Options for poor-credit borrowers seeking short-term financing can be limited. Alternative business lender QuarterSpot is looking to fill the need by offering six, nine-, 12-, 15- and 18-month term loans with annual percentage rates ranging from 30% to 70%.
QuarterSpot is a good option for borrowers who:
Don’t have perfect credit: The lender evaluates borrowers by analyzing their bank transaction history, essentially looking at it as a real-time profit-and-loss statement. The company can predict the default risk more accurately using this method, rather than trying to predict it by evaluating a borrower’s personal credit score, says Mike Green, executive vice president of business development and sales at QuarterSpot.
Are looking for flexibility: QuarterSpot doesn’t charge a prepayment fee, so you can pay back your loan early.
Borrowers with good credit and strong business financials may qualify for cheaper funding.
Though the lender doesn’t track how borrowers use their financing, Green says that most of the money goes toward working capital or general use and that the top industries QuarterSpot serves include automotive repair, restaurants and freight trucking.
Reasons to use QuarterSpot
No prepayment penalty. Unlike other short-term lenders, QuarterSpot loans are fully amortizing, meaning your daily or weekly payments go to both interest and principal. This lets the borrower save on interest by paying back the loan early. The company doesn’t charge a prepayment penalty.
“We did that because we didn’t want to lock people in,” Green says. “If you need to use us for a loan, great, but if the [Small Business Administration] comes along and offers a better loan, you shouldn’t be penalized for that.”
Option for borrowers with poor credit. Though QuarterSpot has a minimum FICO requirement of 550 for a personal credit score, the number is more of a cutoff for applicants and doesn’t necessarily affect the loan terms you’ll be offered, Green says. The company doesn’t do a hard credit pull, so applying for a loan won’t hurt your credit.
Instead of focusing on credit score, QuarterSpot uses a secure login to access three to 24 months of bank account transaction data. Those data are reviewed as a real-time profit-and-loss statement, says Green, which gives the lender a better understanding of the strength of a business.
Where QuarterSpot falls short
High cost of borrowing. QuarterSpot APRs range from 30% to 70%, with an average APR of 44%. That’s a pricey loan, but the short-term nature of the product and the ability to pay back the loan early without a penalty can help borrowers keep their overall APR low.
Personal guarantee. QuarterSpot requires a personal guarantee, which puts your personal assets on the line if you default on your loan. And while it doesn’t require a lien upfront, if you default on the loan, the company reserves the right to file a UCC lien on the business, which essentially means you’re putting up your business as collateral.
You won’t qualify for a loan with QuarterSpot if you’ve had a business or personal bankruptcy in the past two years.
Compare QuarterSpot with other lenders
If you want to compare QuarterSpot with other lenders, use NerdWallet’s small-business loan tool. We gauged lender trustworthiness, market scope and user experience, among other factors, and classified lenders into categories that include your revenue and how long you’ve been in business.