Qualifying Criteria for Private Money Lenders
Compared to banks and SBA lenders, private money lenders have more flexible underwriting guidelines, but there are still minimum requirements and eligibility that most borrowers need to meet.
Here's what private lenders typically look for:
Credit Score: 500–650+
Many private lenders will work with businesses with bad credit, especially if your business has strong revenue or valuable collateral. Some may do a soft credit pull during the application process, but higher scores still unlock better terms.
Monthly Revenue: $10,000 or More
Strong, consistent revenue signals your ability to repay. Most lenders require at least $10K in monthly business income to qualify for a loan or line of credit.
Time in Business: At Least 6 Months
While some lenders fund true startups, many want to see 6 plus months of operational history and bank statements to verify business activity.
Collateral: Optional, Depends on the Type of Loan
Unsecured loans are common, especially for short-term funding and MCAs. But for larger loan amounts, private lenders may require business or personal assets (equipment, real estate, receivables) as collateral.
Borrower Profile & Documentation
Expect to provide basic financials, like profit and loss statements, recent bank statements, and your credit history. A clear use of funds, repayment plan, and business model helps build lender confidence.
Each lender has different borrower qualifications, so working with a platform like Clarify Capital helps match you with the best-fit private funders.
How To Qualify for a Private Business Loan: A Checklist
Before applying with a private money lender, get your documents and pitch ready. Private lenders move quickly, but they still expect clarity, transparency, and proof that you can repay.
Use this checklist to prepare:
Build a short business plan. Highlight what your business does, current performance, and growth opportunities. A clear plan increases lender confidence.
Pull your financial statements. Include your most recent P&L statement, bank records, and balance sheet (if available). These help verify income and assess risk.
Prepare collateral documentation (if needed). If applying for a larger loan or real estate deal, show proof of asset value, such as property appraisals or equipment lists.
Outline a repayment strategy. Be ready to explain how you'll repay the loan, based on cash flow, expected revenue, or future events (e.g., customer payments, project completion).
Clarify your use of funds and exit strategy. Whether you're investing in marketing, inventory, or a property flip, lenders want to know where the money is going and how you'll close the loan.
Private vs. Bank/SBA Loans: Pros and Cons
Not sure if you should go with a private lender or a traditional institution? Here's how they stack up across key decision points:
| Private Business Loans | Bank/SBA Loans |
|---|
| Approval Speed | Fast: get funds in 24–72 hours | Slower: 1–6+ weeks |
|---|
| Documentation | Flexible: minimal paperwork | Strict: full financial package required |
|---|
| Eligibility | Ideal for newer businesses or bad credit | Requires strong credit, revenue, and history |
|---|
| Interest Rates | Higher interest rates (8%–40% typical) | Lower, especially with SBA guarantees (6%–12%) |
|---|
| Loan Terms | Shorter terms (3–24 months) | Longer repayment options (up to 10 years) |
|---|
| Oversight & Security | Less regulation, more lender flexibility | Heavily regulated, more borrower protection |
|---|
Private loans are ideal when you need fast funding, have less-than-perfect credit, or don't want to deal with lengthy underwriting. Bank, credit union, and SBA loans offer better rates and longer terms, but take more time and documentation to secure.
Legal Considerations With Private Money
Private business loans move fast, but that doesn't mean you should skip due diligence. Because private lenders aren't subject to the same regulations as banks, it's critical to review the terms carefully before accepting funding.
Here's what to watch for when looking into private business loans:
Have a legal advisor review the agreement. Don't sign any funding contract without understanding the repayment terms and structure, fees, and any personal guarantees.
Check your state's usury laws. Some states cap the maximum interest rate a lender can legally charge.
Understand the full APR. Private lenders may present interest as a factor rate or flat fee, but you'll want to calculate the true annualized cost.
Clarify all fees. Origination fees, prepayment penalties, or daily repayment schedules can impact your cash flow more than expected.
When working with a private money lender, a fast deal is only a good deal if the terms are transparent and sustainable for your business.
Get Fast, Flexible Private Business Funding Today
Get fast access to private business loans through Clarify Capital. Apply online today in under two minutes with no fees, no obligation, and no impact on your credit score. Your dedicated advisor will match you with the best funding options based on your business needs.
FAQs About Private Money Lenders for Business
If you're exploring private business loans, here are some common questions business owners ask before applying.
What Interest Rates Do Private Lenders Charge for Business Loans?
Private lender interest rates typically range from 10% to 30%, depending on the loan type, term length, borrower qualifications, and collateral offered. Some use flat fees or factor rates instead of traditional APRs. While rates are usually higher than bank loans, approvals are faster and documentation is lighter.
Are Private Loans Safer Than SBA Loans?
Private loans aren't necessarily "safer", but they offer more flexibility and faster access to capital. SBA loans tend to have lower interest rates and longer terms, but they require more paperwork and time. Private loans are a great option for businesses that need quick funding or don't qualify for SBA terms.
Can New Businesses Use Private Money Lenders?
Yes. Many private lenders fund startups and early-stage businesses that don't meet traditional bank criteria. However, ideally they have been in business for six months or more. While newer businesses may face higher rates or need to offer collateral, private money can help bridge funding gaps quickly.
How Do Private Business Loans Compare to Merchant Cash Advances?
Private loans often have longer terms, lower rates, and fixed repayment schedules compared to merchant cash advances (MCAs). MCAs take a daily or weekly percentage of your sales, which can strain cash flow. For businesses with steady revenue, private loans can be the more manageable option.
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