Able Lending Review: Friends and Family Financing Intersects Online Lending

Able Lending Review: Friends and Family Financing Intersects Online Lending

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Able, founded in 2014, is a small business lender with an innovative lending model that combines peer-to-peer lending with friends and family financing, asking potential borrowers to find two or more backers to fund a portion of the loan. On average they ask borrowers to find backers to fund 25% of the loan, but this can be as low as 0% or as high as 75%. As the amount of backer funds increase, the overall APR of the loan decreases. They also specialize in refinancing high interest rate loans, such as merchant cash advances or revenue based loans.

Like many other online term loan lenders, they offer loans up to $500,000. Their rates and fees are transparent, and they offer services such as a business advice line, indicating that they have a serious interest in helping small business owners.

What an Able Lending loan might look like

Able Lending offers loans from $25,000 – $500,000 with interest rates between 6% – 16% plus a 3 – 5% origination fee. Loans can be paid back over 1 to 5 years, and payments are made monthly and equally amortized over the term of the loan. The average APR on an Able loan is 10.9%.

Let’s say you’re qualified for a $200,000 loan from Able Lending, with a 3 year repayment schedule. Using Nav’s term loan calculator we can see that the APR for this loan would fall somewhere between 10.8% – 18.19% APR with a total financing cost between $31,620 and $59,130. The total financing cost will go up if we extend the loan terms to four or five years, while the total APR would go down.

Able Lending Calculator APRs

How will my rate be determined?

To determine rates Able Lending looks at your personal credit (their credit model is described in detail here), along with metrics from your business, including: revenue, gross margin, net income, and debt to asset ratio.

Borrowers may be able to lower their overall interest rate by raising more of the loan from backers. For riskier borrowers, Able may require you to raise more than 25% of your loan from your backers to keep the overall interest rate at or below 16%. Your backers can choose whether they want to charge you the same rates as Able, or they can lower the rate.

Requirements to qualify

Able Lending’s main requirements are:

  1. 6 months or more in business
  2. $50,000 or more in annual revenue

As of August, 2015, Able was lending in 40 states plus Washington D.C. They are looking for borrowers who need to purchase equipment or inventory, hire new employees, improve or find a new office space, and more.

Able’s requirements are different than many other online term loan lenders. Many lenders offering comparable rates will require 1 – 2+ years in business, but won’t require backers to fund a portion of the loan.

How Able Lending compares

 

Able Lending Other online term loans Merchant Cash Advances SBA Loans
Loan amount $25,000 – $500,000 Up to $500,000 Typically up to $250,000 $50,000 – $5M
Interest rate 6 – 16% interest plus 3% origination

(Avg: 10.9% APR)

7 – 30% APR 15 – 150% APR 6 – 13% APR
Speed of funding About 6 days plus the amount of time it takes to find backers 2 – 7 days on average 1 – 7 days 1 – 3+ months
Loan duration 1 – 5 years 1 – 5 years Up to 2 years 5 – 25 years
Credit score needed to qualify 600+

for primary signer

600 – 640+ 500+ FICO SBSS score of 160 or above
Requirements – 6 months or more in business

– $50,000 or more in annual revenue

– Generally, the borrower must be able to find backers to fund a portion of the loan

– 2 years in business

– $50 – $75K or more in annual revenue

– no history of bankruptcies, delinquencies, or current tax liens

– must accept credit cards

– sometimes personal guarantee required

– available to startups & established businesses, but many providers require 2+ years in business

– no existing debt obligations to U.S. gov

– do business in the U.S.

– read more requirements here.

Collateral needed? Personal guarantee generally required Personal guarantee generally required None When available, yes
Prepayment penalty? No No Sometimes No

 

Able Lending is huge on the community aspect behind small business and small business loans. In fact, that’s what distinguishes them from competitors. Not only are they testing the waters of collaborative loans, but their model involves providing general advice to their borrowers and creating a network amongst their borrowers and backers so that small businesses connected with Able can make strategic connections with other businesses across the country.

Able can be a good lender for young businesses, businesses with friends and family willing to make an investment, or businesses looking to refinance high interest loan products. Able will not be a great option for you if you’re in a time crunch for financing, as it will take Able about four days to make a decision on your loan, a number of days to find and approve your backers, and a few extra days to see funds in your account.

As always, keep in mind that there are tons of financing options out there for small businesses—be sure to browse through Nav’s marketplace, which can match you with the best financing options for which you are most likely to qualify.

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About the Author — Lydia serves as Content Manager for Nav, which provides business owners with simple tools to build business credit and access to lending options based on their credit scores and needs.

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