Mid Prime Alternative Deals

Mid prime small business deals are a type of alternative financing provided by institutional and commercial lenders to companies that have good credit, good cash-flow and solid revenue, but still can’t qualify for bank-rate or SBA financing. Mid prime deal sizes usually range from $10,000 up to $500,000 and have terms ranging from 1-5 years. While a mid prime alternative deal has rates higher than traditional bank financing, the rates and overall costs are much lower than that of a merchant cash advance or other types of fast, high-interest business financing. Mid-prime financing options are true deals and lines of credit (as opposed to a business-to-business transaction — like a cash advance) and have true APRs. Since this is a true deal, the interest associated with the deal is tax deductible. Another advantage to this type of financing is the fact that this deal can be funded with a traditional bank deal or line-of-credit in place. Since this is a 2nd position deal, all other types of traditional financing can remain in place uninterrupted. Mid-prime lenders are willing to take a second position, provided that the lender with the first position is a traditional lender, and not another alternative lending source. The underwriting process for this type of business financing is much different than traditional financing, being that these deals rely less on personal and business credit, and rely more on the company’s cash flow for approval.

Advantages associated with this type of financing is the fact that the process is simple, and funding is quick. From beginning to end, the process can be completed within 1-2 weeks. The approval rates of these lenders are as high as 75%. Unlike bank deals and other traditional business financing, a mid-prime deal requires minimal documentation. Disadvantages associated with mid-prime financing are the higher rates than a company would receive from traditional lender. Rates can be 50-100% higher than traditional bank deals provided by a small, large or community bank or credit union. Origination fees range usually range from 1-5% (usually deducted from the use-of-funds) making this form of financing much more expensive than traditional financing.

Approval Rates

CASH ADVANCE LENDERS
%
LARGE BANKS
%
TRADITIONAL BANKS
%
ALTERNATIVE LENDERS
%

Details

  • Interest rates: 7-25%
  • Terms: 6 months – 5 years
  • Funding time: 3-10 days
  • Repayments: weekly – monthly
  • Industries funded: most

Documents

  • Credit application
  • Business tax returns
  • Financial statements
  • Schedules of liabilities
  • Personal tax returns
  • Personal financial statement

Pros

  • High approval rates
  • Lower rates than cash advances
  • Minimal documentation required
  • Weekly and Monthly repayments
  • Doesn’t affect traditional bank financing

Cons

  • Decent credit required
  • Higher interest than bank deals
  • Good cash-flow required
  • Personal guarantee required
  • May have high fees

Business Financing Apply