Top 3 Reasons Quickbooks Capital May Decline You
Quickbooks Capital is the new loan origination program offered by Intuit, the company that owns popular financial software Quickbooks, TurboTax, and Mint. Quickbooks Capital represents the company’s first entry into the small business lending space.
Prior to this, Intuit played more as a finance matchmaker role. With a platform called Quickbooks Financing, Intuit created a marketplace of small business finance products that they would setup with businesses based on what they determined to be the best fit. This included small business administration loans, lines of credit, short/long term loans, and peer-to-peer loans. This worked by Intuit partnering up with specific partners who were the ‘true’ lenders, and Intuit would vouch for the company using their Quickbooks financials as backup.
The move for Intuit to provide their own financing to its customers, as opposed to previously simply supporting their finance through software, is being received well in the industry, and makes a lot of sense for the company. Intuit wants to make finance as simple as possible for their clients from beginning to end; how finances are accounted for, how taxes should be filed, and now, how to receive a loan. Quickbooks Capital brings Intuit one step closer to completing their pipeline. The company offers loans up to $35,000 for up to six months.
Applying with Quickbooks Capital is one of the easiest loan applications one can find, if you’re already a Quickbooks user. Since Quickbooks users have part or all of their business accounting already in the system, the loan origination team at Intuit has a much easier time verifying the companies metrics and providing appropriate loan terms. This can be a huge benefit.
However, as with any lending program, Quickbooks Capital may not be for everyone or every business. There are many specific requirements in place for originated business loans in general, and Quickbooks Capital is no exception. Having your application declined is par for the course if these requirements aren’t met, so with that, here are the top three reasons Quickbooks Capital may decline you.
1. Your personal credit score isn’t high enough
The first major hurdle would-be borrowers are likely to face is Quickbooks Capital’s personal credit score requirement. The interest rate you receive on loans originated from Quickbooks can range, typically between 6% – 18% per year, with the final rate dependent on a combination of both business and personal credit scores.
However, personal credit scores that are lower than 580 are not eligible for Quickbooks Capital whatsoever. This is a hard cutoff, no exceptions. Many business owners may be surprised to see a flat personal credit score requirement even on a business loan; after all, the business’s fundamentals should somewhat speak for themselves, and are wholly separate from how the business owner lives his/her life. Right?
Unfortunately, wrong. Quickbooks Capital’s loan program only offers loans that are personally guaranteed. They are very much recourse loans, as opposed to secured business loans which use the company’s collateral as their safety net. Intuit needs to ensure you can pony up if your business can’t repay its loan, and a personal credit score is the best indicator they have to work with.
Applying for a Quickbooks Capital loan with a personal credit score of less than 580 is the surest way to get declined, so be sure to start working on paying off those credit card bills as soon as possible, or bring in a new owner with a better score.
2. Your gross sales revenue is too low
Another strong factor for being declined a loan from Quickbooks Capital is having sales revenue that is simply too low. Intuit looks at the past calendar year’s financials when reviewing loan applications, and a solid, tried and true indicator of current business volume is that top line number.
As a general rule, Quickbooks Capital wants to see a gross annual sales revenue number of at least $45,000. Depending on the size and scope of the business, this can either be no sweat at all or a huge issue. Small, local shops may be making profit due to low expenses and having a strong, lean business plan, but they still wouldn’t qualify for a Quickbooks loan under this general guideline.
Luckily, in this case, Quickbooks Capital does look at each business on a case by case basis. If a company is fairly new and shows a positive growth trajectory, Quickbooks may approve their loan application even if their previous year sales were underneath that magical $45,000 number. According to a report by Benzinga, 60% of Quickbooks Capital customers would not have likely received a loan at any other lender, and 46% have never even applied to a loan previously.
This is one of the major benefits of Quickbooks Capital: because they have access to an enormous amount of predictive business data, they are able to provide brand new companies (the ones who might benefit from it the most) with funding, while many lenders have to stray away from this type of client for a perceived higher risk. A business that has been chugging along for a few years, however, that isn’t showing major growth and is still below the $45,000 threshold may find themselves and their application swiftly declined.
3. You don’t use the Quickbooks accounting software
Surprisingly, Quickbooks Capital can and may decline your application simply because you do not use its accounting software. This is certainly a unique checkbox for a small business lender to have, and surely Intuit is one of the only ones looking for this quality.
But it makes sense. The strength of Quickbooks Capital lies in the fact that the loan originators have the benefit of being able to look into your company’s guts. This is what allows them to lend to new businesses that might not otherwise qualify anywhere else, and what allows them to offer competitive rates. This synergy between Quickbooks users and their borrowing applications is so strong that Intuit even built the application process into the software itself.
Now, Intuit doesn’t have to worry about borrowers lying or fudging the numbers on their applications. They don’t have to hire a separate team whose sole job is to verify this information. The Quickbooks database does the work for them, and you (if you use it) have already done the work getting all your information in there. Unless, of course, you don’t use it.
This is not a hard and fast rule, and you can very well get your application to Quickbooks Capital approved even without using Quickbooks accounting. However, this will very likely leave you with a declined application if your business isn’t achieving any of the other requirements; requirements that may have been overlooked when using Quickbooks.
New businesses not on Quickbooks will likely get denied, as will companies with low sales or previous years of hardship. Borrowers can’t negotiate using their current or future business prospects either; if they used Quickbooks, they can show open invoices, works in progress, or inventory that can be leveraged to receive more credit.
Since Quickbooks Capital can’t verify and run your numbers through their algorithms, it can’t spit out what overall risk lending to you would impose on their bottom line. Most of the time, when lenders don’t feel comfortable enough with the risk, they simply won’t lend at all. A good rule of thumb is to look at the business’s big picture overall and ask yourself: does it look like the business is doing well? If the answer is no, a lender will likely feel the same way, and decline a loan application due to risk.
Quickbooks Capital is a fantastic lending opportunity for small businesses and is a welcome addition to the lending community. It brings Intuit’s stellar reputation in the small business world onto a new side of the equation, and provides a service to companies that may not have been eligible before.
Thanks to their incredible database (estimated to be more than 26 billion data points), Quickbooks Capital can run smart algorithms to provide capital to businesses that may have previously been perceived as too risky. However, it is not a money free-for-all. Companies whose sales are too low, or whose owners lack the required personal credit score will often find themselves with a declined application. Being a Quickbooks user can help smooth the ground for the loan origination process, and not being one can make the difference between getting the funds or not.
So who is the ideal Quickbooks Capital borrower? The average, successful Quickbooks Capital customer needs $25,000 of working capital to capitalize on growth opportunities, such as buying more inventory or hiring additional employees to handle a high load of orders. Such companies are growing, and can utilize the funds to further improve their profit bottom line.
Companies that seek out lending to stabilize a struggling business model will likely not benefit from the Quickbooks Capital loan structure, and (due to their financials) are likely to be declined.