Younger businesses can have a difficult time obtaining business lines of credit. The best options typically require perfect credit scores, substantial annual revenue, and at least two years in business. Short-term business loans carry looser requirements, but younger companies often don’t have the cash flow to sustain fixed monthly payments.
Thanks to companies like Headway Capital, younger businesses can access business lines of credit with bad credit with rocky cash flow. Unlike more traditional options, Headway Capital caters to less established companies and offers multiple repayment methods.
Small businesses that prefer a business line of credit structure should consider Headway Capital’s unique product.
Headway Capital is an online business lender that offers just one product: a business line of credit. Small business owners can get a revolving line of credit with a credit limit as high as $100,000. Repayment terms are 12, 18, or 24 months.
There are many differences between Headway Capital’s product and a traditional credit line, which we’ll explain below.
The standard application requires three months of business bank statements and your online bank login information. But depending on your business’s financial health, you may also be asked to provide the following documents:
Eligible businesses must have a minimum credit score of 560, annual revenue of at least $50,000, and at least one year in business.
Headway Capital also does not work with businesses that:
You can still get approved with a bankruptcy on your record, provided it did not occur in the past twelve months. If you have a tax lien, Headway Capital may be able to work with you, depending on your financial health and the nature of the lien.
Headway files liens on lines of credit of over $50,000. All borrowers must sign a personal guarantee, meaning Headway could potentially seize your personal assets in the event of a default.
You can draw funds from your line of credit at any time. However, there is a minimum amount for your first withdrawal. In most states, the minimum is $500. Depending on your home state, you might also have to pay a 2% fee every time you draw funds.
The following states have no draw fees:
You decide whether to pay off your debt weekly or monthly during the application process. Once you draw funds, portions of your balance (plus interest) are automatically deducted from your bank account per your selected frequency.
Interest and terms depend on your creditworthiness and financial health. Every month, you could end pay interest anywhere from 3.33% to 6%, which works out to an APR of 40%-72%.
There are no prepayment penalties, and you can save money on interest if you prepay the loan early. Payments are not reported to the personal or business credit bureaus. Making on-time payments on Headway Capital business loans won’t build business credit.
The application for Headway Capital is straightforward and can be completed in a matter of minutes. Once approved, funds may reach your bank account in under 24 hours. Here’s how to get started:
You can apply for Headway Capital through United Capital Source’s online application. Before you apply, a UCS executive will work with you to ensure Headway Capital is the right product for your needs.
Our one-page application requires basic information about you and your business. You’ll also disclose your desired borrowing amount to create an account with Headway.
After completing the application, you’ll be asked to provide three months of business bank statements. Next, Headway Capital will perform a soft credit pull (which does not affect your credit score) and let you know how much you are eligible to borrow.
UCS will help negotiate rates and terms to ensure you receive the most beneficial arrangement for your business.
You should receive an official offer from Headway Capital in approximately four hours. If you’d like to accept the offer, you can move on to choosing your initial draw amount and finalizing your terms. Finally, you’ll sign a contract and receive funds within one business day.
Once you sign your loan documents, Headway Capital will perform a hard credit pull. If this dramatically affects your credit score, you may be asked to sign a new loan agreement.
As with a traditional business line of credit, your first payment is not due until you draw money. When you draw funds, your first payment is automatically deducted from your bank account in 7-30 days, depending on whether you choose weekly or monthly payments.
Not only is there no prepayment penalty, but Headway Capital does not front-load your interest. If you pay off your loan early, you won’t pay the same amount of interest as if you paid on the scheduled due date. Consider paying part or all of the loan early if you can afford it to potentially save a lot on interest.
Headway Capital’s most significant advantage may be the simplicity of its application process. Many online business lenders have short applications and require minimal paperwork.
Headway Capital takes this convenience to another level. There’s no hard credit pull until you’ve signed your contract, and few business lenders require only one set of documents (bank statements). You can even have money in your account just hours after you apply.
Headway Capital also has some of the loosest requirements in the business financing industry. Their minimum credit score is very low, and you only need to be in business for one year. This makes Headway Capital a strong choice for a growing company with poor or little credit history.
Another significant advantage is the lack of a prepayment penalty. You’d be hard-pressed to find another business lender that not only allows you to pay early but also allows you to save on interest by doing so. Though some of Headway’s competitors don’t charge prepayment penalties, you probably wouldn’t save as much on interest.
Headway Capital only offers one product, which could be disappointing for someone looking for loose requirements in exchange for something other than a business line of credit. Different products are designed for various purposes.
Other business lenders may be capable of solving a wider variety of problems thanks to their more extensive array of products. Headway Capital is further limited by its low borrowing limit of $100,000.
Also, while some of Headway’s requirements are very loose, others are very restrictive. Headway only serves businesses in 36 states. In most of them, your first withdrawal must be at least $500, and the majority have a mandatory 2% draw fee.
Some states have first-time withdrawal minimums of at least $5,000. Many institutions that offer business lines of credit have no first-time withdrawal minimums.
Lastly, Headway Capital’s rates and fees are considerably expensive compared to the rest of the industry. The 2% draw fee is steep, and if you have poor credit, your APR could exceed 70%. A higher credit score will give you a lower APR, but it would also probably steer you towards a different product altogether.
Pros:
Cons:
Headway Capital is a legitimate business lender. Unlike malicious or deceptive business lenders, Headway Capital is entirely transparent with its rates and fees.
Transparency is especially crucial for businesses that need cash immediately, which is Headway’s target clientele. This situation can make someone susceptible to accepting offers that may not be in their best interest.
Positive Headway reviews tend to focus on convenience and transparency. Many new clients were shocked at how easy it was to apply for and receive funding. And unlike some of its competitors, Headway Capital discloses its rates and APRs on its website.
You don’t have to pick up the phone or fill out an online form to obtain this crucial information. Unfortunately, this is very rare in the business financing industry.
Negative reviews typically talk about the cost. Several users found the 2% draw fee excessive, even if it is in keeping with similar products.
Other users discussed the high interest rates, which we’ve noted as a drawback. Headway Capital also reserves the right to adjust credit limits when it conducts periodic reviews. Some users complained about an unexpected credit limit drop or an account being frozen.
No, Headway Capital does not report to credit bureaus, meaning your payment history will not affect your personal or business credit score.
Yes, you can withdraw from your line of credit before you pay off your previous draw. In this case, your second draw would be added to your current balance, which includes interest and fees.
If Headway declines your application, it might be because they determined your cash flow cannot handle their repayment structure, rates, or fee system. Thankfully, Headway is far from the only business lender that works with younger businesses with poor credit. Many business lenders carry similarly loose requirements and can put money in your bank account within 24-48 hours.
These business lenders might offer a wider array of products, allowing you to choose the repayment structure most conducive to your cash flow. You’ll probably be able to avoid some of Headway’s most significant disadvantages.
Some other small business loan options you can pursue include:
Finding another company that can match Headway Capital’s convenience and transparency might be challenging. If you need a smaller amount of money right away and have poor credit, Headway may very well be the right choice.
But your cash flow should always be your top priority. It’s feasible to get convenience, transparency, and minimal impact on cash flow.
Hardworking business owners deserve to work with a company that offers all three. Based on our client’s feedback on dealing with Headway Capital, we give them a 4.8 out of 5 rating and highly recommend them.
Disclaimer: The Headway Capital trademark is owned by Headway Capital, LLC and its use herein is for reference purposes only and it does not indicate sponsorship or endorsement from Headway Capital, LLC.
Fraud Disclosure:
Please be aware that individuals have been fraudulently misrepresenting to business owners (and others) that United Capital Source, Inc. (“UCS”) can assist small businesses in receiving government grants and other forgivable business loans, when in fact those grants or loans do not exist or are not available. These individuals have ulterior motives and are engaging in the unauthorized use of the names, trademarks, domain names, and logos of UCS in an attempt to commit fraud upon unsuspecting small business owners.
UCS will never communicate with a prospective client on Facebook, Facebook Messenger, or any other type of social media. Further, any email communications will always come from an official UCS email address and not a Gmail, Yahoo, or other email domain. If you believe you have been contacted by someone posing as an employee of UCS, please email [email protected].
