Our review of Swift Capital looks at a particular type of loan available to small business owners. We’ll explain what these loans are and help you understand a key component of the way they work.

What is Swift Capital?

Startups and small businesses are a little like young newlyweds: There’s a lot to do, but very little money available. What’s more, unexpected costs pop up that aren’t just investments toward a business’s long-term goals; they’re emergency expenditures needed to keep the business above water.

When the money isn’t there in these make-or-break situations, it has to come from somewhere. Unfortunately, banks aren’t quick to lend money to owners of early-stage businesses, and if they are willing to lend, it normally takes a while to move through the application process. Credit cards are a speedier and more accessible option, but the funding amounts are often low and the APR high – or so we think.

Companies like Swift Capital meet the needs of small business owners by providing quick access to funds at what it says are reasonable rates.

(For related reading, see How to Keep Your Small Business Afloat During Hard Times.)

Some of the particulars work like this: To qualify, your business must be at least one year old, your credit score at least 500, and you must bring in $100,000 or more annually. 

A good rule is that you will qualify for a loan equal to about 10% to 15% of your annual revenue

Along with your loan, there’s a 2.5% origination fee but what about the interest rate? That’s what we need to look at in detail.

What Is a Buy Rate?

It gets pretty complicated but a buy rate is the multiple the lender charges for you to borrow money. For example, if a buy rate is 1.2, a $10,000 loan would cost you $12,000.

To make it easier to understand, Swift Capital writes its buy rate as a percentage. In the example on its website, it shows a price of 17.9%. That’s simply a buy rate of 1.179.

Why use a buy rate instead of an APR that consumers are familiar with? In part, because short term loans have high APRs. That’s because the term is part of the APR calculation: The shorter the loan term, the higher the APR. If you were paying off a 1.35 buy rate loan in six months, your APR is 112%. Pay it off in three months, it’s 200%!  Now you can see why these companies don’t advertise APR.

Others will argue that although tacking on the interest payment at the front of the loan is simple to understand, it makes the true cost of the loan – compared to other loans – very difficult to figure out. In Swift’s example, it added the 17.9% cost onto the $35,000 to come up with a total loan amount of $42,140 – an effective APR of about 39% since it’s a 12-month loan.

What you need to understand is this: When you’re looking at the interest rate of Swift Capital or any other merchant cash advance (MCA) lender, the percentage quoted is not the same as the APR. You can see some basic calculations here.

Back to Swift

Now that you understand how the cost of the loan works, let’s get back to the review. If you compare APR, MCA loans are the retail equivalent of cash advance loans – high interest and short payment term – but Swift’s rates, compared to others in the MCA space, are good. On its website, Swift says that its buy rates start at 1.099. For those who can get that rate based on their credit rating and other lending metrics, that’s quite good.

Swift also advertises a best-price guarantee. It will match the rate providing all the terms are exactly the same and the loan isn’t funded yet.

Overall, the company has high marks from the Better Business Bureau and online reviews are general positive. Of course, it’s not hard to find angry customers but that’s true in all areas of banking. Common negative threads include poor communication and a lot of run-around for people who try to prepay the loan. 

The Bottom Line

Sometimes your business needs money quickly; if that’s the case, Swift might be a good choice. You should also check the offers at other lenders like OnDeck.

The conventional wisdom is that using your credit card is a bad deal for short-term borrowing, but if you compare apples to apples (paying off the debt as rapidly as you would an MCA), your credit card is probably a better deal. Still, if you’re looking for this type of loan, Swift Capital is a good choice.

For additional financing options, see The 7 Best Peer-to-Peer Lending Websites. For information on another type of small business financing, see Expanding Your Small Business with an SBA Loan



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