Frequently Asked Questions (FAQs)
General
1st Capital Financial is the leading authority for small business financing, tax services, and employee benefits. We employ an extensive partner network, over 30 years of industry experience, and a client-centric approach for thousands of businesses each year.
1st Capital Financial’s team is dedicated to helping business owners and entrepreneurs secure the funding best suited to their needs and circumstances. We have partnered with over 200 banks, non-banks, and private investors to offer our clients greater flexibility and better rates. Our financing products include:
- Business Lines of Credit,
- Business Term Loans,
- Commercial Loans,
- Equipment Financing,
- ERC Bridge Financing,
- Invoice Factoring,
- Merchant Cash Advances,
- Private Money Loans,
- and SBA Loans.
Yes, 1st Capital Financial welcomes all business owners and entrepreneurs, regardless of their credit score. If conventional lenders have turned you down due to a poor credit history, we encourage you to call us. We are honest and transparent with all our clients about their options.
The sooner you connect with our financing team, the sooner we can process your application. Approval and funding timelines will vary by product, lender, and other factors.
If timing is a concern, though, let us know!
The basic eligibility requirements for most SBA loan programs involve each of the following:
- An Acceptable Personal or Business Credit Score
- A For-Profit Business StatusÂ
- A U.S.-Based Location and Operations
- Adherence to the SBA’s Business Size Standards
- A Qualified SBA Industry
- A Qualified Owner
- Owner Support and Funding
The privacy and security of your data is our top priority. We have implemented best practice security protocols that are consistent with leading financial institutions, including 256-Bit SSL encryption, reCAPTCHA protection, and routine monitoring.Â
No, there are no application fees or obligations associated with using tools on this site (i.e. there are no hidden fees).
Yes, many of 1st Capital Financial’s financing products and small business services are available in all 50 states.
Small Business Financing
Business Line of Credit
A business line of credit is intended for large draws that may be paid back over several months. While you will pay interest on the entire draw amount, the cost may be lower than a business credit card. In contrast, a credit card is designed for day-to-day expenditures and typically requires a minimum monthly payment while your balance revolves. A business credit card often has other fees attached as well.
Any business that has regular, short-term expenses they need to or would like to float in order to smooth cash flow gaps would be fit for a line of credit.
A business line of credit allows you to borrow up to a specific limit and only pay interest on the money you borrow — similar to a credit card. When you repay the money you borrow, your credit line is replenished. Business lines of credit can be used for a variety of short-term needs, including paying for operational expenses, purchasing new equipment or upgrades, jump-starting growth initiatives, and covering cash flow gaps.
Business Term Loan
The advantages of business term loans include affordable interest rates, short- and long-term options, predictable repayment schedules, and a wide variety of permitted uses.
The disadvantages, however, are that the application process can be more cumbersome, and newer businesses and startups are unlikely to qualify.
Established businesses with good financial health, credit history, and positive cash flows are best suited for term loans. Newer businesses and startups that have been operating for less than two years are unlikely to qualify.
A business term loan is a lump sum of capital you borrow from a lender and repay on a fixed schedule over a set period (i.e., a “term”). The cost of capital for small businesses is generally cheaper than conventional financing, while the turnaround on funds is faster than SBA loans. Business term loans may be used for a variety of purposes, including long-term investments.
Commercial Loan
Any business seeking a significant capital raise for a real estate investment, and whose options do not include an SBA loan, should consider applying.
Commercial loans work similarly to residential mortgage loans. One of the key differences, however, is that a commercial loan is secured against a commercial property instead of a residential property. Another key difference is that the Loan-to-Value (LTV) for a commercial loan may be limited to 75-80%. Lenders will also consider your business’s Debt Service Coverage Ratio (DSCR), so cash flow is important. The higher your business’s DSCR, the higher your likelihood of approval.
Exact terms will vary based on the lender, property type, DSCR of the business, creditworthiness of the borrower, and other factors.
A commercial loan is a debt-based funding arrangement for purchasing, developing, or constructing commercial properties. It is affordable, long-term, and uncapped. Businesses that do not qualify for an SBA 7(a) or 504 Loan or need more funding than can be secured through an SBA program may consider a commercial loan viable.
Equipment Financing
This comparison is akin to a car loan versus a car lease. The biggest difference between equipment financing and equipment leasing is ownership. Equipment financing is a loan option that assigns ownership to the borrower. When you pay off an equipment loan, you own the equipment free and clear. Financed equipment can also be paid off early, sparing you additional interest.
On the other hand, equipment leasing is not owned by the lessee. Leased equipment also cannot be paid off early without penalties. It is not uncommon for an equipment lease to be structured as lease to own or have a purchase option at fair market value after a set term or upon termination.
Yes, you can apply a Section 179 tax deduction for equipment financing. This write-off allows you to deduct the entire purchase price of the equipment you purchased in the applicable year.
An equipment loan is one of the easiest forms of business financing to qualify for since lenders typically use the equipment as collateral.
There is a broad range of equipment types that can be financed. Startups, new, and existing businesses may finance any of the following for example:
- Computers, Printers, and Other Hardware
- Office, Restaurant, or Retail Furniture
- Commercial Kitchen Appliances
- HVAC Units
- Commercial Vehicles
- Construction Equipment
- Farm Equipment
- Fitness Equipment
- Industrial Equipment
- Medical Equipment and More
Equipment financing is a loan option for purchasing, repairing, or replacing machinery and equipment that is essential to your business. Use cases include everything from office furniture and medical equipment to farm machinery or commercial appliances. Equipment loans are easier to qualify for, don’t require additional collateral, and are quick to fund.
ERC Bridge Financing
No. There are no limitations on how qualifying employers use the funds they receive from ERC funding options (i.e., ERC Advance Loans or ERC Buyouts).
Yes, ERC loans are secured against employers’ anticipated ERC refund amount. Personal guarantees may also apply depending on the viability of employers’ businesses, creditworthiness, and other factors.
Pre-approvals can take as little as 24 hours, but the time it takes to receive funds for an ERC Buyout or an ERC loan is closer to one to two weeks. ERC Buyouts can be faster. Turnarounds are primarily determined by applicants’ responsiveness to requests for documentation or information and lenders’ capabilities.
Lenders’ requirements for ERC Advance Loans and ERC Buyouts vary but generally include the following:
- Satisfy the IRS’s ERC Eligibility Criteria
- Proof of IRS Form 941-X Report Submission(s)
- Minimum ERC Refund of $75,000 (ERC Buyout) or $100,000 (ERC Advance Loan)
- Minimum Credit Score of 500 (ERC Buyout) or 600 (ERC Advance Loan)
- No Tax Liens or Judgements
The IRS will include accrued interest when issuing employers’ ERC refunds based on the dates the refund amount applies and their processing time. This IRS-paid interest accounts for the time value of outstanding ERC balances with the agency.
SBA Loans
The 90% rule suggests that if the appraisal of a fixed asset that’s part of an SBA 504 loan comes back at less than 90% of the estimated value, the loan amount must be reduced or the borrower must provide additional collateral.
Yes, you can pay off an SBA 504 loan early — but there’s a prepayment penalty that may apply. Prepayment penalties are equal to the first year’s interest and decline by 20% each year for a 10-year loan and 10% each year for 20- and 25-year loans. At year six or 11, the penalty would be zero.
The SBA will guarantee the entirety of the debenture that’s raised by the Certified Development Company (CDC). This means that up to 40% of the loan is guaranteed.
The time it takes to fund an SBA 504 loan depends on the project specifications, as well as the CDC and third-party lender that are involved. On average, it’ll take 60 to 90 days from the time you start your application to fund the loan.
It may be harder to get approved for an SBA 504 loan compared to the Administration’s other loans. This is due to the program’s unique project criteria, and comparatively lower cost and longer repayment terms. However, as it’s still an SBA loan, it’s considered easier than a conventional loan.
The SBA doesn’t specify a minimum credit score; however, the Administration does consider creditworthiness a factor for eligibility. Most lenders require a minimum credit score of anywhere between 650 and 680. The recommended credit score for 7(a) borrowers is 690 or higher.
Tax Services
ERC Filing Service
Yes, you certainly are! The Taxpayer Certainty and Disaster Tax Relief Act (enacted 12/27/2020) modified the ERC eligibility guidelines so that PPP applicants could also take advantage of the ERC program. However, you cannot claim the same dollar-for-dollar funds. We take this into account when processing your ERC claim.
As soon as you’ve completed your ERC application and submitted your documentation, our CPAs will get to work on a comprehensive assessment for your business. This process takes 5-10 business days. Assuming you decide to move forward, your amended employer tax returns (i.e., Form 941-Xs) and supporting documentation are filed with the IRS.
IRS processing of ERC claims is now expected to take 10-16 months with the moratorium.
For immediate access to your ERC refund, 1st Capital Financial offers ERC Bridge Financing (ERC Bridge Loans and ERC Claim Buyouts).
No, the IRS does not consider ERC refunds for income tax purposes.
However, you are required to reduce your business’s deductible wage expenses by the refund amount you receive. We encourage you provide this information to your current CPA or accounting agency.
Businesses can claim up to $26,000 per employee for the Employee Retention Credit (ERC) broken down as follows:
- For 2020, you can claim up to fifty percent (50%) of qualified wages and health plan expenses for a maximum credit of $5,000 per employee for the year.
- For 2021, you can claim up to seventy percent (70%) of qualified wages and health plan expenses for a maximum credit amount of $7,000.00 per employee per quarter and $21,000 for the year.
1st Capital Financial’s ERC Filing Service is available to qualifying employers in all 50 states, including:
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Colorado
- Connecticut
- Delaware
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Minnesota
- Mississippi
- Missouri
- Montana
- Nebraska
- Nevada
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- Rhode Island
- South Carolina
- South Dakota
- Tennessee
- Texas
- Utah
- Vermont
- Virginia
- Washington
- West Virginia
- Wisconsin
- Wyoming
The same applies to the company’s ERC Partner Programs.
Most business types, including hospitals, universities, and nonprofits, may be eligible for the ERC. The following list represents just a couple dozen examples we have experience with:
- Art Galleries
- Breweries, Distilleries, and Wineries
- Theaters and Live Arts
- Childcare and Behavior Centers
- Restaurants
- Events Venues
- Hotels
- Non-Profits
- Churches
- Medical Practices
- Dentists and Orthodontists
- Law Firms
- Construction and Real Estate Developers
- eCommerce Businesses
- Cannabis Businesses
- Tobacco and Smoke Shops
- Startup Businesses
- Barbershops, Cosmetologists, Salons, and SpasÂ
- Private Schools and Universities
- Manufacturing Businesses
- Liquor Stores
- Car Dealerships
- Automotive Repair Businesses
- Assisted Living Services
Do not worry if your business type is not listed above. We have filed ERC claims for businesses in more than 65 different industries. If you are uncertain of your business’s eligibility, we encourage you to give us a call at +1 (833) 317-8227.
For more information, check out this article: The ERC Eligibility Requirements Employers Need to Know in 2023.
Employee Retention Credit (ERC) Bridge Financing refers to 1st Capital Financial’s solution for businesses that do not want or cannot afford to wait for the IRS to process their ERC refund. By applying for an ERC Bridge Loan or an ERC Claim Buyout, businesses can advance up to 85% of their refund in a matter of days.
1st Capital Financial charges a 15% contingency fee once your checks are received from the U.S. Treasury. There is no upfront cost.
Other major ERC processors charge up to 30% with additional upfront costs (e.g., Consultation Fees or Assessment Fees).
No, there is not. 1st Capital Financial’s clients only pay a 15% contingency fee, with no additional costs, and are never asked to sign an agreement before their ERC assessment is received. Our assistance and due diligence are free of charge.
We encourage businesses to reconsider their ERC processor if they are asked to pay additional fees for a consultation or assessment or are expected to sign an agreement before their ERC assessment is received.
If your business was negatively impacted by the COVID-19 pandemic, but your CPA believes you’re ineligible — we still encourage you to apply.
It is not uncommon for CPAs, accounting agencies, or even Chief Financial Officers (CFOs) to get it wrong. The Employee Retention Credit (ERC) is a complex program and the IRS has released a number of warnings.
1st Capital Financial does not submit claims for businesses that’re ineligible. We take the time necessary to conduct our due diligence, present our assessment, and let our clients decide whether or not to proceed.
R&D Credit Filing Service
Yes, there are currently 38 states that recognize the R&D tax credit. These states typically follow the IRS’s guidelines on qualified research expenditures (QREs) — with some exceptions. Fortunately, state R&D tax credits may be combined with federal R&D tax credits. When you work with us, we consider state and federal tax incentives during initial discovery.
There is no cap on the amount your business can claim in R&D tax credits. Since R&D tax credits are determined by the size and scale of your business’s technical activities — the more you spend, the more you save. Most businesses recover about 10% of their qualified R&D tax credit expenditures.
Examples of technical activities that qualify for the R&D tax credit include:
- Developing Consumer Products
- Developing Software or Mobile Applications
- Developing New Processes or Techniques to Manufacture Products
- Improve the Performance, Functionality, Quality, or Reliability of Existing Products
- Designing Prototypes
- Testing Competitors’ Products
- Conducting Research that Speeds Up Your Time-to-Market
- Implementing New Process Automations
- Implementing Process Improvements that Reduce Waste or Improve Efficiency
- Developing Formula Improvements for Food, Beverage, or Chemical Applications
- Creating Patentable Products or Processes
Examples of expenditures that qualify for the R&D tax credit include:
- Employee Wages
- Consultants’ Fees
- Material Costs
- Cloud Storage Subscriptions for Testing Environments
Note that expenditures must be related to research projects conducted in the US. Expenditures made in foreign countries do not qualify.
The R&D tax credit is generally used to offset federal income taxes. If the credit is not fully utilized the year it is generated, businesses may carry it back one year for a tax refund. If excess credit is still available, businesses may carry it forward up to 20 years. Startups that are not yet profitable may apply the credit toward federal payroll taxes to offset up to $500,000 each year for up to five years (a total of $2.5 million).
Employee Benefits
WIMPER Program
WIMPER programs can be used to comply with the ACA’s employer mandate for Applicable Large Employers (ALEs) with a Minimum Essential Coverage (MEC) plan funded with employees’ tax savings.
Employees’ net pay will show no change or a nominal increase but never a decrease. Additional line items on their pay stubs will reflect the pre-tax deduction and post-tax reimbursement of the Section 106 Wellness Plan and charges for elected qualified benefits.
WIMPER program benefits are supplemental, so there’s no interference with your business’s existing policies. You may even stack coverage to assist employees with high deductibles.
Most employee wellness programs don’t produce immediate or quantifiable savings and come at a considerable cost, with comparable products averaging up to $2,000 per employee per year. WIMPER programs, on the other hand, produce immediate and quantifiable savings with no out-of-pocket expense.
There’s no upfront cost associated with adding a WIMPER program if you work with an administrator or broker. You’re invoiced directly by your policy carriers after two or three payroll periods, allowing you to pay the benefit premiums using your accrued savings.
No, participants are not asked health-related questions since our WIMPER Program leverages exclusively group policies.
WIMPER Program participants will see additional line items on their pay stubs to account for pre-tax deductions and post-tax reimbursements. However, the net pay amount will show no change or up to a $50 increase.
Yes; all WIMPER Program benefits may extended to participants’ spouses and dependents.
Yes. In most cases, WIMPER Program participants may apply a portion of their allotment balance to optional ancillary benefits, including accident insurance, critical illness with cancer, hospital insurance, life insurance, and more.
No; WIMPER Program benefits are generally not taxable due to the tax codes that apply. See our guide for more information.