Younger businesses can have a difficult time obtaining business lines of credit. The most advantageous options typically require perfect credit scores, substantial annual revenue, and at least a year in business. Short-term business loans carry looser requirements, but younger companies might not be able to sustain fixed monthly payments.
Thanks to companies like Headway Capital, younger businesses can access business lines of credit despite subpar credit or rocky cash flow. Unlike more traditional options, Headway Capital caters to less established businesses and offers multiple repayment methods. Small businesses that prefer the structure of a business line of credit should certainly consider Headway Capital’s unique product.
In this guide, we’ll answer the following questions:
What is Headway Capital?
Headway Capital is an online business lender that offers just one product: a business line of credit. You can borrow up to $100,000 for terms of up to two years. There are many differences between Headway Capital’s product and a traditional line of credit, which we’ll explain below.
What Do You Need to Apply for Headway Capital?
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:
- Business tax returns
- Personal tax returns
- Profit and loss statements
Other Important Factors for Headway Capital:
Eligible businesses must have a minimum credit score of 560, annual revenue of at least $50,000, and at least six months in business.
Headway Capital also does not work with businesses that:
- Have an average bank balance of less than $500
- Are located in the following states: AK, AR, CT, HI, MI, MT, NV, ND, OH, OR, RI, SD, VT, or WV.
- Are sole proprietorships located in the following states: DE, ME, MN, NE, NJ, or WY
You can still get approved with a bankruptcy on your record, provided the bankruptcy did not take place 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. On that note, Headway files liens on lines of credit of over $50,000.
All borrowers must sign a personal guarantee. This means that in the event of a default, Headway could potentially seize your personal assets to make up for the loss.
For Headway Capital, You Need to Know That:
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: CO, GA, IN, NJ, and OK.
During the application process, you decide whether to pay off your debt on a weekly or monthly basis. Once you draw funds, portions of your balance (plus interest) will automatically be deducted from your bank account in accordance with your selected frequency.
Interest and terms depend on your creditworthiness and financial health. Every month, you could end up paying anywhere from 3.33% to 6%, which would come out to an APR of 40%-72%.
There are no prepayment penalties. Payments are not reported to the personal or business credit bureaus. Thus, making timely payments will do nothing for your personal or business credit score.
How to Apply for Headway Capital:
The application for Headway Capital is straightforward and can be completed in a matter of minutes. Once you’re approved, funds may reach your bank account in under 24 hours. Here’s how to get started:
Step 1: Fill Out Application
You can apply for Headway Capital through United Capital Source’s online application. So, before you apply, a UCS executive will work with you to make sure Headway Capital is indeed 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.
Step 2: Provide Documentation
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 make sure you receive the most beneficial arrangement for your business.
Step 3: Review Your Offer and Get Funded
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.
Headway Capital: Post Funding
As with a traditional business line of credit, your first payment is not due until you draw funds. When you do draw funds, your first payment will automatically be deducted from your bank account 7-30 days afterward, depending on whether you choose weekly or monthly payments.
Not only is there no prepayment penalty, but Headway Capital also does not front-load your interest. This means that if you pay off your loan early, you will not have to pay the same amount of interest as if you paid on the scheduled due date. Hence, you should consider paying part or all of the loan early if you can afford it. You could potentially save big on interest.
What are the Advantages of Headway Capital?
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. Well, 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 entire business financing industry. Their minimum credit score is very low, and you only need to be in business for six months. This makes Headway Capital a highly logical 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.
What are the Disadvantages of Headway Capital?
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. Thus, other business lenders may be capable of solving a wider variety of problems thanks to their more extensive array of products. Headway’s problem-solving ability 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. 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 at all.
Lastly, Headway Capital’s rates and fees are considerably expensive when compared to the rest of the industry. The 2% draw fee is pretty 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 completely different product as well.
Frequently Asked Questions
Here are some common questions potential clients might have about Headway Capital:
Is Headway Capital Safe?
It’s understandable to be suspicious of Headway’s quick application, loose requirements, and high rates. But Headway Capital is indeed a legitimate business lender. Unlike malicious or deceptive business lenders, Headway Capital is entirely transparent with their 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.
What Do Positive Headway Capital Reviews Focus On?
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 their competitors, Headway Capital discloses their rates and APRs on their 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.
Does Headway Capital Report to Credit Bureaus?
No, Headway Capital does not report to credit bureaus. This means that your payment history will not affect your personal or business credit score.
Can I Withdraw from My Line of Credit Before I Pay Off My Previous Draw?
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.
What If I’m Declined by Headway Capital?
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. Plenty of other 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, which allows you to choose the repayment structure that is most conducive to your cash flow. You’ll probably be able to avoid some of Headway’s most significant disadvantages, like the draw fee or inability to operate in 14 states.
In summary, being declined by Headway does not mean you’ll see the same result after applying for other online business lenders.
Making Your Decision
It might be hard to find another company that can match Headway Capital’s convenience and transparency. 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. Yes, it’s entirely feasible to get convenience and transparency along with minimal impact on cash flow. You deserve to work with a company that offers all three.