The Cities with the Highest-Rated Independent Coffee Shops

admin / May 24, 2025

Something strange is happening to coffee shops: the chains are getting smaller while the independents are getting bigger and bolder. Big chain cafés are saving money by opening smaller premises to minimize costs and concentrate on walk-through trade. Meanwhile, independent cafés are capitalizing on their already cozy premises by delivering personality, quality and good company to customers looking to sit down with a brew and a pastry — and maybe even return to the counter for more. The specialty coffee shop market is tipped to grow by $39.17 billion from 2022 to 2027, driven by the indie sector. This is the dream of many indie café owners: to share not just their passion for coffee but a unique social space with their neighbors. However, with the pressure of rising prices and big-name competition, entrepreneurs must weigh every creative and business decision against the economic reality. To celebrate the ones doing it the best, we identified the areas with the top-rated independent coffee shops around America — and the indie cafés that customers love the most. What We DidFollowing our previous study celebrating the highest-rated independent restaurants in the country, we collected the five-star rating figures for every non-chain coffee shop in America’s biggest major cities. Then, we ranked the cities based on the weighted average five-star rating across their indie cafés. Finally, we identified the highest-rated independent coffee shops nationwide and in every state. Key FindingsKnoxville, Tennessee, has America’s highest-rated indie coffee shops, with an average rating of 4.59.The highest-rated indie café in the U.S. is The Espresso Bar @ Taos Valley Lodge in Taos, New Mexico, with a customer rating of 4.93.New York City’s top-rated indie café is Frisson Espresso in the Hell’s Kitchen neighborhood (4.76).There are 52.18 independent cafés per million people in New Orleans — more than any other major American city.Knoxville is the Home of Great Indie Coffee ShopsFirst, we found the average rating for independent coffee shops in America’s most populous major cities. Knoxville, Tennessee, is in the top spot, with an average rating of 4.59. “We have a fantastic community here in South Knoxville,” says former Honeybee Coffee Company barista Mitchell Bustillo. “We can really have a good conversation with whoever comes in.” U.S. Map showing the cities with the highest rated independent coffee shops Knoxville’s top-rated indie café is Coffee & Chocolate on Union Avenue, with 94 out of 129 customer reviews labeling it as ‘Excellent’. Coffee & Chocolate is “[p]erhaps the smallest coffee shop in all of Knoxville,” according to Knox News, and famed for its macarons, hand-painted chocolates and sweet-smelling environment. “We were in town just for one day and discovered this small gem of a coffee and chocolate shop,” writes one reviewer. “The coffee is so good we went back twice in one morning. The chocolates are beautiful mini works of art–you almost hate to eat them.” Although Knoxville has the best indie cafés, you’re more likely to stumble upon an independent coffee shop in New Orleans — where there are a stunning 52.18 indie cafés per million inhabitants. This is significantly more than the next densest big city for indie cafés, Orlando (37.41). U.S. map showing the cities with the most independent coffee shops per capita “New Orleans has a longer relationship with coffee than pretty much anywhere in North America,” writes Mike Scott for New Orleans Magazine. “Given its proximity to coffee-cultivating locales in the Caribbean and South America, the Port of New Orleans has been the de facto entry point for untold millions of pounds of coffee beans dating to the late 1700s.” “A worldwide corporate Goliath, [Starbucks] represents exactly what’s loathed by New Orleanians who like to think the city’s culture is special,” says C.W. Cannon. “[C]offee, and the places that serve it, are especially beloved symbols of local identity.” Taos Espresso Bar is America’s FavoriteNext, we identified the top-rated indie cafes in America. We found that The Espresso Bar @ Taos Valley Lodge in Taos, New Mexico, is America’s favorite indie, with an average rating of 4.93. The Espresso Bar serves breakfast and fresh Peet’s Coffee brews (a San Francisco Bay Area-based specialty coffee roaster) from the handsome premises of the Taos Valley Lodge and regularly offers new specialties. “The coffee was delicious and so was the danish!” writes a reviewer. “The space is warm and cozy but big enough to have your own conversations without bothering anyone else!” Infographic showing the ten highest rated independent coffee shops in America Texas is the only state to feature two cafés among the top ten: the Iris Bagel and Coffee House in Arlington (4.86) and the Estate Coffee Company in San Antonio (4.80). According to its regulars, the Iris is a veritable embodiment of what makes a local indie café great. “This is an amazing gem in my neighborhood,” writes one reviewer: “My out of town guests require me to bring them here. The coffee is cheaper and better than Starbucks. I know some Starbucks employees come here for their latte. (Shhhh). I love the lox special & they know I like it without sprouts so I don’t have to ask anymore. The owner knows many people by name & he is interested in the lives of people who walk in.” California’s Best Indie Café is Right On the BeachFinally, we identified the top-rated independent coffee shop in every state. New York’s is Frisson Espresso in the Hell’s Kitchen neighborhood of New York City, with an average rating of 4.76. Tulian Sanchez and Robert Melo established Frisson in 2014, united “by their passion for coffee and a desire to create the perfect “first sip experience.” […] Tulian’s expertise as an espresso machine technician and Robert’s entrepreneurial spirit set the stage for Frisson Espresso’s journey.” “Real coffee made by people that care about what they are doing,” says one reviewer. “We found this place because of its reviews and we were not disappointed. If these are not the nicest baristas in New York then they must be

Insights and Stories

What is Operations? And Why Does My Business Need It?

admin / May 24, 2025

In simple terms, “operations” is the internal engine that powers your business. If you are currently trying to extend your product line, open a brand in an up-and-coming neighborhood, resolve a purchasing inefficiency or improve customer loyalty, then you should look at your company’s operations. In this article, we will explain the basics of operations and cover key differences in operations management for small businesses across different industries. What Is Operations? When we talk about “operations” in the context of a business, we are referring to the processes and inner workings that allow a company to run as efficiently as possible. Whether you make products, sell products or provide services, every small business owner has to oversee the design and management of the behind-the-scenes work that makes up their company’s operations. Well-run operations is a critical and often overlooked source of a business’s success. It can help streamline costs, allowing you to do more with less and maximize the impact of business funding such as a business line of credit or term loan. At a small business, you may not want to dedicate a single person to an operations role. Rather, both employees and owners should understand how the business works and how various processes impact day-to-day tasks. Regardless of your industry and type of business, your first approach to business operations will most likely include the design, planning, management and ongoing improvement of processes for the production of goods or provision of services, management of your team and management of the company and its finances. Business operations should grow and evolve as your small business grows. In larger organizations, business operations teams collaborate with internal teams and are responsible for managing and improving four major elements: When done correctly, implementing business operations in your business will improve efficiency and productivity, leading to higher customer satisfaction while increasing revenue and profitability thanks to more streamlined processes and reduced costs. How to Optimize Operations for Different Types of Small Businesses The specific definition of operations will depend on your industry and the stage your business is in. Sometimes, improving operations means thinking strategically about your systems and processes. Other times, it means being part of the on-the-ground work to bring every aspect of a project, from tiny to huge, to reality. Whatever your needs may be, developing an operations manual is usually a good place to start. Here are some examples of operations in different industries and how mastering your processes can contribute to success. Operations for a Retail Business As the owner of a retail business, your daily goal is to stock the items customers want at a price they’re happy to pay. For your operations, that means perfecting your inventory. Take a look at the records from last season: While some of the answers will be obvious when you crunch the numbers and analyze the results, another operational update might be to implement a software program that can manage and optimize your inventory in real-time so you can address these questions more quickly and more often. Operations for a Restaurant Business Food businesses have even more challenging inventory problems than retailers since their product is perishable. At a restaurant, operations apply not just to foodstuffs but also purchasing, preparation and the costs of food, beverage and labor. You’ll also be concerned with customer service and customer experience at your restaurant. As you look to streamline your operations, you can think on the following questions: There’s a big range here, so think through who should be in charge of leading the different aspects of operations, since it likely won’t fall to one person. Operations for a Service Company Service companies can divide their operations into two key buckets: client-facing and business-related. As you analyze the performance of both, you will be able to assess how your current processes for communicating, collaborating and managing projects affect the services you’re offering. Start by thinking through your client interactions: For example, if client projects are continually coming in over budget, one big operational concern would be the methods used to calculate your estimates at the beginning of a job. Operations for a Product Manufacturing Business The origin of the term “operations” comes from companies that made physical goods. Back when economies were industrializing, inventive businesses tried to add efficiencies wherever possible. That led entrepreneurs like Eli Whitney to pioneer the method known as parts-based assembly so that cotton gins and other products could come to market more rapidly, cheaply and consistently. You don’t have to reinvent the assembly line if your small business makes products, but you should take a good look at how you purchase, store, make and ship your merchandise. Consider your methods from a time standpoint: Operations for a Digital Company Much of a digital company’s value lies in its personnel. For you, operations have a lot to do with finding optimal ways of hiring, training and mentoring your staff. Tools to help with employee retention and satisfaction are wrapped into this, too. In order to improve your operations, start by thinking about the following questions: Wrapping Up Operations is key to running a business that’s always getting better and better at what it does. By taking a look at the day-to-day activities that make your business possible and asking yourself questions about existing processes, you’ll be able to define and optimize what operations means for you and your organization. This content is for educational and informational purposes only, and is not intended as financial, investment or legal advice.

Running a Business

Small Business Employee Benefits: What You Need To Know and Why It Matters

admin / May 24, 2025

Offering competitive employee benefits can help small businesses attract top talent. But how do you build an outstanding benefits package? Whether you’re navigating healthcare options, trying to decide on retirement plans, or considering which perks will resonate with your employees, we’ll walk you through what you need to know. Here’s why employee benefits matter, and how you can structure yours to support your team and grow your business. What are employee benefits? Employee benefits are non-wage compensation provided to employees in addition to their regular salary. They can include health insurance, retirement savings plans, vacation days and even perks like gym memberships or paid volunteer days. These benefits play a critical role in boosting workplace satisfaction and employee well-being. For small business owners, building an effective employee benefits package isn’t just about ticking boxes. It’s about providing tangible value to employees, showing them they’re appreciated, and fostering a positive, productive work environment. Why is offering benefits important for small businesses? 1. Attracting talent. Small businesses often compete with larger corporations for skilled professionals. Offering competitive benefits levels the playing field and allows you to stand out as an employer of choice. 2. Retaining employees. Strong benefits packages play a crucial role in improving employee retention. Employees are more likely to stay with a company that offers healthcare, retirement plans and flexible perks that align with their needs. Reducing turnover saves recruitment and training costs in the long run. 3. Boosting productivity. Happy employees are more motivated and productive. Offering benefits that support both physical and mental well-being ensures a healthier workforce capable of performing at its best. 4. Enhancing your reputation. A well-rounded benefits package builds a strong employer brand. Word travels fast in tight-knit communities, and your investment in your employees establishes your company as a reputable, compassionate place to work. What benefits do small businesses offer their employees? There are different types of employee benefits. Let’s break them up into categories. Legally required benefits. Certain benefits are required by law, and failing to offer them could lead to penalties or legal challenges. Some legally required benefits depend on your businesses’ number of employees. Social Security and Medicare. Employers are required to withhold and match contributions from employees’ paychecks. Unemployment insurance. Employers must contribute to state and federal unemployment insurance programs to support employees during job loss. Workers’ compensation. This insurance provides financial support to employees injured on the job. Workers’ comp is mandatory in most states, regardless of company size, with a few exceptions. COBRA (Consolidated Omnibus Budget Reconciliation Act). Employers with 20+ employees must offer continued coverage after job loss or events like divorce or childbirth, lasting 18 – 36 months depending on the situation. Smaller employers should note that some states offer “mini-COBRA” for businesses with fewer than 20 employees. Affordable Care Act (ACA). Businesses with 50+ full-time employees must provide affordable healthcare under the Affordable Care Act. Companies with fewer than 50 employees aren’t required to offer health insurance, but might consider doing so to remain competitive. Local government requirements. California, Hawaii, New Jersey, New York, Rhode Island and Puerto Rico require employers to provide employees short-term disability insurance. Health benefits. High healthcare costs can create significant stress for employees. And when workers are sick or managing chronic conditions, businesses may lose productivity. Employee health benefits cover both physical and mental health, addressing the full spectrum of well-being. Group health insurance plans. These plans not only support employee well-being, but also provide tax savings for businesses. Medical flexible spending account (FSA). This allows employees to use pre-tax contributions for eligible healthcare expenses. Both employers and employees can contribute, offering significant tax savings. Health reimbursement arrangement (HRA). This account is fully funded and owned by the employer, providing employees with funds to cover eligible healthcare expenses. It also offers tax savings benefits. Health savings account (HSA). HSAs allow employees to use pre-tax funds for qualified medical expenses, similar to an FSA or HRA. Both employers and employees can contribute to the account. However, unlike FSAs and HRAs, an HSA is employee-owned and functions as an investment account that earns tax-free interest over time. Vision and dental insurance. Offering vision and dental insurance shows employees that you value their health and well-being beyond the legal requirements. They’re also competitive benefits that can set your small business apart. Mental health and wellness programs. Small businesses can offer mental health programs like access to counseling services or employee assistance programs (EAPs) to support their teams. Wellness initiatives such as mindfulness workshops or stress management sessions can also promote overall mental well-being. Financial benefits. Financial security helps employees feel peace of mind, allowing them to focus on their work without worrying about the future. By providing strong financial benefits, employers help their teams plan ahead with confidence. Retirement plans. Retirement plans, like a 401(k), help employees build a secure financial future, making it easier to save for life after their careers. Employer matching contributions can further enhance these savings, providing an added incentive to invest in retirement. Paid time off (PTO). PTO, which includes vacation, sick leave and personal days, ensures employees can take necessary breaks to recharge or handle personal matters without financial stress. It promotes better work-life balance and overall well-being. Life insurance. Life insurance offers employees peace of mind by providing financial security for their loved ones in case of unforeseen circumstances. It’s a safeguard that supports families during challenging times. Flexible spending accounts (FSAs). FSAs allow employees to set aside pre-tax dollars for eligible expenses like medical bills or childcare. This benefit helps reduce financial strain and makes managing expenses more affordable. Fringe benefits. Fringe benefits are optional perks that employers offer to attract and retain talent. While not legally required, fringe benefits can enhance employee satisfaction and differentiate your company from competitors. Examples include: What does a typical benefits package look like for a small business employee? A realistic benefits package for a small business might include: How much do benefits cost the employer? While costs can vary, 2024 data from the Bureau of Labor Statistics provides the average benefits cost for private industry workers in establishments that employ under 50 people: For small businesses

Running a Business

12 Tips and Tricks to Help You Manage a Successful Restaurant

admin / May 24, 2025

Make no mistake — the food service and hospitality industry is more competitive than ever. From managing employees and suppliers to staying ahead of marketing and culinary trends, restaurateurs wear many hats. It takes hard work, but with the right strategies in place you can build or maintain a thriving operation — and make the most of your restaurant financing. These practical restaurant tips and tricks can equip you with ideas to help streamline operations, improve profitability and create memorable customer experiences. Restaurant Operations and Management Let’s start with the fundamentals — your day-to-day restaurant operations. The decisions you make here can keep your restaurant efficient and profitable. Buy and source wisely. Your restaurant’s food ordering expenses can quickly spiral out of control without proper inventory management. Build strong relationships with reliable vendors to negotiate better deals. Buy seasonal produce for cost savings, and utilize inventory management software to track stock and reduce food waste. Take care of your staff. A happy restaurant staff equals happy customers. Train your team well, offer competitive wages and incentives and create an environment where they feel valued. Employee satisfaction impacts efficiency and morale which, in turn, influences your service quality and overall guest experience. Review your menu pricing and design. Review your pricing strategy regularly to ensure there’s a good profit margin on all of your restaurant menu items. Factor in rising ingredient and food costs and adjust prices when necessary, but make sure your pricing aligns with customer expectations. Consider seasonal menu swaps with high-quality, low-cost appetizers, tasting flights, shared plates or entrees to help save money and balance your profit margins. Feature higher-return items and add-ons more prominently on your menu. Upgrade your technology. From POS systems to digital inventory and payroll software, technology integrations can save you time and effort with tableside ordering, contactless payments, reservation management and more. Point-of-sale tools like Toast, Square or TouchBistro can streamline your table operations and produce data and reporting for smarter decision-making. They can also help create efficiencies across the board — from kitchen display systems to payment processing. Review your hours. While you already know your busy and slow times, analyzing them in black and white could reveal new patterns. If certain hours of the day or even days of the week are consistently quiet, modify your business hours to concentrate resources during peak times and cut down on operating costs. Consider expansion opportunities. Once your restaurant achieves a sustainable level of success, you might want to think about strategically expanding. This could mean opening a new location, launching a catering menu or even offsite catering, or partnering with meal delivery companies to boost revenue streams. Marketing and Sales A strong marketing strategy that aligns with your customer experience and communicates your brand’s unique selling proposition will build your brand’s presence and loyalty. Get social. Establish a social media presence to showcase your brand to potential customers and generate awareness and impressions. Create quality content and visual photography for platforms like Instagram and Facebook to put your best foot forward and reach potential new customers. From menu spotlights to behind-the-scenes storytelling, memorable visuals and content marketing can make a huge difference in your posts’ engagement rates. Experiment with new marketing strategies. Shifting consumer preferences in the restaurant industry are a constant. The same goes for getting people’s attention. Stay ahead of the curve by finding new and innovative ways to reach your audience: Track customer responses to identify which strategies yield the best return on investment (ROI). Get on delivery apps. Partner with food delivery platforms such as DoorDash or Uber Eats. This not only opens your services to a wider audience and customer base, but it can also increase convenience for your customers, especially during quiet dining-in periods. Offer reservations via booking apps. Make it easy for customers to reserve a table with apps like OpenTable or Resy. These platforms come with added search capability, making it easier for people who may not know your brand to find your restaurant. Host events. Live music, trivia nights, or chef-led tastings and pop-up concepts can bring in new customers and create buzz. These events encourage new and loyal customers alike to experience your restaurant in a way that stands out from a typical dining experience. Customer Experience Delivering a memorable experience for your guests can increase customer retention and foster strong word of mouth. Make customer retention a priority. According to restaurant software company Olo, 60% of a restaurant’s revenue is driven by repeat customers. Focus on building customer relationships and earning their loyalty. Remember names, favorite dishes and preferences to create personal connections that make them feel valued. Start a loyalty program. Reward repeat business with a loyalty program. Offer customer discounts, free items or exclusive perks when they hit a certain spending level. Loyalty programs can help customers feel appreciated and keep them coming back. Manage and moderate your online reviews. Reviews play a big role in customer decision-making. Monitor platforms like Google, Yelp and TripAdvisor to respond promptly to feedback, whether it’s positive or negative. A professional response to complaints shows your dedication to improvement and builds trust. What are the four Ps of restaurant management? The “four Ps” play a vital role in successful restaurant management. Here’s how they apply: Product. Provide high-quality food and beverages that exceed expectations. Place. Your location and ambiance matter. Make your establishment inviting and comfortable. Price. Balance affordability with profitability. Maintain a pricing strategy that aligns with customer expectations. Promotion. Consistently share your restaurant’s story and unique value prop to attract and retain customers. What are the three Cs of restaurant success? Elevate your restaurant’s success with this simple, easy-to-remember framework. Several guest speakers shared this list during a “2023 Restaurant Franchising and Innovation Summit,” and it stuck: Convenience. Make it easy for customers to dine with you. Offer accessible hours, online ordering and delivery options. Consistency. Whether it’s food quality or service, deliver excellence every time. Consistency builds trust with your customers. Connection. Build a relationship with your customers through personalized service and by creating an ambiance where they feel welcomed. The Bottom Line Managing a restaurant requires countless responsibilities, but with strategic planning and focus, your extra

Small Business Financing

Secured vs. Unsecured Business Loans

admin / May 24, 2025

When you need extra working capital, choosing the right type of small business loan or business line of credit is crucial. Business financing generally falls into two main categories: secured and unsecured. Each has its benefits and drawbacks, and the right choice depends on factors like your business’s financial health, business plan, credit history and the level of risk you are willing to take. Let’s explore the differences between secured and unsecured business loans, and how to determine which funding option is best for your business. What’s the difference between a secured and unsecured business loan? A secured business loan requires the borrower to provide collateral — an asset that the lender can seize if the loan is not repaid. Common types of collateral include real estate, equipment, inventory or accounts receivable. Because these loans are backed by assets, they generally come with lower interest rates and higher borrowing limits. An unsecured business loan, on the other hand, does not require collateral. Instead, lenders approve these loans based on the borrower’s creditworthiness and revenue history. Since unsecured loans increase the lender’s risk, they often come with higher interest rates and stricter qualification requirements. What is collateral? Collateral is an asset that a borrower pledges to a lender to secure a loan. It serves as a form of protection for the lender, ensuring that if the borrower defaults, the lender can recover the funds by seizing and selling the collateral. Collateral can take many forms, including: Real estate. Business owners can use owned personal or commercial property to secure a loan, giving lenders confidence that they can recover their funds if needed. Business equipment. Machinery, vehicles or other essential tools can be pledged as collateral, especially for businesses that rely on expensive assets. Some types of financing, such as equipment financing and some types of auto loans are structured this way. Inventory. Retailers and wholesalers can use inventory as collateral, allowing them to access funding based on the value of their stock. Accounts receivable. Businesses that invoice clients can use outstanding payments as collateral, ensuring lenders have a fallback option. Merchant cash advances may also provide upfront funding to businesses that pledge repayment via a percentage of their business’s credit card sales. Cash deposits or investments. Savings, investment accounts or certificates of deposit (CDs) can serve as collateral, providing a liquid asset that lenders can easily claim if necessary. The value of the collateral must typically match or exceed the loan amount to be considered acceptable by lenders. What are the pros and cons of a secured business loan? Pros of a Secured Business Loan Lower interest rates. Since secured financing options pose less risk to lenders, they typically come with lower interest rates. Higher loan amounts. Businesses can borrow a larger amount of money because the loan is backed by valuable assets. Longer repayment terms. Secured loan terms often have more extended repayment periods, making monthly payments more manageable than unsecured loans with shorter repayment periods. Broader eligibility. Businesses with weaker credit histories and lower credit scores may still qualify if they have valuable collateral. Cons of a Secured Business Loan Risk of losing collateral. If a business defaults on the loan, the lender can seize and sell the pledged assets. Longer approval process. The lender must assess the value of the collateral, which can slow down the approval time. Potential for over-borrowing. Since businesses can borrow more money with collateral, they may take on excessive debt that becomes difficult to manage. What are the pros and cons of an unsecured business loan? Pros of an Unsecured Business Loan No risk to assets. Since no collateral is required, entrepreneurs do not risk losing valuable assets if they default. Faster approval process. Without the need to evaluate collateral, the loan application process and funding times are generally quicker. More flexibility. Unsecured loans can be used for various business needs, from expansion to short-term cash flow gaps. Good for established businesses. Companies with strong financials and business credit history can often secure favorable terms. Cons of an Unsecured Business Loan Higher interest rates. Since the lender is taking on more risk, interest rates are typically higher. Lower loan amounts. Borrowing limits are often lower compared to secured loans, leading to approvals for smaller loan amounts. Strict qualification requirements. Businesses must demonstrate strong creditworthiness and steady revenue to qualify. Personal guarantees may be required. Lenders may require a personal guarantee from the small business owner, putting their personal assets at risk in case of default. Is a secured or unsecured loan right for my business? The choice between a secured and unsecured business loan depends on several factors: Your business’s financial health. If your business has strong financials and a solid credit history, you may qualify for an unsecured loan with reasonable terms. If not, a secured loan may be the better option. Available assets. If you have valuable assets that you are comfortable using as collateral, a secured loan could provide better rates and terms. Loan amount needed. If you need a larger amount, a secured loan may be the better option since financial institutions are more willing to offer higher limits when collateral is involved. Urgency of funding. If you need funds quickly, an unsecured loan might be preferable due to its faster approval process. Risk tolerance. If you prefer to avoid the risk of losing business assets, an unsecured loan may be the safer choice, despite the higher interest rates. The Bottom Line Ultimately, the right type of financing depends on your business’s specific needs, financial situation and long-term goals. If your business requires a large sum and has assets to offer as collateral, a secured small business loan might be the ideal solution. Conversely, if you need quick access to funds without putting assets at risk, unsecured loan options could be the better choice. Carefully evaluating the advantages and potential risks of both options will help you make an informed decision that aligns with your business strategy and long-term growth objectives. DISCLAIMER: This content is for informational purposes only. OnDeck and its affiliates do not provide financial, legal, tax or accounting advice.

Small Business Financing

What Is a Business Term Loan and How Does It Work?

admin / May 24, 2025

Business term loans are one of the most popular ways to secure funding for your business. Whether you’re looking to expand, purchase new equipment, or simply cover cash flow gaps, term loans can provide the financial flexibility you need. But how do they work, and are they the right choice for your business? Let us guide you through business term loans: benefits, drawbacks, alternatives and what’s required to qualify. What is a business term loan? A business term loan provides you with a lump sum of money that you repay over a fixed period of time, or “term.” Your scheduled payments are typically monthly or weekly and include a portion of the loan principal, interest and any fees the lender charges. Term loans are often used for long-term investments, such as growing operations, acquiring equipment, or purchasing real estate. Because this type of business financing usually comes with a fixed interest rate, term loans offer predictable repayment schedules, making financial planning easier for small business owners. Lenders that offer term loans include traditional banks, credit unions, and online lenders. How does a business term loan work? Here’s how a business term loan typically works. Applying for a business term loan. The loan application process for a business term loan typically starts with a pre-qualification step to determine your eligibility. Lenders determine your eligibility based on factors like time in business, annual revenue and your personal or business credit score. Next, you’ll need to provide key documents — such as financial statements, bank statements, tax returns and business plans — to support your application. Most loan applications also ask you to provide business checking account information. Once all necessary information is submitted, the lender reviews your information and provides a decision. This process is called underwriting. Borrowing and repayment terms. If you’re approved for a business term loan, you’ll be presented with a contract, or loan agreement. You may be charged an origination fee, which is a fee to cover the loan processing costs. By signing your contract, you agree to pay back the loan over a repayment period. After you sign, you’ll receive an upfront lump sum of money from your lender. Making payments. With a business term loan, you’ll make consistent monthly payments according to your agreed-upon repayment schedule. These fixed payments, typically referred to as installments, will apply toward the loan’s principal, interest and any fees. The pros and cons of a business term loan. Like any financing option, business term loans come with benefits and drawbacks. Understanding your loan options can help you decide if a term loan aligns with your business goals. Pros Cons When is it a good idea to take out a business term loan? Term loans are suitable for larger, one-time expenses and are less ideal for ongoing financing needs. A business term loan may be worth considering when you’re seeking a reliable source of funding for a defined, long-term goal. Here are some situations when it may be a good fit: If your expenses are ongoing or unpredictable, consider exploring a business line of credit instead of a term loan. What do I need to qualify for a business term loan? Different lenders have different requirements, but make sure you meet typical eligibility requirements before applying for a term loan. These may include: Time in business. Most lenders require at least 1-2 years of operational history. Some online lenders may accept companies with just 6 months of experience. Credit score. You’ll need credit history to borrow a business loan. For traditional bank loans, a personal credit score of 680+ is typically required. Some online lenders accept scores as low as 550, although you may pay for it in the form of higher interest rates. Annual revenue. Traditional lenders can require $100,000+ in revenue. Some online lenders accept businesses generating $50,000 annually. You’ll also need to prepare documents, such as: Keep financial records current, and consider consulting an accountant before applying for small business loans. What are some alternatives to business term loans? If a term loan doesn’t meet your small business needs, here are some alternatives: Business line of credit A business line of credit is a revolving credit line that allows you to draw funds as needed, up to a fixed limit. It functions similar to a credit card — you only pay interest on what you draw, and funds replenish as you pay back your balance. A business line of credit is best for flexible spending and managing short-term cash flow gaps. It also provides quick access to capital for emergencies or scaling. However, interest rates may vary, and credit lines often come with annual fees. Invoice factoring Invoice factoring involves selling unpaid invoices to a factoring company at a discount to receive immediate cash. It tends to work best for businesses with outstanding invoices seeking short-term liquidity. Although invoice factoring may work for businesses with less-than-perfect credit, high fees can add up over time, and the total payout from your invoices will be reduced. Merchant cash advance (MCA) A merchant cash advance is a lump sum advanced in exchange for a percentage of future credit card or debit sales. It can be a great fit for businesses with strong sales but limited access to traditional loans. There are no fixed monthly payments, because you repay based on sales. However, MCAs come with extremely high fees, and it may cause cash flow issues if sales slow. SBA loans SBA loans are term loans backed by the Small Business Administration, offering low interest rates and long terms. However, the approval process is lengthy, and there are strict qualification requirements. When considering term loan alternatives, weigh the costs and benefits of each option based on your business’s revenue, creditworthiness and immediate needs. The Bottom Line A business term loan can be a strategic tool for fueling growth, weathering financial hurdles or pursuing a major opportunity. However, it’s essential to assess your business needs, cash flow and repayment ability when deciding if it’s right for your small business. DISCLAIMER: This content is for informational purposes only. OnDeck and its affiliates

May 24, 2025