Intuit Inc., the company behind Turbotax and Quickbooks accounting software, offers small businesses the ability to get loans through Quickbooks itself with Quickbooks Capital.
The program began in 2017 and initially offered loans up to $35,000 over six months but has grown that offer considerably. Now businesses can apply for short-term loans of up to $150,000 paid back over 18 months.
Why is Quickbooks Offering Loans?
Traditionally, small businesses just starting and seeking lines of credit were rejected far more often than banks accepted them. Cash flow in the early stages of a company is low, but the irony is that generating revenue required loans that businesses couldn't get, leading to a feedback loop of never getting enough working capital.
With funding options limited, Intuit saw a hole in the market and decided it might be time to become a lender and offer small business loans. Thus, Intuit Quickbooks Capital was born.
Since Quickbooks is the de facto standard for many accounting departments, and companies input all their financial data through the software, Intuit was in a unique position to analyze the ability of a startup to pay back their entire loan amount.
Quickbooks can glean plenty of information to inform their decision with 26 billion data points to determine eligibility even with little to no credit history. This approach offers Quickbooks customers an easy way to get a loan by entering their Quickbooks software and filling out a loan application — it's a handy addition to other Quickbooks benefits.
How Does it Work?
Whether you have Quickbooks desktop or Quickbooks online, you can apply for a loan as long as you have a Quickbooks account. Keep in mind that even if you're a Quickbooks user, that's no guarantee you will be accepted for a Quickbooks Capital loan.
In fact, your business needs to be invited to be able to apply for a loan. Based on financial data already stored in your account, you may see an in-app invitation to apply. Once you get this invite, you can go through the application process.
The criteria for a loan as per Quickbooks are:
- A clear picture of your business with six months of activity within your QuickBooks account
- Personal and business credit history, typically a personal FICO score of 620 or higher
- Primary business bank accounts connected through QuickBooks Capital
- Revenue of at least $50,000 over the past 12 months
Thankfully, the application itself is simple. Because the Quickbooks platform already has customers' information, that information doesn't need to be filled in.
Instead, applicants choose the amount they want to borrow, between $5,000 and $150,000. The amount small business owners can apply for is based on Quickbooks' analysis of their financial history.
What are The Loan Terms and Interest Rates?
Loan rates and timelines are based on how much money your business is borrowing and what your company's credit score happens to be. Loan interest rates and terms range from 2.61% and 9.99% APR for six months for $5,000 for companies with excellent credit to 29.04% and 34% APR for 18 months for $150,000 for companies with the minimum level of credit.
What Are The Fees?
Fees are one of the areas where Quickbooks Capital small business lending is strong. Quickbooks Capital has no origination fees, and there are no prepayment penalties.
Paying a loan off early can save on interest payments. Borrowers' repayments are taken via debit from their business bank account through the Quickbooks platform using Automated Clearing House (ACH) payments.
Are There Discounts?
There are no discounts available, but small business owners who have paid off their loan will have the opportunity to apply for a second loan if they desire.
Do Business Owners Have to Put Up Collateral?
No, but that doesn't mean Quickbooks Capital will have no way of collecting if the business can't repay the loan. Let's say your business declared bankruptcy. You will personally have to pay back the loan. Quickbooks requires a promise from all applicants to this effect, which is why one of the criteria for a loan is a personal credit score of 620 or higher.
How Soon Will I Find Out If I'm Accepted?
From the time the application is sent to the time when Quickbooks responds is generally 2 to 3 days. Rarely do applicants need to provide additional information since Quickbooks has access to all pertinent financial statements.
Quickbooks will run a soft credit check, which does not hurt applicants' credit scores, but might slightly impact their company's credit history.
What Happens if I'm Not Approved?
Since Quickbooks doesn't accept everyone for a loan, it's good to have a backup plan. The Quickbooks Capital marketplace offers connections to other loan providers that can integrate with Quickbooks Online. You can also apply for an SBA loan or try to get a small business line of credit through a bank or other institution.
Can I Still Get Forgiveness for PPP Loans Through Quickbooks Capital?
Yes, even this far out, you can still get Paycheck Protection Program (PPP) loan forgiveness. The deadline is farther out than many people realize. If your business received a loan on or before June 5th, 2020, you received a 2-year term. If your business got the loan after June 9th, 2020, you received a 5-year term.
Quickbooks partnered with Cross River Bank (CRB), an SBA-approved lender, to allow for second PPP loans for eligible customers, but PPP loans stopped being granted on May 31st, 2021. Businesses that got loans just before the deadline have a reasonably long five years to repay the loan.
Is Quickbooks Capital Right for My Business?
Small business owners have more options than ever for loans, and while Quickbooks Capital is compelling, it may not be your preferred loan source. Perhaps you don't use Quickbooks, or you need loan amounts that Quickbooks doesn't offer. Whatever the case, there are advantages and disadvantages to using Quickbooks Capital.
Quickbooks Capital Advantages
Once you've been invited to apply for a loan through Quickbooks' platform, the application process is easy. It's a matter of clicking a few buttons and requesting the loan amount you want. There aren't any excessive fees; rather, there are zero fees that other lenders will charge you (such as prepayment penalties or origination fees).
These loans are a great opportunity for small business owners with a Quickbooks account who need a short-term loan with reasonable interest rates. And even if you get rejected, there's still the Quickbooks Capital marketplace with lending partners that offer easy integration with Quickbooks.
These lenders also use Quickbooks data for determining loan terms, so the process is still easier than if you were to apply from another source.
Quickbooks Capital Disadvantages
If you want a loan to get some quick working capital but haven't gotten the invite to apply, you'll have to wait. There's no way to speed up the process, either. When Quickbooks sees you're eligible, then you can apply and not before.
This waiting period can be a problem because the software isn't perfect. If Quickbooks doesn't recognize your actual cash flow for any reason, you might be eligible based on their criteria, but you won't get an invite because that's not what the software sees.
If you want alternate loan details, such as better rates, longer terms, or more loan money, you'll have to go elsewhere. And if you don't find a suitable lender in the Quickbooks Capital marketplace, you'll have to keep searching, and there's no guarantee outside lenders will be easily integrated into Quickbooks.
Quickbooks Capital Alternatives
If you're looking for a small business loan, you don't have to rely only on Quickbooks Capital. While Intuit may have blazed a trail, others have followed suit in recent years.
1. PayPal Working Capital
PayPal is almost as ubiquitous as Quickbooks, with most businesses either accepting PayPal payments because of how easy they make online payments or using PayPal as an online storefront. Now PayPal offers PayPal Working Capital, which like Quickbooks Capital, offers small businesses the opportunity to get a loan through a familiar platform.
Applying for a loan through PayPal Working Capital doesn't require a credit check because PayPal already has account holders' pertinent information. This state is good news for businesses looking to build up good credit because credit history doesn't impact a PayPal Working Capital loan.
Businesses can borrow up to $97,000 for their first loan, and repayments are paid back from the company's PayPal sales, somewhere between 10% and 30%, as well as a fee. Subsequent loans can be as much as $125,000.
To be eligible, applicants must have had a PayPal Business or Premium account for three months. PayPal Business account holders must have a minimum of $15,000 in annual sales, and Premium account holders must have at least $20,000 in annual sales.
Fundation is an attractive alternative for small business owners seeking longer terms and higher loan amounts. Qualification requirements are stricter, however. Applicants must have at least a 660 credit score vs. Quickbooks Capital's 620 requirement. To qualify, a business must also make at least $100,000 per year and have three full-time employees.
Installment loans offer amounts between $20,000 and $500,000 with term lengths from 1 to 4 years. There is an origination fee of 5%, and APRs run from 7.99% to 29.99%.
As for Fundation's lines of credit, the loan amounts are $20,000 to $100,000 and require a $500 closing fee as well as a 2% draw fee. Collateral is a personal guarantee and a UCC-1 blanket lien.
Thanks to laxer borrower qualifications and tech-based lending analyses, application approval with OnDeck is quick, typically 1 to 2 days. However, because of those relatively relaxed qualifications, they may charge higher rates. To qualify for a loan, businesses must have a FICO score of at least 600 and annual revenue of $100,000 or more.
Short-term loans can be anywhere from $5,000 to $500,000 for 3 to 36 months, offering a much wider spread than Quickbooks Capital. However, borrowers will have to pay a factor rate of between x1.003 and x1.04 per month, as well as an origination fee of 2.5% to 4%. Collateral is a personal guarantee and UCC-1 blanket lien.
Lines of credit, which offer between $6,000 and $100,000 for six months, have no draw fees, but borrowers will have to pay a maintenance fee, typically $20 per month. APR ranges start at 13.99%. Collateral is a personal guarantee.