What Is Snap Finance and How Does It Work?
Snap Finance is an essential part of running a business. But when you’re just getting your venture off the ground, you don’t want to take on unnecessary financial obligations. That’s where snap financing comes in.
Snap financing is a form of angel financing that allows startups with innovative business ideas to gain access to working capital without having to hand over equity. Instead, you agree to pay back the lender (the “snap”) in a set period of time, usually three to five years.
This article explains what snap finance is, the advantages for investors and entrepreneurs, and how it’s different from other forms of angel financing.
What is Snap Finance?
Snap financing is a form of angel financing that allows startups to gain access to working capital without handing over equity. Here’s how it works: investors provide the startup with the funds they need, and the entrepreneur agrees to pay back the lender in a set period of time, usually three to five years.
This type of financing has skyrocketed in popularity in recent years, with some estimates indicating that as much as 50 percent of all angel investments are now made through this form.
Why Use Snap Finance?
Snap financing is also known as “marketplace lending,” and it allows young businesses access to funds without the full-commitment of an equity stake. Instead of giving away part of your company, you agree to repay your lender in a set time period. This type of financing leaves you with more control over your business and less risk that comes with a heavy debt load early on in your company’s history.
If you’re looking for funding for your startup, then snap financing may be a great option for you. It can help you cover any short-term cash flow issues and give you time to plan out how to eventually pay back the money over time.
How to Apply for Snap Finance
If you’re looking to apply for snap financing, take a look at the following three steps.
- Determine your credit worthiness: The first step is to determine if you are eligible for snap financing. You can apply for a credit check with a company like Kabbage or OnDeck, which will determine how much funding you qualify for and what terms are available to you.
- Apply for your loan: After completing the credit check, banks and lenders will consider your qualifications and decide on an appropriate loan amount and repayment term. Snap financers typically require that the applicant have some form of income in order to qualify for their loans.
- Finalize your agreement: Once you have determined your affordability and decide on an agreement, sign the paperwork with all parties involved before deciding how you want to receive payment each month (check, ACH). If you don’t understand anything in the contract or want help negotiating, be sure to ask!
Read More: What Can Developers Build With Clover Finance?
How Much Does Snap Finance Cost?
The cost of snap financing depends on the amount you’re borrowing and your credit score. Your credit score is used to determine the interest rate, which can be anywhere from three to 12 percent.
Is Snap Finance Right for You?
Snap financing is a form of angel financing that provides small businesses access to capital without the need for traditional equity or collateral. It’s great for startups because you don’t have to give up equity at the outset or pay interest on a loan. You also get the capital upfront and are able to establish your business without any growing pains.
The idea behind snap financing is that you’re expected to grow your company enough before you repay the debt, but the lender hopes to see a return on their investment along the way. It might be an attractive option if you have an innovative business idea and need money quickly with little risk from an investor.
However, it’s important to note that borrowers with poor credit are typically discouraged from this type of borrowing arrangement as they will usually have higher interest rates.
The Disadvantages of Snap Finance
Snap financing has some drawbacks that entrepreneurs should be aware of before choosing this form of finance.
Perhaps the most significant drawback is equity stake. If you’re a startup, you probably don’t want to give up any ownership of your business. You want to maintain control so you can make decisions about growth and direction. Equity stake is what sets traditional angel investors apart from snap financiers, and it should factor into your decision.
Another disadvantage of snap financing is the risk involved in paying back the loan. Unlike traditional forms of financing where interest rates are capped at 12-20 percent, rates on snap loans are not capped and can be as high as 36 percent. This means entrepreneurs need to have a plan for securing future profits in order to pay back their lender on time.
A final disadvantage is that there are typically fewer regulations surrounding these loans than other forms of financing, meaning there may be more risks associated with collateral or security agreements that protect the lender if an entrepreneur fails to repay the loan on time or at all.
Conclusion
Snap Finance is a lending service that allows you to borrow up to $100,000 for your business.
Snap Finance was co-founded in 2012 by Adam Dell and Brent Turner. Dell and Turner were inspired to start the company after witnessing how difficult it was for their friends to get a small business loan.
Snap Finance is a lending service that allows you to borrow up to $100,000 for your business.
If you are looking for a secured loan, Snap Finance may be the right choice for you. Snap Finance is also great for businesses that require less than $100,000 in financing.
It’s important to weigh the pros and cons of this type of loan before applying.