credit, contract financing, and term loans. It also provides small business loan investment choices for new companies that need short-term financing for a big purchase or long-term financing for daily expenses.
The best part about StreetShares is that the pre-approval only takes a few minutes, providing instant feedback to the applicant without harming the individual’s or business’ credit scores. This quick response can fill you with hope and optimism about your business's financial future.
For a business owner to be eligible, they must have been in business for more than 1+ year with an annual revenue higher than $25,000. The applicant should have a credit score >620.
Bank of America
Bank of America offers business loans to small business owners who want to kick-start their companies. This traditional institution has additional perks than other banks, such as business loan rate discounts, expert tips on income and cash flow methods for new startups, and free business credit score analysis.
Business owners with an American Express credit card can be eligible for pre-approval for an American Express Business Line of Credit.
AdvancePoint Capital
AdvancePoint Capital offers an online application that requires documentation for the business loan pre-approval process, including business profile information, business bank statements, financials (tax returns, balance sheets, etc), and a personal credit review.
AdvancePoint offers fast approval and possible loan consideration despite a low personal credit rating, giving you the flexibility and control to pursue your business goals. Their straightforward online application process puts you in the driver's seat of your business financing journey.
Pre-approved Credit Cards
The quicker an individual is approved for a credit card, the quicker they can start spending to finance their business. Although buying items out of your price range and then falling into debt is not the way to start a company, startups, entrepreneurs, and small businesses need working capital to get their ideas off the ground.
Credit cards can be a smart way to get the ball rolling when it comes to stocking, paying staff, renovations, repairs, technology, and other must-have items that are essential to getting customers in the door and starting to earn consistent income.
The most important aspect of credit cards is the pre-approval process. A lengthy or confusing pre-approval process can slow down business financing and hurt a new business owner’s credit score, which can lead to long-term issues with an entrepreneurial adventure.
A fast and easy pre-approved credit card means that the applicant knows almost immediately if they meet the requirements to become a cardholder. The soft credit pull, which doesn’t affect the individual’s credit score, is used for pre-approvals. This prevents any issues with receiving loans or borrowing in the future.
In contrast, a hard credit pull is performed when the applicant finalizes the credit application, providing the lender with deeper insight into the applicant's finances.
When applying for a pre-approved credit card, there are three things to remember. A ‘pre-approval’ credit card uses a soft pull and public data to see if the person is approved, meaning it is highly likely to succeed. A ‘guaranteed’ credit card is specifically for customers with poor credit, providing a ‘secured’ financing line that can help an individual build credit.
Lastly, ‘instant approval’ is a credit card option that provides an immediate response, although there is no approval guarantee.
For those who need immediate financing with fewer roadblocks, one of the following pre-approved credit cards could be the best bet.
Ramp Corporate Card
The Ramp card has a $0 annual fee, cashback rewards on purchases, unlimited cards for dozens of employees, accounting software, high credit limits, and custom vendor controls. To qualify, the owner must have at least $25,000 in the business’ bank account, and the business must be an established corporation or LLC. The only drawback is that it is only available to these types of businesses.
Capital One Spark 2x Miles
Another option for a pre-approved credit card is the Capital One 2x Miles card with a $95 annual fee and 26.24% variable APR. Despite the high annual fee, this card offers 2x miles on all purchases, 5x miles on rental cars and hotel bookings, and a bonus of 50,000 miles for spending more than $4,500 in the first 3 months of opening the account. These benefits can outweigh the annual fee for frequent travelers or those who make large purchases.
The drawbacks of the Capital One card are the high annual fee, no introductory APR rate, and fewer benefits than other business credit cards.
First National Bank of Omaha Business Edition Secured Mastercard
The First National Bank card is $39 per year with a 25.99% variable APR. Business owners can apply online and find out if they pre-qualify for this option within minutes. They can also set their personalized credit limit anywhere between $2,000 and $100,000.
The only negatives of this credit card are the $39 annual fee, the 110% deposit of the credit limit to open the account, and the lack of an unsecured card option.
Capital on Tap Business Credit Card
The Capital on Tap card is a $0 annual fee and 15.5% variable APR credit card with a 48-hour answer period for business loan pre-approval. Pre-approved applicants can get a virtual card as soon as possible to begin spending and receiving bonuses and cashback on all purchases.
The only drawbacks to this card are the high credit rating needed and monthly business revenue of more than $2,500.
Marriott Bonvoy Business American Express Card
The Marriott credit card has an annual fee of $150 and a 20.9% fixed APR, making it one of the more expensive cards on the list — but it comes with perks. This card benefits those frequently staying in Marriott Bonvoy hotels and instant approval for those meeting all requirements.
The main perks of this card include the 125,000 introductory points for spending more than $8,000 and one free night’s stay at a Marriott every year. The drawbacks are the high annual fee and the lack of rewards for non-Marriott customers.
Pros And Cons Of Business Pre-Approval
Pre-approved offers are a double-edged sword for new businesses. Sometimes, owners automatically accept a pre-approval because they need immediate funding, only to find out later that the stipulations attached to the loan or line of credit were not worth the convenience.
Benefits of Pre-approval
- Convenience: Pre-approved credit cards, lines of credit, or loans are fast, streamlined, and quick, making the process stress-free and easy.
- Favorable terms: Pre-approved offers can sometimes benefit from better interest rates, perks, travel discounts, and points rewards.
- Negotiating potential: Pre-approved applicants can sometimes use their pre-approved rating to negotiate with lenders to achieve lower interest rates or more favorable repayment periods.
- Introductory rewards: Lastly, pre-approval means applicants can obtain advantages and perks, like discounts, points, miles, rewards, and sign-up bonuses.
Negatives of Pre-approval
- Credit score: In some instances, pre-approval options can reduce the applicant’s credit score. Although most use only soft pulls, which don’t damage a personal credit score, the next step involves a hard pull to the owner’s credit score — which can lead to a huge drop in the FICO rating if the applicant is unsuccessful.
- Overspending: High credit lines, credit cards, and loans can sometimes lead to irrational and unchecked spending for new business owners who need working capital to fund big purchases.
- Unfavorable terms: Pre-approved credit cards and loans know that the applicants are somewhat desperate, so they can make their terms, annual fees, or APRs much higher than they should be.
Business Loans Pre-Approval Options Suited for You
Still trying to figure out where to start? As a new business, it can be challenging to determine if you want to go for a small business loan, credit card, line of credit, or invoice factoring. And sometimes, you need the funds, and you need them now — that is where pre-approval comes into play.
Business Loans offers expert advice on finding and applying for the most suitable pre-approval financing options for your unique business.
