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Before you apply for a StreetShares loan, find out whether you meet the lender’s minimum qualifications.
*You need only 6 months in business if you have $100,000+ in revenue. StreetShares is currently unavailable to borrowers in North Dakota and South Dakota. Do I qualify? ▾
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By tapping into the power of community, Virginia-based alternative lender StreetShares offers a unique approach to peer-to-peer lending. Using a model that the company calls “affinity-based lending,” StreetShares matches borrowers with investors who share similar characteristics.
This makes StreetShares helpful for groups such as women and U.S. military veterans, one of the company’s largest lending segments. You can qualify with just a year in business and $25,000 in annual revenue, which helps fill a financing void for newer businesses trying to get their footing.
Since its inception, StreetShares has funded more than 500 loans and provides approximately $1 million a month to small-business owners. The company offers three- to 36-month term loans from $2,000 to $100,000, and a line of credit from $5,000 to $100,000. With annual percentage rates for both products at 9% to 40%, StreetShares offers competitive rates in the alternative lending market.
Reasons to use StreetShares
Community-based lending: Connecting the borrower to investors who have similar passions or interests is a selling point for StreetShares. Doing so takes some of the risk out of lending, says Mark Rockefeller, chief executive and co-founder of StreetShares. The borrower feels a responsibility to those who put up the funds. “You, in essence, tap into positive peer pressure,” he says, “and the borrowers are less inclined to be late on a payment or default on that loan.”
Entrepreneurs who are military veterans, in particular, have benefited from the company’s affinity group approach. Rockefeller, a veteran himself, says he recalls seeing payday lenders lining the streets around military bases, preying on young service members. When starting his company, Rockefeller aimed to help veterans finance their small businesses and avoid similar lending traps, partnering with organizations including the American Legion and the National Veteran-Owned Business Association.
But StreetShares has expanded beyond veterans: It has successfully matched businesses based on other characteristics, including gender and location.
Access to capital for new businesses: Finding loans for startups with low revenue can be tricky, but StreetShares offers loans to companies that have been in business for just one year and pull in $25,000 in annual revenue. But if you’re among the few who hit the six-month mark and already have $100,000 in revenue, you’re also eligible to apply for a term loan.
The reason StreetShares can lend to newer businesses that don’t have much revenue is that it focuses primarily on cash flow. Rockefeller says the lender uses a combination of traditional and alternative underwriting practices but believes cash flow is the single best indicator of whether someone will be able to pay back a loan.
The ability to share your story: During the pitch process, you have the opportunity to highlight your company, tell your story and persuade investors to bid a monetary amount as well as an interest rate they think is appropriate. (See more details in our step-by-step story on the StreetShares application process.)
When your auction is complete — anywhere from a few hours to a few days, depending on how quickly you request funding and which type of product you’re applying for — StreetShares collects the lowest interest rates of the bids that add up to the approved loan amount and bundles them into a single rate that you can accept or decline. The more bids, the lower the interest rate. To have some skin in the game, StreetShares always backs the first 5%.
No prepayment fee: Borrowers can pay back their loans early, with no prepayment penalties. If your company is young, there’s a good chance you’ll alter your financing plan as your business changes, says Peter Somerville, director of investor relations. “We’ve talked to business owners who are being choked to death by prepayment fees,” he says. Regardless of the length of your loan, StreetShares offers the flexibility of paying it back immediately.
Financing flexibility: StreetShares also offers a line of credit to help provide small-business owners with flexible spending. The minimum draw is $5,000, and you can borrow up to $100,000 (though you follow the same revenue-based funding limitations as with the term loans; more on that below). Terms are from three to 36 months, giving consumers plenty of time to manage their lines of credit. Unlike with a typical business line of credit, StreetShares does not charge a draw or maintenance fee.
Where StreetShares falls short
Funding limitations: Though StreetShares offers term loans and lines of credit up to $100,000, the maximum amount you can qualify for is 20% of your annual revenue. If you make $200,000 a year, that limits you to a maximum loan of $40,000. You may need to look elsewhere to get financing for big projects, such as a major expansion.
Limited reach: In response to market demand, StreetShares applies for permission to lend on a state-by-state basis. At the moment, it does not provide loans to businesses in North Dakota or South Dakota. If you operate a sole proprietorship, you can’t use StreetShares if you live in Connecticut, Nebraska, Nevada, New York, Oregon, Rhode Island, West Virginia or Wisconsin (as of July 2016).
There are also a few industry limitations. StreetShares does not lend to construction contractors and those who will use the loan to flip homes or other real estate (although real estate management is OK). Neither does it lend to law firms or tax preparation or accounting firms — unless the business belongs to a CPA.
Weekly payments: You’ll pay back your loan with automatic weekly deductions from your bank account. Although some borrowers may find that convenient, others looking for semimonthly or monthly payments may struggle with the lack of flexibility. If you have uneven cash flow, you may also find this repayment option inconvenient.
Want to shop more small-business loans?
If StreetShares doesn’t seem like the right fit, check out NerdWallet’s small-business loans comparison tool. We gauged lender trustworthiness, market scope and user experience, among other factors, and arranged loan options by categories that include your revenue and how long you’ve been in business.
Compare business loans
This article was updated July 7, 2016. It was originally published April 6, 2016.
Jackie Zimmermann is a staff writer at NerdWallet, a personal finance website. Email: jzimmermann@nerdwallet.com. Twitter: @jackie_zm.
To get more information about funding options and compare them for your small business, visit NerdWallet’s small-business loans page. For free, personalized answers to questions about financing your business, visit the Small Business section of NerdWallet’s Ask an Advisor page.
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