When a term loan is the right shape
A term loan works when you can name the purpose, size the amount and see where the repayment will come from. A restaurant converting an adjacent unit into a larger dining room, a clinic adding a treatment room or a studio taking on a longer lease all fit that description. The cost is known and the payment is predictable, which makes planning simpler.
What San Francisco owners are usually planning
San Francisco's economy, as Wikipedia describes it, spans professional services, tourism, financial services, high technology and healthcare, with universities and institutions anchoring much of it. Planned spending in these sectors tends to be capital-style: tenant improvements, relocation, additional staff ahead of a contract, a vehicle or two. Those are the kinds of purchases that suit a defined loan.
Test the plan before you borrow
- Write the payback in plain numbers. What does the project add each month, and does that exceed the payment?
- Test a slow month. If revenue dropped by a fifth, could the payment still be made?
- Check the timeline. If the project takes six months to produce revenue, make sure there is cash to bridge those months.
Term loan or something else?
| Situation | Better starting point |
|---|---|
| One-time, clearly sized project | Term loan |
| Recurring gaps between invoices | Line of credit |
| A specific machine or vehicle | Equipment financing |
| Payroll and bills in a lean stretch | Working capital |
A worked example, for illustration only
These round numbers are not our terms or a typical result. Suppose a San Francisco physical-therapy practice spends $120,000 on a build-out and equipment that lets it see more patients. If the added room produces an extra $9,000 of monthly margin, the project can service a payment in the same range and still leave something over. If the room is only expected to produce $4,000, the same payment would eat the whole gain and the project is oversized. The exercise is about fit, and it should be done before applying rather than after.
Questions a good file answers
Whatever the product, a clear application answers the same few questions: what is the money for, how long until it comes back, and what happens if it comes back late? Owners who can answer the third question usually have the strongest case, because it shows they have already thought about the downside. Put the answer in a sentence and keep the bank statements clean and recent.
What we ask for
We consider FICO scores of 500 and above, ask for about three months of business bank statements and need no tax returns. The application takes about five minutes with a soft credit pull. Funding runs from $25,000 to $5,000,000 and can arrive in as little as 24 hours. Sole proprietors can apply. Apply here or see the wider Bay Area funding overview.